Errors of Enchantment

The United States Postal Service is a truly socialist enterprise. Anyone who has to deal with the Post Office on a regular basis, especially if you have to go to the actual offices themselves, is aware of this. Of course, as has been well-publicized in recent months, the Post Office now faces massive financial problems.

Of course, in a socialist agency such as the Post Office, politics plays an incredibly large role. As this article from today's New York Times illustrates, when it comes to cost savings, politics makes increased efficiency very difficult to achieve. With USPS facing a $6.5 billion deficit, "the agency continues to spend $46,000 a year for a challenging small-plane route that serves about 20 addresses secluded in the roadless wilderness of the northern Rocky Mountains."

Inevitably, the story goes on "John E. Potter, the postmaster general, began getting calls, letters and e-mail messages from the owners of ranches on the river. People showed up on Capitol Hill in rafting sandals and cowboy boots.

Then, just before Mr. Potter was about to face a conference call with the four members of Idaho’s Congressional delegation, he decided that the high-flying weekly route through the Frank Church-River of No Return Wilderness, in place for more than half a century and the last air route into a wilderness area in the continental United States, should best be left as is."

So, 20 or so people receiving a massive government subsidy succeeded in killing a reform that would have saved this so-called business money in it's ongoing effort to break even. A private company, on the other hand, could easily make the decision to not serve such high-cost customers. Unfortunately, America is moving rapidly towards greater politicization of health care, energy policy, and manufacturing to name just a few areas of the economy that will become much less efficient under government control.

Posted by Paul Gessing at 11:19 AM | Permalink | Comments (0) | TrackBacks (0)

I hope you had an enjoyable Memorial Day weekend. We're back to work here at the Rio Grande Foundation and I happened to check the Washington Post website to find this story by Sebastian Mallaby. He writes about the ramped-up efforts on the part of the Chinese to find a way to stop relying on the dollar. I've written previously about the debt we're leaving our children.

This debt is of course of concern to our economic future, but, as Mallaby writes, "If the greenback declines, China's government stands to lose a fortune." Having so much money tied up with the drunken sailors in Congress and the White House cannot be a comfortable situation (I know I'm not comfortable with it), so the Chinese have been looking for ways to get out from underneath the dollar without harming the investment they already have made in the currency.

I don't know if the Chinese can square that circle, but if they simply decide to stop digging the hold that they're in by not buying any more dollars, we'll be in serious trouble.

Posted by Paul Gessing at 11:10 AM | Permalink | Comments (0) | TrackBacks (0)

The Wall Street Journal had an excellent article about the negative impact of high marginal tax rates yesterday. The article discussed misguided efforts by politicians in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon to increase income tax rates on the highest earners within their respective borders. While politicians facing massive, spending-induced budget deficits are certainly eager to get their mitts on "excess" earnings of the "rich," the track record of these politicians in doing so without destroying wealth is rather spotty.

As the authors point out:

From 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. Over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

So, the truth is that the taxing and spending policies of America's most poorly run and rapacious states are simply pushing productive activity to more fiscally-responsible states like Texas. In fact, the authors point out, "Texas created more new jobs in 2008 than all other 49 states combined."

To the credit of New Mexico politicians, income taxes were not increased during the last legislative session although such a move was considered as part of the education tax hike effort that subsequently passed the House in another form. Despite his failings in other areas, Governor Richardson should be applauded for his role in reducing New Mexico's top income tax rate from 8.2 to 4.9 percent.

Posted by Paul Gessing at 01:38 PM | Permalink | Comments (0) | TrackBacks (0)

Recently, we at the Rio Grande Foundation released a study analyzing each of New Mexico's various film studies and their real economic impact. A letter to the editor on this report has published in this morning's Albuquerque Journal. Also, Jim Scarantino was interviewed by columnist Robert Nott for the Santa Fe New Mexican's "Pasatiempo" section. Check that interview out here.

Posted by Paul Gessing at 08:07 AM | Permalink | Comments (0) | TrackBacks (0)

Ever wondered whether New Mexico's film subsidies have a positive or negative impact on the state economy? We've certainly had a hunch for a long time that such targeted and generous economic incentives are unwise and not economically beneficial.

Well, now we know...and we were right. First, there was the Arrowhead Center Study which found that the subsidies provided a return of only $.14 on the dollar. Then there was the Governor's study by Ernst & Young which found returns of $1.50 on the dollar.

Now, there is a third study by the Legislative Finance Committee (LFC) that was buried. As our investigative journalist, Jim Scarantino discusses in his new report "A Modern Spaghetti Western: Shooting Holes in the Ernst & Young Study of Film Industry Subsidies," the LFC found numerous problems with the Ernst & Young Study.

Among the major problems:

* Instead of looking at payroll data, Ernst & Young utilized information collected from on-line and telephone surveys of the film industry – surveys coincidentally commissioned by a defensive Film Office. Furthermore, that information was collected at a time when the film industry was aware of the growing skepticism about the generous film subsidies they were receiving.

* Then Ernst & Young did something not seen in any other film industry study. They added in the income of millionaire movie stars, producers and directors, some of whom make 100 times or more the income of a film crew member. As a result, the average New Mexico film industry job income jumped to $91,396! That figure is also higher than reported in any other film industry study – higher than studies conducted in Louisiana, Arizona, Seattle, Florida, even New York City.

* Lastly, Ernst & Young excluded the cost to taxpayers of making interest-free loans to Hollywood. At a simple annual interest rate of 5% on a $15 million loan (the largest given out under the program), taxpayers are giving up $750,000 in interest annually. On a six-year loan, the loss to taxpayers exceeds $13 million. Yet, Ernst & Young completely excluded this enormous expense from its calculations of the cost to New Mexico of the film industry subsidies.

The fact is that New Mexico's film industry is not a money-maker for taxpayers and with $60 million being spent annually to attract the industry, legislators need to cap or reduce the generosity of these subsidies. Using the leftover money to cut taxes on all New Mexico businesses would be a nice way to use the money to increase economic growth.

Posted by Paul Gessing at 10:22 AM | Permalink | Comments (0) | TrackBacks (0)

Albuquerque Mayor Martin Chavez is accused of having retaliated against Bode Aero Services Inc., an operator at Double Eagle II airport on the city’s west side for the operator's unwillingness to provide the Mayor with free and discounted service.

Of course, what the Mayor is accused of doing is wrong. Being the Mayor should not entitle you to special treatment. But if the City privatized the airport entirely, would the Mayor even think about trying to get cut rate or free flights? I highly doubt it. Better still, according to the Reason Foundation, privatization can save between 15 and 40 percent while generating immediate revenue for cash-strapped governments.

Hopefully this apparent abuse of power will spur the discussion about real reforms rather than simply fading into the background as other scandals will inevitably come to light throughout New Mexico.

Posted by Paul Gessing at 02:40 PM | Permalink | Comments (0) | TrackBacks (0)

The Rio Grande Foundation released our latest story on the poor record of New Mexico's State Investment Council this week. The release can be found here and the full story is available here. The story was also covered on Joe Monahan's blog.

The gist of the story is as follows:

In 2004, at the urging of Governor Bill Richardson, the State Investment Council (SIC) loaned $9 million dollars to Earthstone International. Governor Richardson said he was “encouraged by Earthstone International’s pledge to create high-paying jobs in Doña Ana County.” The problem, Scarantino found, is that Earthstone appears to have used the state’s money to create jobs in Old Mexico and Arkansas instead of New Mexico.

Earthstone orignially pledged to construct a 200,000 square foot plant at Doña Ana County’s Santa Teresa border crossing. At least 200 new jobs were touted. In one report, Andrew Ungerleider, the company’s co-founder, said that plant would be operational within approximately 18 months from when the loan was approved.

In researching Earthstone and the company’s use of the $9 million loan the SIC made on behalf of taxpayers, Scarantino found that Earthstone never built a New Mexico plant. Instead, New Mexicans’ money has helped Earthstone shift money and jobs to Juarez, Mexico and Bentonville, Arkansas. The loan has never been repaid. In fact, it has been converted to an ownership stake in Earthstone itself.

Given this poor track record, it is clear that the SIC is in need of serious reform.

Posted by Paul Gessing at 03:49 PM | Permalink | Comments (0) | TrackBacks (0)

There is no doubt that AIG seems to be deliberately acting in ways to spur the moral outrage of politicians and taxpayers. If you are not completely familiar with the story as it stands now, click here.

New Mexico's own Sen. Tom Udall couldn't resist piling on, but he went a step further by explicitly threatening AIG. As economist Russell Roberts points out:

Udall doesn't like to see our money going to a bad cause. Unless it's friends of his. From KFDA in Amarillo:

As part of the $410 billion Omnibus Spending Bill, US Senator Tom Udall says he included over one million dollars for Eastern New Mexico industries.

Over $200 thousand is going to a dairy consortium so they can boost research on improved dairy production.

And more than $950 thousand is going to the Sapphire Energy Algae so that company can create and grow technology that turns the algae into fuel.

Udall says the algae company could create 100 jobs.

Love that word, "could." Can't wait to count them.

The Senator does not seem to understand that these two stories conflict with each other. AIG has failed to generate private capital to keep it afloat. It can only stay afloat with my money. AIG can't raise private capital because it has lost the trust of potential investors. They're bankrupt and exist only because of the government's largesse funded by taxpayers. Why would you want to repeat the same mistake with that dairy consortium and Sapphie Energy Algae? If they're good investments, let private investors take the risk and either reap the reward or lost their money. If they're bad investments, why am I being forced to pay for them?

To his credit, Udall voted against the original bailout bill, but the point remains that throwing taxpayer money at AIG is not much different from throwing taxpayer money at politically-connected companies that pledge to create jobs. If he and others in Washington (not to mention Santa Fe) understood this, we'd all be in much better shape.

HT: Harry Messenheimer

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Economist Scott Moody recently analyzed state and local government employment for The Rio Grande Foundation. An opinion he wrote on his findings is available here.

Posted by Paul Gessing at 06:32 PM | Permalink | Comments (0) | TrackBacks (0)

Most New Mexicans are abundantly aware that the Rio Rancho Star Center has quickly turned into a white elephant. The City of Rio Rancho recently took over management of the facility, in part because the Center has lost an astounding $580,000 since it opened in 2006 (this does not include the $36 million in bonds floated to finance the arena). Not to be outdone, Albuquerque Mayor Marty Chavez wants Albuquerque to build an arena of its own and is looking for a handout from Washington to do it.

As if to symbolize the waste that often results from investment in sports arenas and stadiums, it was reported today that the famous "Bird's Nest" stadium where the Olympics were held is being abandoned and turned into a shopping complex. So much for China as a role model! Rather than wasting taxpayer money on centrally-planned boondoggles, arenas, like most other projects, should be built by the private sector when there is adequate demand. Otherwise, our governments will waste massive amounts of our tax money ($450 million in the case of the Bird's Nest)

Posted by Paul Gessing at 10:36 AM | Permalink | Comments (0) | TrackBacks (0)

A few days ago I discussed the generous incentives that have been used to attract filmmakers to New Mexico. I've had several questions about which study I believe to be more accurate and unequivocally I say the Arrowhead Center Study which was done at the request of the Legislative Finance Committee, not the Ernst and Young study, is closer to the truth. But, we have been talking about these subsidies for the film industry for a long time (see this entry from 2004) saying that they are bad public policy and should be eliminated.

But what about an objective, outside opinion on the studies' relative merits. Here is an interesting analysis from "The Contrarian." A couple of choice quotes from the posting indicate the reasons to be skeptical of the Ernst & Young study:

It’s hard to explain the discrepancy without culling through footnotes and looking at the methodology and data used. But the study commissioned by the governor’s office might be slightly more suspect, given the political and economic capital Richardson has invested in the issue. Even the pro-subsidy report concedes that the direct economic benefits don’t make up for the foregone tax revenue, dollar for dollar. But it manages to find a net benefit by estimating the present and future impact of "film tourism.”

Does anyone really choose New Mexico as a vacation destination because some scene in an Indiana Jones movie was shot there? Possibly. But this seems a slender thread on which to hang a program that has handed out an estimated $67 million in tax breaks since 2003. And does Steven Spielberg really need the handout? I think not.

Posted by Paul Gessing at 09:34 AM | Permalink | Comments (0) | TrackBacks (0)

Something I blogged about at the start of November and included in our "2008 Piglet Book" has finally been picked up by the Associated Press.

The story, which was reported in the Albuquerque Journal on Sunday is that New Mexico's film Incentives hurt our economy rather than helping it. While the fact that that New Mexico's generous film incentives are economically dubious has been known for some time, I say "better late than never." And the story includes some good reporting including the following:

More than 40 states have film incentives and they have been scrambling to out-do one another, said Frank Hamsher, a public policy consultant from St. Louis. Michigan offers a production rebate of a whopping 42 percent.

“It’s like poker. They see the last bid and they up it a bit,” said Hamsher, who spoke on the subject at a recent meeting in San Diego sponsored by the Western States Arts Federation.

Fickle filmmakers, meanwhile, are chasing the next best deal, he added.

Most states haven’t taken a hard look at what’s being spent, what taxpayers are getting in return, and how sustainable it is, Hamsher said.

We'll see if the Legislature decides that overly generous film incentives will face reductions in tougher economic times with the state facing a massive budget deficit.

Posted by Paul Gessing at 05:52 PM | Permalink | Comments (0) | TrackBacks (0)

As I wrote on this site a few days ago, Albuquerque Mayor Marty Chavez is asking incoming President Barack Obama for a $1.6 billion bailout. Obama has already pledged to "invest" in infrastructure, so Mayor Marty is just getting his, right?

Unfortunately, as Kristina Rasmussen of the National Taxpayers Union points out in a recent article by columnist Cal Thomas: "Total cost of the wish list is $73,163,299,303. They claim this will create an estimated 847,641 jobs in 2009 and 2010. Divide that out, and you get a cost to taxpayers of $86,314 per job. Not exactly a great deal." It seems like the plan simply shuffles the deck chairs on the Titanic rather than providing any "stimulus."

As Mayor Marty has figured out, much of this spending represents nothing but pork and other projects, like the Albuquerque streetcar, that would not otherwise receive funding if the issue was left to local politicians and voters. Once Santa Clause (the feds) agree to pay, all restraint is abandoned.

As if to summarize the wrongheaded economic thinking associated with this money grab, Forbes recently named Albuquerque one of 5 "Obama Boomtowns" that are expected to benefit from the "stimulus." Perhaps Forbes will raise a more important question next time "Which taxpayers and small businesses will lose out the most as massive amounts of their money is wasted on these boondoggles?" Unfortunately, I have a feeling this group includes all of us.

Posted by Paul Gessing at 09:04 AM | Permalink | Comments (0) | TrackBacks (0)

On Sunday there was an interesting article in the Albuquerque Journal explaining that legislators have found $173 million worth of unspent funds that could be re-allocated for other uses. While the opportunity to re-allocate unspent funds that would have otherwise been wasted on a $22.3 million equestrian center would seem like a good thing, Ed Sandoval is skeptical. He is quoted in the article as saying "Capital outlay in essence drives the economy...we've got to be careful how we do this."

Certainly, care is important whenever legislators are dealing with millions of taxpayer dollars, but the idea that the capital outlay process "drives" the economy is truly a joke. The private sector drives the economy and people like Sandoval (politicians) suck off of our productive activity and re-distribute it to others, often with highly unproductive results. Does anyone really believe that they couldn't spent $22.3 million more effectively than the state has plans to do for this equestrian center?

In the best of times Sandoval's economic ignorance should be of concern. In today's economic situation, Sandoval's ideas are truly dangerous.

Posted by Paul Gessing at 08:43 AM | Permalink | Comments (0) | TrackBacks (0)

Having been out of state for much of this week, it has been tougher to follow the action locally, here in New Mexico, but I did see this great article from the Wall Street Journal from Wednesday. The authors' essential argument is that while we expect Congress and corporations to behave badly, we have seen an unfortunate abandonment of principle from many economists relating to the spate of bailouts and the role of government in having created the current economic malaise.

As the authors conclude:

Our desire for a principled approach to this crisis does not arise from an academic need for intellectual coherence. Without principles, policy makers inevitably make mistakes and succumb to lobbying pressure. This is what happened with the Bush administration. The Obama administration can do better.

Principle, especially relating to limited government, is more important than ever these days. Usually economists are among the most principled members of society, but supporters of bailouts and arbitrary, massive government spending have debased the field.

Posted by Paul Gessing at 04:39 PM | Permalink | Comments (0) | TrackBacks (0)

While all these bailouts are economically dubious from a policy standpoint, Charles Krauthammer points out that their real danger is in shifting the emphasis of business from economic success and innovation and to political lobbying. What he doesn't state explicitly is that President Bush is largely responsible for the shift. He does point out that it will be up to Obama and the Democrats to further these changes or return to the market.

Posted by Paul Gessing at 11:58 AM | Permalink | Comments (0) | TrackBacks (0)

Despite tough economic times and plummeting oil and gas prices, Texas maintains an $11 billion surplus (without forcing its citizens to pay an income tax). As this article points out, despite the surplus, politicians in the Lone Star State are not calling a special session to spend the money, unlike the Governor of a neighbor of Texas. According to the article, in Texas "new spending by lawmakers will be capped at about 9.1 percent over the current two-year budget." New Mexico grew spending by this much in one year during the recent oil and gas boom.

Perhaps that is why the average Texan makes more than $5,000 more than the average New Mexican annually???

Posted by Paul Gessing at 08:16 AM | Permalink | Comments (0) | TrackBacks (0)

It looks like the endgame may finally be near for Albuquerque-based Eclipse Aviation. According to KOB TV, Eclipse employees found out that they won't be receiving paychecks from their past two weeks of work. With no money to pay employees, it would seem doubtful that the company can go on much longer -- how long would you keep showing up for work if you weren't being paid?

As Jim Scarantino has pointed out, if/when Eclipse goes under, taxpayers will be out $20 million. Nonetheless, I sincerely hope that Governor Richardson and our "economic development" gurus don't decide to double-down on this taxpayer loss by bailing out the failing company.

While it is sad that so many people will likely lose their jobs and New Mexico's economy will take another body blow, the lesson learned must be that government's role in economic development should be to create an economically-viable and equitable tax structure rather than attempting to pick and choose "winners" of government largesse. Those "winners," like Eclipse, often are engaged in risky businesses that would otherwise not attract private investment and when times are tough, they are unable to survive.

Perhaps Eclipse will pull through on its own. It would be great if it does. Unfortunately, it is not looking good right now.

Posted by Paul Gessing at 09:54 AM | Permalink | Comments (0) | TrackBacks (0)

Regardless of what happens on Election Day, New Mexico is facing a tougher economic climate than it has faced in quite some time. We will be front and center with solutions to reduce the budget and ensure that economically-devastating tax hikes are not foisted on already reeling New Mexico taxpayers.

To this end, we have been critical of the state's giveaways to the film industry. More articles and analysis are available on our website and blog. Recently, I found an analysis from the Arrowhead Center which is the economic research arm of New Mexico State University. Unlike so many other economic "analyses" done in this state, the Arrowhead Center takes a clear and unbiased look at the New Mexico film industry.

Some of its findings are not pretty and, not surprisingly went unreported in the media. Regarding the state's 25% film production rebate (filmmakers receive 25% of their taxable expenses back as a rebate from taxpayers), meaning if you take your film crew out to dinner after a shoot and spend $1,000, New Mexico taxpayers pick up 25% of the tab. According to the study:

During fiscal year 2008 the NM government granted $38.195 million in rebates. The resulting increase in economic activity generated $5.518 million in revenues. The implied return is 14.44 cents on the dollar. This means that for every one dollar in rebate, the state only received 14.44 cents in return.

14 cents on the dollar? Even if you are not good at math, it is clear that the film industry tax credit is nowhere close to paying. Rather than wasting money on film subsidies, we should have been cutting taxes on all New Mexicans. With a fiscal crisis in the making, the least the Legislature can do is cut this program back significantly.

Posted by Paul Gessing at 08:23 AM | Permalink | Comments (0) | TrackBacks (0)

Check out this excellent article (by a self-described liberal) which explains how Fannie and Freddie are at the heart of the current economic crisis and explains how the media is all too eager to blame "free markets" for government failure.

On a related note, the National Taxpayers Union and Competitive Enterprise Institute have set up a website called Beyond Bailouts. You can sign the petition in support of the following steps to make sure a similar government-caused financial crisis never happens again.

* Privatize Fannie and Freddie
* Prosecute Corrupt Officials
* Suspend Destructive Accounting Rules
* Repeal the Community Reinvestment Act
* Clean Up the Tax Code

Posted by Paul Gessing at 02:23 PM | Permalink | Comments (0) | TrackBacks (0)

The Washington, DC-based Cato Institute is a libertarian think tank. While not always in alignment with them on policy, we at the Rio Grande Foundation have a great deal of respect for Cato and work with them on a regular basis.

Recently, Cato published its ranking of governors. The study which is in pdf format can be found here. According to the study's findings which analyzed tax and budget policies of America's governors gave Florida's Charlie Christ the highest marks and gave Maryland's Martin O’Malley the worst rankings. Our own Governor Richardson fared relatively well in the rankings scoring a "B" on the A through F scale. Richardson was ranked 10th with high marks given for his tax cuts and poor marks for out-of-control spending.

Unfortunately, the study did not include VP candidate Sarah Palin because Alaska's very unique budgetary practices and access to tremendous oil and gas revenues make direct comparisons with other states quite difficult.

Posted by Paul Gessing at 03:56 PM | Permalink | Comments (0) | TrackBacks (0)

It seems like only yesterday that Congress and all manner of people who are ignorant of basic economics were bashing oil and gas companies for their supposed efforts to manipulate prices and keep them high. Now, with the global economy on the skids, crude prices are plummeting right along with the stock market and are likely to keep dropping.

So, the question must be asked: where are the speculators and manipulators? If Exxon has an iron lock grip on the prices it charges for its product, why aren't they keeping them high or at least stabilizing them? The simple fact in is that they don't control prices; they are "price takers."

While the information above is simple economics, the more interesting issue is how the collapse in oil and gas prices will impact New Mexico's budget and economy. Months ago I wrote about the impact lower oil and gas revenues could have on New Mexico. It would appear that the chickens are coming home to roost.

Posted by Paul Gessing at 08:25 AM | Permalink | Comments (0) | TrackBacks (0)

According to the new U.S. Economic Freedom Index 2008 Report which was co-published by the California-based Public Research Institute and Forbes, New Mexico is less economically-free than most states (as indicated on the chart on page 11, it is ranked 41).

There is no question that New Mexico lags in economic freedom and that it relies heavily on the federal government for its daily bread, but this information is particularly interesting considering that Forbes is one of the sources. After all, the magazine has written glowingly of Albuquerque as a place for doing business. Albuquerque is certainly not dramatically freer than the rest of the state, so what is the disconnect?

Does Forbes not believe that economic freedom is integral to business? If they believe that, then I'd urge them to take a look at this international index of economic freedom. More likely, it just seems that the writers of those puff-pieces on Albuquerque simply don't understand economics and they are basing their recommendations on the amount of handouts our local governments give to those who know how to lobby properly or have the right connections.

Posted by Paul Gessing at 02:56 PM | Permalink | Comments (0) | TrackBacks (0)

Rarely will you ever see a more fact-base and easy to understand analysis of everyday economic issues than RGF Board member and Director of Research Ken Brown's opinion piece on the pages of the Albuquerque Journal today.

Brown explains the "broken window fallacy" and why so-called "economic development" simply does not work. Copies of this piece should be mandatory reading for all elected officials in New Mexico and beyond. The Rio Grande Foundation will distribute this piece to all New Mexico legislators before the 2009 session.

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We at the Rio Grande Foundation spend a vast majority of our time analyzing and discussing New Mexico-specific issues and policies. But, I was given a chance recently by a national syndicate to write an opinion piece on Barack Obama's tax plan.

With wall-to-wall coverage of the conventions and the campaigns, I humbly submit my $.02. Check the article out here.

Posted by Paul Gessing at 09:17 PM | Permalink | Comments (0) | TrackBacks (0)

City Councilor Michael Cadigan has an op-ed in today's ABQ Journal that defends the City's practice of charging http://www.cabq.gov/council/impact-fees">"impact fees" on development. The opinion piece was in response to Councilor Sanchez who recently questioned the economic impact of these fees when he said, "fees for the west end of Central Avenue are nine times higher than on the east end," and that he's "concerned that we are not getting commercial development ... because of the way the impact fees work."

Certainly, I understand why builders don't like impact fees. We as citizens are paying taxes on a wide variety of items and yet, those who construct new buildings and developments must pay and then pass along these fees to those who purchase or lease that space. Whether or not there is any direct benefit to these people is unclear. Where the money goes that would have otherwise been allocated to this newly developed area is also unclear.

Ultimately, the problem with impact fees is that it is hard to tell who exactly benefits from them. What needs to happen is for builders to band together to construct their own internal infrastructure. Perhaps they could strike a deal with the government along the lines of a Business Improvement District that would handle such infrastructure needs privately? The problem is, once the government gets involved, there is no accountability or ability to separate "impact fees" from other taxes and spending and those who pay the fees wind up just paying another tax.

City Council is not going to solve this problem because they like taxes. Only the local development community can push Council to get rid of or limit these fees while also taking care of infrastructure needs.

Posted by Paul Gessing at 04:09 PM | Permalink | Comments (0) | TrackBacks (0)

We at the Rio Grande Foundation took the position earlier a few weeks ago on this blog that the Belgian company InBev should have the right to purchase Anheuser-Busch. Unfortunately, the purchase of InBev was not simply an example of the free market at work. Instead, the takeover was at least partially the result of America's high corporate taxes.

As Stephen Moore and Tyler Grimm pointed out recently in the Wall Street Journal:

According to the Tax Foundation, Belgium 's corporate tax rate is 33%, but the effective tax rate can be half the nominal rate thanks to adjustments for something the OECD calls a "notional allowance for corporate equity." Bottom line: InBev was paying around 20% of its profits in corporate taxes, compared to Anheuser-Busch's rate of 38.4%.

Things have gotten pretty bad when U.S. companies relocate to Europe to cut their tax payments. But a research analysis by Morgan Stanley finds the combined company's corporate tax bill will be lower than in the U.S. and that the tax differential indeed figured into the economics of the sale...

New data from the OECD for 2008 indicate that the international average for corporate tax rates fell by another percentage point last year, meaning the U.S. is pricing itself out of the market as a corporate headquarters. " America 's 35% corporate tax rate is not just bad economics, it's downright unpatriotic," says tax expert Kevin Hassett of the American Enterprise Institute.

High taxes have an impact not only when American companies leave for lower taxes, but when New Mexico businesses move out of state or to other nations for lower taxes. This is a real issue and we need to address it both in Santa Fe and Washington.

Posted by Paul Gessing at 11:08 AM | Permalink | Comments (0) | TrackBacks (0)

If you missed today's episode of "Eye on New Mexico," I discussed the proposed arena/convention center expansion with UNM professor Kate Krause this morning. Video of the show is available here. Considering that she was supposed to be a supporter of the project, Krause certainly comes off as sharing my healthy skepticism of the proposed project.

Posted by Paul Gessing at 12:51 PM | Permalink | Comments (0) | TrackBacks (0)

As mentioned in previous postings, I spoke at the New Mexico First town hall on the proposed taxpayer-financed arena and hotel in downtown Albuquerque. The event was covered in both the Albuquerque Journal and on KOB TV (article and video available).

Posted by Paul Gessing at 09:59 AM | Permalink | Comments (0) | TrackBacks (0)

Bad ideas never die. Thus, Albuquerque taxpayers were greeted with the headline "Downtown Arena Revisited," this morning. While the article explains much of the story, you can only read it if you subscribe to the Journal. Thankfully, the story was covered elsewhere including KOB TV.

Certainly I knew that even though I'd debunked the need for a taxpayer-financed arena in Albuquerque a year and a half ago, Council will tonight vote on whether to spend $700,000 taxpayer dollars to study the issue. Obviously, since the arena and hotel complex are projected to cost at least $330,000, an expenditure of "only" $700,000 is a relative bargain. But we need to nip this rip-off in the bud.

The existing arena in Rio Rancho is struggling and, while that is far away from downtown, it certainly does not bode well for a competing arena in Albuquerque. Tingley Coliseum is also experiencing problems. Another arena is simply not necessary. Worse, the plan is to "double-down" a possible arena mistake by forcing taxpayer to subsidize hotel construction downtown. Why should taxpayers subsidize another hotel downtown when a vast majority of the hotels in this city (if not all) receive no such support?

Downtown is not just surviving; it is thriving. If a private entity wishes to build an arena or hotel anywhere in the city, Council should work with them, but demanding taxpayer support for this project is simply wrong and a waste of money.

Posted by Paul Gessing at 09:57 AM | Permalink | Comments (0) | TrackBacks (0)

Recently, I discussed our new study on eliminating New Mexico's personal income tax with Alan Riehl on Las Cruces radio station KSNM 570AM. You can listen to the show here.

If you'd rather read a short, 700 or so word article about eliminating the personal income tax, you can read that here.

Posted by Paul Gessing at 03:10 PM | Permalink | Comments (0) | TrackBacks (0)

In case you missed it -- or you were not at our luncheon event with John Stossel yesterday -- the Rio Grande Foundation's Ken Brown appeared on the front page of yesterday's USA Today discussing the propensity of the federal government to continue to hire and grow even as private employers cut back in a tough economy. While some "economists" view this as a good way to mitigate tough economic times, Brown more accurately points out that the problem is that governments are much slower to react to economic conditions than other actors in the economy.

Posted by Paul Gessing at 09:27 AM | Permalink | Comments (0) | TrackBacks (0)

John Stossel, who will be speaking tomorrow in Albuquerque at an RGF-sponsored event, questioned in a recent article the chicken little perspective being foisted on the American people by the media and their political leaders.

It is easy to see that the media benefits from hyperventilating about supposed crises we're now facing -- after all, a crisis is interesting and draws viewers. Who else benefits from a crisis? Politicians and big government, of course! Government is often looked to as the solution to supposed crisis (the Great Depression would be a great example) and bigger government means more power for government officials. Thank you Mr. Stossel, for giving us all a chill-pill.

Posted by Paul Gessing at 05:37 PM | Permalink | Comments (0) | TrackBacks (0)

You may have read my blog posting yesterday which discussed Governor Richardson's campaign debt and drew a connection between the fiscal irresponsibility of our politicians and the citizenry as a whole. It turns out that I was being a bit hard on the spending and borrowing habits of my fellow Americans. As Harry Messenheimer pointed out in a few emails, the fact is that American consumers are not in nearly as bad of shape as the mainstream media would like us to believe.

Debt as an aggregate figure is irrelevant. What really matters is real net wealth -- and it is way up and continues to climb. Indebtedness is simply a number and it can simply mean that more people are buying houses. So, there you have it. Government debt is relevant and rising dramatically. Debt as a simple number is not a good measure of the average Americans' real economic picture.

Posted by Paul Gessing at 04:42 PM | Permalink | Comments (0) | TrackBacks (0)

I've long believed that personal financial management and government fiscal policy are closely related. In other words, it is no coincidence that American families owe $14 trillion in debt and that the US government is $9.4 trillion (not to mention $40 trillion in un-funded government liabilities).

This overlap is also apparent among specific politicians. Take Bill Richardson for example. His Presidential campaign was unsuccessful, but because he spent more money than his campaign actually raised, he is now sending out desperate fundraising messages to his supporters asking him to pay off his $380,000 debt. At the same time, he's only contributed $2,300 to his own bid for the White House. I didn't give Bill any of my money, but even if I had done so, I'd be taken aback at his plea for more when he's already dropped out. Does this tendency to stick others with the bill sound familiar, like perhaps New Mexico's economy after Richardson leaves office and the Rail Runner starts sucking up tax dollars?

Winding up in debt and desperate for help does not bode well for Richardson's political future or New Mexico's economic outlook.

-Hat tip, Harry Messenheimer

Posted by Paul Gessing at 05:10 PM | Permalink | Comments (0) | TrackBacks (0)

"A lot of you are going to have to make decisions above your level," was Scott's message to his people. "Make the best decision that you can with the information that's available to you at the time, and above all, do the right thing." This quote from Lee Scott, the chief executive officer of Wal-Mart, was made to his employees shortly before Hurricane Katrina made landfall illustrates the mind set the company took prior to the greatest natural disaster in American history which allowed the company to succeed where the Federal Emergency Management Agency failed.

According to a new study by Steven Horwitz, an Austrian-school economist at St. Lawrence University in New York, the entrepreneurial mentality of Wal Mart's employees allowed them to excel while indecision paralyzed their highly-paid, "expert" colleagues in the federal government. A few of the specific acts of "heroism" or at least tremendous individual initiative on the part of certain Wal Mart employees:

In Kenner, La., an employee crashed a forklift through a warehouse door to get water for a nursing home. A Marrero, La., store served as a barracks for cops whose homes had been submerged. In Waveland, Miss., an assistant manager who could not reach her superiors had a bulldozer driven through the store to retrieve disaster necessities for community use, and broke into a locked pharmacy closet to obtain medicine for the local hospital.

Among the recommendations of Horwitz's study designed to improve the response to future natural disasters:

1. Give the private sector as much freedom as possible to provide resources for relief and recovery efforts and ensure that its role is officially recognized as part of disaster protocols.

2. Decentralize government relief to local governments and non-governmental organizations and provide that relief in the form of cash or broadly defined vouchers.

3. Move the Coast Guard and Federal Emergency Management Agency (FEMA) out of the Department of Homeland Security (DHS).

4. Reform "Good Samaritan" laws so that private-sector actors are clearly protected when they make good faith efforts to help.

Posted by Paul Gessing at 01:00 PM | Permalink | Comments (0) | TrackBacks (0)

A recent article in the Las Cruces Sun-News outlining a new $1.9 million award by the U.S. Department of Labor to Doña Ana Community College's nursing program caught my attention. As the article points out in its opening paragraph, nurses are in high demand and have been for some time. In fact, some would say there is a shortage of nurses.

Much later in the Sun-News piece, however, David Pearse, dean of health and public services at DACC, tells us that "there are typically 200 applicants each semester for 24 slots in the nursing program. That means we are turning away 176 students each semester." That is where the $1.9 million from the feds comes in.

So, is there some kind of market failure here? Not likely, especially in two heavily-socialized areas of our economy like health care and education.

The reality is that in a "free" market in health care and education, nurses would likely be paid enough that no shortage would exist. Places of learning would spring up to fulfill the demand to educate nurses who would be happy to pay for the education necessary in order to get into the field just as they do for other fields.

Unfortunately, in the absence of anything resembling a "free" market in health care and medicine, nurse's salaries are apparently too low, thus creating a shortage and the need for federal subsidies to educate them. Clearly, this is not ideal.

Posted by Paul Gessing at 03:02 PM | Permalink | Comments (0) | TrackBacks (0)

New Mexico has come to be known for its extremely generous subsidies for the film industry. In fact, the New Mexico Film Office recently publicized the "fact" that the state's film industry has generated $1.5 billion for the state economy.

While there is no proof that New Mexico's generous subsidies are good for the economy, other states like Michigan are hoping to lure films with even more generous subsidies. Of course, neither Michigan nor New Mexico are paragons of economic achievement. In fact, while Michigan's economy and personal incomes continue to lose ground to states like Alabama, it has a long way to go before it falls to New Mexico's low level.

While Michigan's auto industry is likely to continue that State's economic decline, attracting a relatively small film industry with generous subsidies is not likely to turn things around. After all, it is oil and gas revenues that have given New Mexico a bump in recent years, not the film industry. Hopefully these two economically-struggling states are smart enough not to get involved in a bidding war.

Posted by Paul Gessing at 03:01 PM | Permalink | Comments (0) | TrackBacks (0)

Harold Meyerson is the resident left-wing "economist" at the Washington Post. Since the Post's columnists often run in the Albuquerque Journal, New Mexico readers often have the pleasure -- or displeasure -- of reading columns from writers including Meyerson, E.J. Dionne, Robert Samuelson, and George Will to name just a few.

Meyerson's most recent piece which appeared in our papers on Monday of this week discusses the "fact" that the American economy no longer produces anything, rather, Americans simply consume goods produced in other countries. He blames both Wal Mart and our nation's lack of a labor-driven "industrial policy" for these supposed problems.

The fact is, contrary to Meyerson's assertions, that industrial production in the United States does continue to grow. Employment in the sector has shrunk over the years, but largely as a result of productivity gains. Can Meyerson really show that it is economically unhealthy for Americans to consume more of their domestic production than other nations? It would seem that our low unemployment and high personal incomes would be good things, not bad.

Of course, with some people, regardless of the problem, the solution must be bigger government. So it is with Meyerson who believes it is time to institute a National Industrial Policy. He seems to think that Obama and Hillary will do this, but I doubt these savvy politicians will fall prey to that siren song. National Industrial Policy didn't work for the Soviet Union and it won't work here.

Perhaps the Journal should more carefully screen what it accepts from the Washington Post?

Posted by Paul Gessing at 01:13 PM | Permalink | Comments (0) | TrackBacks (0)

To those who don't take a great deal of interest in economics, the concept of the Laffer Curve may make their eyes glaze over. That said, the concept is really quite simple and has a huge impact on our daily lives. A group called the Center for Freedom and Prosperity Foundation is working to educate Americans on the Laffer Curve and other important concepts by producing short videos to educate Americans on basic economic concepts.

Laffer's Curve is essentially a theory of how individuals acting in a free market react to the incentives created by tax policies provides the basic underpinnings of today's tax system. It provides a partial explanation as to why certain Eastern European nations are adopting flat taxes and becoming economically prosperous almost overnight.

Check out the two short videos on the Laffer curve Part I here and Part II here.

Posted by Paul Gessing at 01:37 PM | Permalink | Comments (0) | TrackBacks (0)

Regular readers of this know that while economists support business and economic growth, there are right ways and wrong ways to go about it. The right way is low, equitable taxes for all while the wrong way is largesse for a few which often results in higher taxes for others. Over the weekend, the New Mexico Film Office released figures stating that the industry generated $1.5 billion for the state. I'm not going to question that number. It would be impossible to state definitively that it is wrong.

On the other hand, I can also state unequivocally that bribing the film industry to come to the state was not the most efficient use of our tax dollars. That point was proven more than 150 years ago (by a Frenchman no less) Frederic Basiat. Speaking to the primary difference between a good economist and a bad one, Bastiat said, "The bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, - at the risk of a small present evil."

I'm not calling the film industry "evil," but I do think it is both immoral and bad policy to take money from low and middle income (not to mention wealthy) taxpayers in order to give it to wealthy filmmakers on the possibility that bringing them to the state will generate a few jobs and tax revenue. Across the board cuts in the gross receipts or income tax would have been far more economically efficient (no waste, no special office to distribute the money), not to mention being more just.

I don't wish the New Mexico film industry any ill will, just that they'd stop taking my money.

Posted by Paul Gessing at 02:08 PM | Permalink | Comments (0) | TrackBacks (0)

Gil Heredia is running for District 7 in Alamogordo. Unlike so many politicians who feel that the only way to improve city services is to raise taxes, Heredia is advocating private sector solutions that are likely to reduce Alamogordo's tax burden (which is heavier than other Southeast New Mexico cities) while improving service delivery at the same time. He outlined some of his ideas including privatizing municipal golf courses and the city-owned airport -- most of which are applicable in cities large and small -- in an article in the Alamogordo Daily-News.

Candidates for local office across New Mexico should be encouraged to borrow Heredia's ideas on limited government. Heredia should be commended for his efforts and innovative approach to governance.

Posted by Paul Gessing at 06:56 PM | Permalink | Comments (0) | TrackBacks (0)

A story in this morning's Albuquerque Journal (subscription required) provides a case study that perfectly illustrates some of the biggest pitfalls of state-managed "economic development."

First and foremost, having lured the Malaysia-based Green Rubber Global to the state with $2.9 million in subsidies, the plant's opening had been delayed for technological issues. This is the first major problem with state-managed development -- government bureaucrats and politicians don't know what the next "big thing" will be and, since they are not risking their own money, have fewer incentives to find out. So, we have a state poised to spend millions of dollars to fund a company with technology that may not be commercially viable. Sound a bit like another New Mexico investment in Tesla?

Today's article is really about the fact that the city of Gallup -- where the Green Rubber plant was supposed to be built -- and Governor Richardson, who decided singlehandedly to de-fund the project after a disagreement developed over which governing body was supposed to manage Red Rock Park. Sound a bit immature to you? The state is supposedly going to have a new company creating hundreds of jobs for people in a relatively impoverished area and the Governor pulls the funding over management of a state park?

Of course, that is another major problem with state-managed development -- they are inherently political and nature and policies can be changed on a whim. Businesses are more likely to demand higher subsidies in order to come to New Mexico because policies may change anytime.

Regardless of the ultimate success or failure of Green Rubber and Tesla, New Mexico must abandon state socialism and instead develop the state economy by means of lowering taxes and adopting fair and equitable regulatory policies. Only then will New Mexico achieve its potential.

Posted by Paul Gessing at 12:34 PM | Permalink | Comments (0) | TrackBacks (0)

The economy is on the front pages of newspapers and at the top of most newscasts nowadays (at least it has replaced Britney Spears' misadventures). President Bush and Congress agree that a so-called "stimulus package" is necessary, but each have their own ideas on what the package should contain.

Unfortunately, election time is known in Washington as the silly season and from an economic standpoint (as opposed to a political one) a stimulus is at best economically unnecessary and at worst harmful. Robert Samuelson writing in the Washington Post and argues, quite correctly in my opinion, that much of what passes for economic commentary these days is simply hysteria.

Steve Stanek of the free market Heartland Institute also criticized the idea of a stimulus, writing "lawmakers should rein in federal spending and approve long-term tax reductions that apply to everyone, not just to people in certain income brackets."

I agree 100% with Stanek. Temporary stimuli are not what the economy needs. Rather, making President Bush's tax cuts which are set to expire in a few years permanent would be a good first step. Slowing government spending growth would also be better than what this stimulus amounts to which is the economic equivalent of simply dropping money from the skies.

Posted by Paul Gessing at 03:36 PM | Permalink | Comments (0) | TrackBacks (0)

Dan Mayfield, a columnist in the Albuquerque Journal, writes in today's paper about New Mexico's growing film industry and argues that policymakers should keep the spigot open by not limiting the amount of money the state dishes out.

You see, the current rebate program pays up to 25 percent on all direct production expenses that are subject to taxation by the state. So, if your film company spent $20 million here, you could get a $5 million rebate. This is a refund, not a credit, on the full amount of the expenditure, not just the tax portion. When you think about it, that is an amazing subsidy and it is coming out of taxpayers' pockets whether the film makes any money or not.

Sure, the film office estimates that the industry has spent $496 million here since January 2003, but what industry would not grow and spend more money if taxpayers reimbursed it for 25 percent of their expenses? No one knows, but I can say with relative certainty that New Mexico would have been better off, instead of spending $70 million over the last five years and offering generous tax breaks to the film industry, if that money had been returned to the economy through a broad-based gross receipts or income tax cut.

Unfortunately, when taxes are cut across the board and equally for everyone, it is more difficult for politicians to take credit for the creation of a new industry out of whole cloth. Thus, while Richardson ran for President on his targeted tax credits, he left out the positive impact of his income and capital gains tax cuts (even though some hikes offset those cuts, they were still more economically beneficial than any tax credit).

Politically, it looks like generous film subsidies are here to stay. The industry has these policies in place and is going to be a powerful force. It will be interesting to see what the state's cost-benefit analysis looks like.

Posted by Paul Gessing at 08:23 AM | Permalink | Comments (0) | TrackBacks (0)

The unfolding drama over TIDD's and the subsidization of so-called "green field" development got even more interesting yesterday as Albuquerque Mayor Marty Chavez released his veto of Councilor Cadigan's bill that would limit TIDD to use in existing areas of the City. The text of the veto can be found here.

While the Foundation is skeptical of TIDD, especially for new development, an interesting story caught my attention in yesterday's Albuquerque Journal (subscription required). It turns out that Councilor Cadigan would like to see the Albuquerque-Bernalillo Water Authority -- an organization that is almost completely unaccountable to the public -- play a bigger role in putting the brakes on local development. This is obviously a bad idea as the Journal pointed out in a subsequent editorial. According to the Journal, the water board should stick to providing water for area residents and not get into development questions. We wholeheartedly agree.

Unfortunately, while TIDD would seem to be unnecessary, it looks like both the pro and con sides of the argument have their proverbial hands in the coercion cookie jar. The pro-TIDD side wants development (preferably so-called "smart growth") and is willing to force the rest of us to subsidize their wishes. Some on the anti-TIDD side including Cadigan seem to want to stop all growth and have latched onto the TIDD issue as a means of throwing a wrench into things.

It would seem obvious that Mesa del Sol and Suncal could would thrive on their own merits if they were allowed to develop in ways demanded by the market, but contrary to environmentalist claims, most Americans don't want to live in new urbanist "paradise." Thus, the companies engaged in developing these areas appear to want subsidies in order to hedge their bets against failure.

What a mess! I wish we could all get back to the free market!

Posted by Paul Gessing at 10:20 AM | Permalink | Comments (0) | TrackBacks (0)

Although we don't always agree with the left-leaning 1000 Friends of New Mexico, this article on the hidden costs of TIDD is a must-read. TIDD for urban redevelopment is of questionable benefit because it would be so much more efficient to eliminate harmful government policies. Subsidizing politically-correct "new urbanist" developments in greenfields is nothing more than corporate welfare.

Posted by Paul Gessing at 01:55 PM | Permalink | Comments (0) | TrackBacks (0)

It wasn't the most prominent story in this morning's newspaper, in fact, if you didn't read the Business Outlook section closely, you probably missed it. The story is that the taxpayer-financed Santa Ana Star Center in Rio Rancho is losing money. (subscription required) Of course, I just noticed that the Tribune reported this story a week ago...

Anyway, while backers expected the arena to earn $1.6 million in its first year, the arena actually lost $47 million. Poor attendance at minor league hockey games and the "newness of the arena" were blamed, but new facilities usually result in more fans and profits, not less, so I don't see the situation turning around anytime soon.

it is no surprise to anyone who follows public financing of arenas or railroads and streetcars that the cost estimates and profits are low-balled early to get the public to commit and then the costs are jacked up once it is too late to turn back. We're seeing it right now with the Rail Runner. Thankfully, it looks like Albuquerque Mayor Marty Chavez will be too distracted (subscription required) with other activities to spend his time wasting taxpayer money on arenas and streetcars.

Posted by Paul Gessing at 11:03 AM | Permalink | Comments (0) | TrackBacks (0)

New Mexico has a statewide smoking ban and both cities and states around the nation have adopted similar bans (Albuquerque banned indoor smoking in 2003, while New Mexico was the 17th state to do so). But what are the economics of these bans? In 2004, two economists, Benjamin Alamar and Stanton Glantz produced a paper which argued that legislated smoking bans are actually beneficial to the bars and restaurants that must ban smoking.

Although we at the Rio Grande Foundation have not done extensive research on smoking bans, the findings seemed to be counterintuitive. After all, if banning smoking was really good for business, you'd think more restaurants and bars would be doing so in order to attract customers in a very competitive industry.

Well, an economist named David Henderson, writing in Econjournalwatch, has poked holes in the argument that smoking bans are good for business. It turns out that Alamar and Glantz based their research on faulty assumptions like comparing the sale price of restaurants both in and outside banned areas to sales and assuming that the ratio had some bearing on the impact of a smoking ban. The authors also failed to account for bars and restaurants that closed their doors after bans took effect, thus lessening competition.

Alamar and Glantz respond, but their arguments just don't hold. It only makes sense that legislated smoking bans would hurt bars and restaurants -- after all, owners of those establishments, not politicians should know best what customers want.

Posted by Paul Gessing at 08:56 AM | Permalink | Comments (0) | TrackBacks (0)

Surprise, surprise....actually, not surprising at all. The Federal Trade Commission has studied the issue and determined that oil companies did not manipulate oil prices last summer. For those who care to read the entire study, it is available here. Of course, we at the Rio Grande Foundation were saying this more than a year ago and, as both the FTC and Foundation writers pointed out, government policies, specifically the ethanol mandate, played a major role in driving prices up.

Posted by Paul Gessing at 08:36 AM | Permalink | Comments (0) | TrackBacks (0)

It is widely known and understood that Governor Richardson is running for the presidency on his experience as an executive. After all, his leading opponents, Clinton, Edwards, and Obama are Senators with limited experience even in that role. Good strategy for Bill.

Something that makes quite a bit less sense is his emphasis on the various tax credits he has pushed as an economic development tool in his recent television advertisements. Richardson has received ample praise from conservatives and free market advocates, but not because of his economically-dubious narrowly-targeted tax credits. Indeed, Richardson has made waves by cutting New Mexico's top income tax rate from 8.2 percent to 4.9 percent and dropping the state's capital gains tax from 8.2 percent to 2.45 percent. Despite having raised other taxes in ways that have offset the net effect of these tax cuts, it is this record that Richardson should be running on.

So, what does this mean? Why is Richardson talking about meaningless, targeted tax policies when the key to New Mexico's recent economic success -- aside from oil and gas prices -- has been pro-growth tax cuts? One strong possibility is that running in a primary and attempting to please the Democratic Party base, he doesn't want to talk about being a tax-cutter. This may be indirectly a result of Bush's lack of popularity. I'd be interested in others' thoughts on why Richardson's campaign is missing the forest for the trees....is it economic ignorance or sheer strategy to attract a left-wing Democratic Party base?

Posted by Paul Gessing at 02:28 PM | Permalink | Comments (0) | TrackBacks (0)

This story is really not a surprise. Private charity has always been more effective at improving peoples' lives than government handouts and examples of this in reaction to Hurricane Katrina have already been widely reported.

What is surprising is that people are so easily fooled, so often, by government officials who say "we're going to help." Things weren't always this way. In fact, after every disaster, natural or otherwise, we should mandate the reading of "Not Yours to Give," an excellent Illustration of the way government has usurped and corrupted private charity.

Posted by Paul Gessing at 09:25 AM | Permalink | Comments (0) | TrackBacks (0)

Many credit Byron Dorgan (D-ND) with killing the much hated Senate immigration bill. In his quite animated speeches opposing the bill, he notes his distaste for the guest worker program, which ostensibly takes jobs away from Americans and depresses American wages.

Our own Jeff Bingaman sponsored an amendment to the bill that lowered the guest worker cap from 400,000 to 200,000, proclaiming that the former number as untested and irresponsible. His claims have no basis in reality. Prior to the bill, the government authorized an ulimited number of H-2A guest worker visas, along with numerous other guest worker visas such as H-1B. But for a moment, let us give Mr. Bingaman the benefit of the doubt. What can we expect by lowering the number of guest worker visas offered each year?

The Southwest benefits tremendously from expansive guest worker programs. Texan farmers expressed their dismay at the likely death of the guest worker program. Their comments expose one of the main guest worker fallacies. Contrary to the naysayers, guest worker programs keep businesses in America, thereby keeping tax revenue here as well. When the guest worker program runs dry, businesses pack up and move south of the border, taking both immigrant AND American jobs with them; almost half of this industry has already been lost to Mexico because of the shortage of workers. There goes the money that Dorgan and Bingaman so desparately crave for entitlement programs.

Perhaps what Bingaman and Dorgan should be saying is that guest worker programs take jobs away from labor unions. As someone who goes to school an hour away from Detroit, I highly recommend this course of action.

Posted by Stephen Ford at 08:27 PM | Permalink | Comments (0) | TrackBacks (0)

Jerry Ortiz Y Pino is one of the New Mexico Legislature's most left-wing members. When he's not trying to impeach President Bush he writes a column for Albuquerque's weekly alternative newspaper The Alibi .

In a recent column, the usually "progressive" Ortiz Y Pino struck a somewhat different tone in arguing against Mayor Chavez's proposal to cut Albuquerque's gross receipts tax. As I point out in my follow-up letter to The Alibi Ortiz Y Pino needs to understand that the gross receipts tax is regressive -- that is it hurts the poor worse than it hurts those of us with more money.

So, unless Ortiz Y Pino is simply a lover of government and not a real progressive who is concerned with the welfare of the poor (a real possibility when you consider this), he should come down in favor of cutting the GRT. Unfortunately, in this day and age, both parties seem to care more about growing government and acquiring power than actually helping their constituents.

Posted by Paul Gessing at 09:39 PM | Permalink | Comments (0) | TrackBacks (0)

In a recent column, Gene Grant of the Tribune displays an excellent grasp of the reality and difficulty of putting together a municipal wi-fi/broadband system.

With all of the problems experienced by Rio Rancho and Sandoval County in their public wi-fi endeavors, one might think Mayor Marty would think better of getting involved in such a boondoggle, but apparently "Rio Rancho envy" is a reality when it comes to wasting money on arenas and internet systems.

Posted by Paul Gessing at 02:33 PM | Permalink | Comments (0) | TrackBacks (0)

An article in today's ABQ Journal details the new John Adams Dollar Coin which goes into circulation today. Contrary to most people's understanding of money, the U.S. Mint fervently hopes that people will start "collecting the coins."

The article notes the flops of the Susan B. Anthony and Sacajawea coins while simultaneously explaining that "the U.S. Mint believes it has the right [marketing] strategy." Critics have noted that the dollar bill works just fine when it comes to this issue, yet the U.S. Mint continues to try to promote unnecessary and expensive endeavours.

One cause of monetary inflation is an abundance of unnecessary money chasing fewer goods. When the government mints money for the sake of coin collectors, the value of the dollar drops as the amount of money flooding the market grows. Apparently this could total 900 million coins in the first year, yet no plans have been made to decrease minting the dollar bill. And we wonder why the Euro regularly outperforms the dollar. Turning money into a consumer product certainly won't help things.

Posted by Stephen Ford at 03:05 PM | Permalink | Comments (1) | TrackBacks (0)

E.J. Dionne had a recent column in which he outlined the findings from a new left-wing report outlining ways in which lawmakers can help the poor. As is so often the case, many of Dionne's assumptions are way off base. First and foremost, he assumes that because inequality of incomes is greater that the poor are "falling behind," when in reality we are actually much better off now than we were 20, 30, or 50 years ago.

Then, Dionne outlines several "reforms" like raising the minimum wage, increasing unionization, and helping 16-24 year olds get to work. Perhaps they would get to work if minimum wages didn't prevent them from doing so, but the more likely culprit is our inadequate education system.

Anyway, the Rio Grande Foundation has its own ideas about how to reduce poverty; needless to say, they are quite different from Dionne's.

Posted by Paul Gessing at 12:12 PM | Permalink | Comments (0) | TrackBacks (0)

No, the food fight I'm referring to is doesn't involve Trent Lott throwing a pie at Ted Kennedy (as fun as that would be to watch), I'm talking about impending Congressional action on the farm bill. The Albuquerque Tribune had an excellent op-ed outlining how the perverse system of subsidies costs us billions of dollars every year and hurts America's health.

Although limiting subsidies and eliminating those that subsidize certain unhealthy foods would be a good start, the Washington-based Cato Institute has outlined a more comprehensive plan to eliminate subsidies and spur global free trade.

Agricultural reform and specifically the elimination of subsidies is not just a "conservative" issue, but environmentalists and anti-poverty advocates have embraced.

Posted by Paul Gessing at 01:24 PM | Permalink | Comments (0) | TrackBacks (0)

A few days ago on this blog, I outlined some work the Foundation has been doing on the correlation between poverty and the size of government. In a recent article on the subject that was published in the Albuquerque Tribune, I mentioned New Mexico Voices for Children as a group advocating higher taxes and higher government spending.

Well, their Executive Director Catherine Direen took enough offense to respond with a letter to the editor of her own. While she makes a number of points in her response, mostly dealing with a new study they are touting on the relative level of taxation of New Mexico's poor people, her last point was the most interesting: "New Mexico is not a poor state because of its tax rate. New Mexico is a poor state because of its history of poor wages."

If it is really as simple as that -- New Mexico is poor because of low wages -- then it really is as simple as using government's coercive power to force those greedy business owners to pay higher wages. There are a number of reasons for New Mexico's disproportionate poverty levels.

I'd love to have some debates with NM Voices folks for the sake of the Legislature.

Posted by Paul Gessing at 12:50 PM | Permalink | Comments (0) | TrackBacks (0)

Commercial aviation is one of the most heavily-regulated and taxed industries in the nation. Thus, some new developments that made news this week, could have an impact not only on the industry itself, but on the flying public as a whole.

First and foremost, in a major positive development, the United States and the European Union have finally approved an "open skies" agreement that should make trans-Atlantic air travel cheaper and more convenient. Under the agreement, starting next March, airlines based in any of the EU countries would be allowed to fly to any American city and U.S. carriers will be allowed to fly to any destination in the EU's 27 countries.

Open skies will be a huge boon for the flying public, but of course there is one major opponent: labor unions. The funny thing is that since US workers are actually more productive and less expensive to hire and fire than their European counterparts, American aviation workers should benefit, but that never seems to stop labor unions from fighting economic liberalization.

Unfortunately, the news is not all good. Despite paying incredibly high taxes that subsidize wealthy passengers on private jets, commercial airline passengers will be paying even higher taxes if the airports have their way.

Needless to say, when there is as much government involvement in an industry as their is in aviation, incentives are going to be mixed up...nonetheless, we are in better shape now than we were 30 years ago thanks to of all people, President Jimmy Carter who deregulated the airlines.

Posted by Paul Gessing at 02:05 PM | Permalink | Comments (0) | TrackBacks (0)

Some New Mexicans, especially those directly involved in promoting economic development are feeling rather proud of themselves. The new Tesla motors plant will be built in Albuquerque and Intel is keeping its plant in Rio Rancho. A new study from the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation (ITIF) may throw some cold water on that.

Apparently, New Mexico is losing ground in the battle to "create an environment that fosters innovation and high skills in order to help fast growing entrepreneurial firms and innovative existing firms expand." With an oppressive gross receipts tax and a reliance on government favors and largesse, this is nothing new to the Rio Grande Foundation. It is true that studies and rankings are plentiful and can make economically-healthy states look worse than they are, but think about it. Does New Mexico really "create an environment that fosters innovation and high skills in order to help fast growing entrepreneurial firms and innovative existing firms expand?" Not by a long shot. Hopefully Governor Richardson and the Legislature will avoid the 11% spending hike they're expected to approve. We'll see.

Posted by Paul Gessing at 10:04 AM | Permalink | Comments (0) | TrackBacks (0)

The Rio Grande Foundation loves "teachable moments" in tax policy and that is exactly what happened recently as the New Mexico Senate passed a bill to exempt certain non-athletic events from the state's gross receipts tax. According to a press release from Senator Rawson's office: “The Pan American Center at NMSU is having difficulty competing for headliners now that it has competition from the Don Haskins Center at UTEP in El Paso where there is no sales tax for the concert tickets. We want the concert business and all non-athletic entertainment to be in New Mexico, and not go across the border,” So, “In order for the Pan American Center in Las Cruces to have any significant impact in the non-sporting events venue, the tickets need to be exempt from the state’s gross receipts tax.”

Simply put, taxes do matter. As Dr. Messenheimer pointed out recently, given the very real impact of New Mexico's gross receipts tax -- Las Cruces levies the tax at 7.125 percent -- even a small rate increase can have a big economic impact. Unfortunately, as innocuous as exempting certain activities from the gross receipts tax may seem, these efforts invariably lead to higher taxes on other economic activities.

Posted by Paul Gessing at 03:13 PM | Permalink | Comments (0) | TrackBacks (0)

The first must-read article is Minority Leader Tom Taylor's excellent discussion of the need for constitutional spending lmits here in New Mexico. Regular readers and followers of the Foundation are undoubtedly aware that we've made tax and spending limits the centerpiece of our long-term strategy for transforming New Mexico from an economic weakling dependant on handouts from Washington into a powerhouse.

The second article involves Sandoval County's misadventures in government-run broadband. Unfortunately, a subscription is necessary for that article, but here are a few choice quotes:

"The County is more than two years and almost $3 million deep into the project;"

"So far, no links in the network have been proven reliable for long periods;" and

(The group tasked with creating the network) "have not provided a clear picture of where the $2.8 million spent so far on the project has actually gone."

Posted by Paul Gessing at 10:03 PM | Permalink | Comments (0) | TrackBacks (0)

Just in case you regularly check our blog and not our website -- or the Journal and Tribune -- the Rio Grande Foundation took on some of the misperceptions and problems associated with New Mexico's gross receipts tax on the pages of the Tribune. In a commentary published in the Journal's Business Outlook section, Dr. Messenheimer tackled some ongoing issues in the oil and gas industry and how New Mexico will have a significant impact on those issues in Congress and with Bill Richardson as Governor.

Posted by Paul Gessing at 10:47 PM | Permalink | Comments (0) | TrackBacks (0)

Bill Richardson has a lot invested in the Spaceport that has been proposed for southern New Mexico. That's why he traveled to Las Cruces recently to make the pitch that voters should raise taxes to fund the project. As shaky as the economics of the spaceport really are -- did you know that Richard Branson just signed an agreement to use a Swedish spaceport? -- residents of Doña Ana County and throughout Southern New Mexico have to wonder if their tax money will be wasted. After all, New Mexico's spaceport will be competing with those in several other states and countries to serve a market for private space travel that doesn't even exist yet.

Bill Richardson is by no means the only politician who thinks he knows better how to spend your money than you do, but his energy, power, and ambition (along with a distinct misunderstanding of economics) make him an ardent and rather effective supporter of big government.

Posted by Paul Gessing at 04:46 PM | Permalink | Comments (0) | TrackBacks (0)

Here at the Rio Grande Foundation, we talk a lot about tax policy and the fact that New Mexico's policies tend to be relatively unfriendly to entreprenuers and business activity in general. Unfortunately, while New Mexico trails its neighbors in most economic indicators, the average person often does not make the connection between overall economic conditions and tax policy. In at least one instance, that is changing.

As the Albuquerque Journal reported this week, the Legislature is now considering whether to exempt concert tickets from New Mexico's gross receipts tax. The reason for the potential tax cut? The number of concerts being held at the Pan American Center in Las Cruces has declined by 60 percent since Texas ended its tax on most events. Thus, while New Mexico may be charging only a dollar or more per ticket in taxes, for a concert promoter, that can be $25,000 in forgone profit on $500,000 in ticket sales.

Some might say that even $25,000 is not much money for a "rich" promoter, but a good businessman would be a fool to pass up $25,000. So, is eliminating the ticket tax a good idea? Maybe, or maybe not. The point is that every time we raise taxes -- or forego opportunities to cut them -- businesses and consumers make real-world decisions as far as where they want to spend their money. This has had a serious impact in stunting economic growth in New Mexico.

Posted by Paul Gessing at 07:59 AM | Permalink | Comments (0) | TrackBacks (0)

It looks like the first good thing to come out of the Bush Administration in the long term will be his proposal on health care. Basically, he is removing some of the incentives inherent in today's employer-sponsored system and giving incentives to those who must purchase their own insurance because they are unemployed, their employer doesn't offer health coverage, or some other reason.

While the health care proposal is a step in the right direction, it unfortunately appears likely that Bush will also be making some sweeping proposals to address the purported issue of global warming. The worst part is that Bush is falling into the big-government trap set for him by the environmentalists if he raises fuel-economy standards for automobiles, plans even greater subsidies for renewable energy sources, and places draconian controls on emissions at utility plants and other big polluters.

If Bush instead looked for market-base proposals such as those to increase the gas tax while offsetting other taxes, he might get some support from limited government types.

Posted by Paul Gessing at 11:43 AM | Permalink | Comments (0) | TrackBacks (0)

Rep. Tom Taylor of Farmington (the House Republicans' floor leader) and Rep. Dan Foley of Farmington (the House minority whip) outlined their plans for the upcoming legislative session in today's Albuquerque Journal. Specifically they explained what they plan to do with all the excess revenue flowing into the state's coffers. The Rio Grande Foundation also outlined its hopes for the legislative session recently and there is a great deal of overlap when it comes to cutting taxes. We especially applaud the legislators for stating, "No one can say New Mexicans don't already pay their share of taxes. New Mexico is one of the most heavily-taxed states in the nation."

That said, there were a few concerns: First and foremost, the legislators state that New Mexico should "cut its sales tax." While we encourage almost any tax cut, it is important to be accurate in our descriptions and New Mexico does not have a sales tax. In fact, as the Department of Revenue points out, we have a gross receipts tax which is far more encompassing and economically-harmful than a sales tax.

The legislatators also talk favorably of eliminating the state's gas tax. While I suppose there would be no specific harm if this unlikely scenario were to occur, there are dozens of more economically-harmful taxes than the gas tax. More importantly, the gas tax is one of the few taxes that actually benefits those who actually pay it (through the construction of roads). Thus, we'd encourage Taylor and Foley -- and the rest of the Legislature -- to focus their efforts on reducing the gross receipts and income tax rates with some of this excess revenue. Done properly, tax cuts will spur New Mexico's economy to the point that entreprenuers will no longer need special favors from the State to relocate here.

Posted by Paul Gessing at 10:28 PM | Permalink | Comments (0) | TrackBacks (0)

In today's Albuquerque Journal Rick Homans is claiming that he and the Richardson Administration have created new jobs. It is easy to see the results of government action when it creates government favors for particular interests whether they be movies, spaceports or what not. The people who get jobs as a result of the government favors are readily identifiable and happy about it.

But how about the jobs that have gone begging because we do not have a good tax and regulatory climate? Government does not create jobs. Unfortunately our bad economic climate makes it easier to dish out favors and then claim credit. Despite Homan's claim about our low unemployment, New Mexico remains consistently above the nation and region over time when it comes to the rate of unemployment and the rate of labor force participation and below the nation and region when it comes to per capita personal income. And our situation will not improve relative to other states until we get out of the big-government, dishing-out-of-breaks to favored interests and get into lower tax rates, less regulation and equal tax treatment under the law.

BTW did you happen to notice an irony? While touting governments success on the opinion page, the front page contains news of the difficulty of making jobless claims to the government. A labor department spokesman is quoted as saying: "the call volume has increased dramatically compared to last year, although the number of new claims filed still remains at about 1,400 to 1,600 a week.

Posted by Harry Messenheimer at 12:51 PM | Permalink | Comments (0) | TrackBacks (0)

Thomas Sowell adds another fine article to his series on "dangerous obsesssion."

Posted by Harry Messenheimer at 10:06 AM | Permalink | Comments (0) | TrackBacks (0)

Thomas Sowell does a great job of teaching us economics in four recent, short articles (one, two, three and four).

The articles explain sources of value and knowledge in human interaction and how values and knowledge translate into wages, prices and progress. I won't attempt to summarize Sowell here, since he is one of the best economics teachers on the planet. If you are a bit puzzled about how economists think you should read them all carefully -- he provides lots of examples of the functioning of markets and politics familiar to our daily lives.

Many of us think by casual observation that some prices or incomes are too high (low) or grossly unfair or unjust. Since most of us cannot make sense out of prices or incomes, he urges us not to make matters worse by "doing something" about what we cannot comprehend in the first place. For that reason he entitles his articles "dangerous obsession."

Sowell is author of two superb books accessible to anyone who can read: Basic Economics and Applied Economcs. I highly recommend them.

Posted by Harry Messenheimer at 09:36 AM | Permalink | Comments (0) | TrackBacks (0)

The Environmental Working Group has just published its database in which you can find exactly who is receiving federal farm subsidies. Past recipients of federal largesse have included media mogul Ted Turner and NBA star Scottie Pippen. Who are the top recipients in New Mexico?

Posted by Paul Gessing at 10:39 PM | Permalink | Comments (0) | TrackBacks (0)

I have long felt that the ongoing shortage of body organs for transplants is an artificial result of federal regulations that prohibit any financial incentives for those who -- upon death -- donate their bodies to save the lives of others. As is so often the case when government policies fail (the United Kingdom and Canada both have similar "no-compensation" policies), additional regulations are adopted. The UK and Canada are now considering rules that would essentially allow the state to "steal" the organs of the dead. The authors of this article suggest we go the other direction by allowing financial incentives for those who choose organ donation.

This seems to me like "Economics 101," but financial incentives are the only proven way to create desired results while also respecting personal freedom.

Posted by Paul Gessing at 10:46 AM | Permalink | Comments (4) | TrackBacks (0)

Coyote blog has more interesting commentary on light rail boondoggles here. The rip-off arithmetic he cites is the same relative magnitude as for our Rail Runner and so-far potential streetcar debacles. For example, about LA:

If the core ridership number is 125,000, the highest possible choice, then the total capital cost of the system per rider is $20,000 per rider. This means I was right, that we could have instead bought ever rider a car for the same money. Since the real ridership is probably less than that number, this means we could have bought ever rider a car and had money left over. Concerned about the environment? Then make every car a Prius, which the money would just about cover even without the volume purchasing discount they would likely get.

But what about gas? Well, they say they have a $252 million per year operating loss. This subsidy, which is above and beyond ticket sales, equates to $2,106 (!) per daily rider, even using the higher 125,000 figure. At $2.50 per gallon, this equates to 15.5 gallons of gas per rider per week.

So you can see with the LA numbers, even using the largest possible interpretation of their ridership numbers, the money used for the train could have instead bought every passenger a new car and filled the tank up with gas once a week for life.

Yes, I know, the argument is that the train reduces congestion. Supposedly. I have two responses:

Rail has never reduced congestion in any city. Go see London and Manhattan. In fact, rail seems to encourage urban density that increases congestion.
In Phoenix, where rail will often replace existing lanes of roads, the train will likely carry fewer people than the lanes of traffic used to, so congestion will increase.

Posted by Harry Messenheimer at 10:40 AM | Permalink | Comments (0) | TrackBacks (0)

Randal O'Toole blogs about the failure of light rail in Portland:

In fact, Portlanders recently learned that their much-praised transportation plans were really nothing more than a scheme by what local reporters call the "light-rail mafia" to separate taxpayers from their money and enrich themselves. Far from relieving congestion or getting people to stop driving, Portlanders are so angry at the congestion and other problems resulting from the plans that they have repeatedly voted against light rail and other projects.

Worst of all, the high cost of these plans has led to a decline in urban services throughout the Portland area. This was illustrated with Dickensian irony in September when a leading member of the light-rail mafia calmly ate dinner at an outdoor restaurant a few feet away from police who were kicking a schizophrenic man to death. The budgets for police and mental health services that could have saved this man's life had been cut by the city council that continued to subsidize rail transit and high-density developments that enriched the light-rail mafia.

Now, cities such as Albuquerque and Madison are rushing to follow Portland's example of rebuilding downtown streetcar lines. Yet, despite claims of Portland's advocates, the streetcar did not get anyone out of their cars or stimulate economic development.

Read the whole thing. You will find some interesting links.

HT: Coyote Blog

Posted by Harry Messenheimer at 08:28 AM | Permalink | Comments (0) | TrackBacks (0)

Considering the "thumpin'" received by Republicans in the recent elections, it is mind-boggling that the lame duck group that should have learned its lesson is instead continuing to earmark and spend its way to electoral oblivion.

According to Brian Reidl of the Heritage Foundation, this year's final 11 appropriations bills for fiscal year 2007, which will be voted on during the current "lame-duck" session, "contain an estimated 10,000 pork projects."

Among the more ridiculous projects is: $150,000 to study shellfish genetics at Oregon State University, $250,000 for Carnegie Hall in New York City, $232,000 for the National Wild Turkey Federation. Perhaps our elected officials should lay off the Wild Turkey and pork?

Posted by Paul Gessing at 04:14 PM | Permalink | Comments (0) | TrackBacks (0)

Recently on the pages of the Albuquerque Tribune, the Rio Grande Foundation and New Mexico Voices for Children have traded jabs on the issue of whether a Colorado-style Taxpayers' Bill of Rights would be a boon or a bust for New Mexico.

While the answers to most of her criticisms are contained in my original piece, Kay Monaco is not singing a new song. In fact, her arguments are nothing more than regurgitated talking points from the Washington, DC-based Center for Budget and Policy Priorities. Of course, our side has its own talking points and those were developed by the DC-based Tax Foundation. These talking points answer most of the rest of Monaco's assertions.

Ultimately, the conflicting points can be summed up in one line from Monaco's piece "Fiscal conservatives are careful to overlook the most important fact when they talk about taxes - that taxes represent an investment in America." If you believe that government at any level needs an unlimited amount of your tax dollars -- state government grew by approximately 8 percent last year in New Mexico -- then you need to pick up an economics book. Governments at all levels are at their best when their roles are limited. That is why the Founding Fathers wrote a Constitution that strictly limited the powers of the federal government. State governments too need to take on only those tasks for which government is best, anything else tends to wind up being wasteful and/or a hindrance to our freedoms.

Posted by Paul Gessing at 04:09 PM | Permalink | Comments (0) | TrackBacks (0)

Check out this stealth tax increase. The wishful thinkers now have a desire named streetcar; and you will be paying for it. If my understanding is correct, this gross receipts tax increase will prevent a scheduled one-quarter of one percent tax reduction that was scheduled to take place because of a sunset clause in the prior ordinance. And, of course, this new ordinance does not have a sunset clause -- the tax increase is permanent.

There is still time to stop it. Call your councilor.

HT: Michael Brasher

Posted by Harry Messenheimer at 12:12 PM | Permalink | Comments (0) | TrackBacks (0)

Perhaps you may have heard about the recent letter that was signed by some 675 economists who endorse raising the minimum wage from $5.15 an hour to $7.25. It would be nice if Congress could raise the income levels of working Americans with the wave of a legislative wand, but as Steve Chapman points out, these economists -- yes, it happens to them too -- have fallen prey to a bout of "wishful thinking."

While New Mexico, because of its relatively high poverty and low wages, will hurt its low-income workers more than most states, the best thing about Congress's decision not to raise the wage this year is that some states are raising their wages while others are not. Given time, those states that raise their wages the most aggressively will see a negative economic effect while others will escape harm. Allowing states to go their own ways is far better than a one-size-fits-all policy from Washington.

Posted by Paul Gessing at 06:23 PM | Permalink | Comments (0) | TrackBacks (0)

Often, much is made of America's "economic competitiveness" with the rest of the world. Thomas Friedman's book, The World is Flat made a big deal over whether Americans can "compete" in the world economy. Unfortunately, politicians from both the left and the right of the political spectrum too often harp on our "competitiveness" without fully explaining themselves.

Fortunately, that is why we have people like Paul Jacob to explain in just a few hundred words that we are not really competing against the Chinese or the French, rather we are all cooperating through the wonderful capitalist system to raise living standards in all nations that embrace free trade and economic liberty. In other words, rather than worrying aboiut what the Chinese or Indians are doing and whether they're "catching up" to us, we should celebrate their gains and work to improve our our own country.

Posted by Paul Gessing at 10:04 PM | Permalink | Comments (0) | TrackBacks (0)

I just loved this little blurb from Grace-Marie Turner at the Galen Institute: Wal-Mart announced yesterday that it will soon offer a 30-day supply of nearly 300 generic medicines for just $4 each. Target quickly followed, and surely Walgreens and others will be close behind. Who says that competition doesn't work?

Wal-Mart's program is starting in Tampa Bay and will include the entire state of Florida by January, then spread to stores around the country.

Not to be outdone, Target announced it is matching Wal-Mart's prices in Tampa Bay first, with other stores to follow. Three cheers for Wal-Mart for getting this started!

Generics already are cheaper in the U.S. than in Canada, so how long do you think it will be before we have Canadians coming to the U.S. to get their prescriptions filled here?

Posted by Paul Gessing at 03:56 PM | Permalink | Comments (0) | TrackBacks (0)

As Election Day rapidly approaches, it appears that Congress may be on the verge of accomplishing something positive for taxpayers for a change. Although it took a massive coalition of groups from across the political spectrum and endless pressure from the blogging community, we are one step away from slightly greater transparency in government and exposing all those earmarks that Congress is so addicted to.

Posted by Paul Gessing at 04:47 PM | Permalink | Comments (0) | TrackBacks (0)

Our Guv is among the Democratic presidential hopefuls jumping on the bash Wal-Mart strategy. The strategy could backfire. After all, Wal-Mart can be expected to defend itself. Here is Daniel Drezner's enlightening political and economic commentary on that strategy.

On Wal-Mart defending itself (as quoted from Financial Times): "First, it has attacked its critics – arguing that it is the victim of an unholy alliance between Democrat lawmakers and the unions they rely on to deliver votes and campaign financing. Second, it is seeking to make the argument that the company is good for America."

On how economists view the matter: "they [the Dems] think Wal-Mart's greatest impact is as an employer. Most (thought not all) economists, I suspect, see Wal-Mart's greatest impact as lowering the costs of consumption for Americans who frequent their stores -- including the middle class."

HT: Michael Munger

Update: BTW have you ever noticed that Wal-Mart employees voluntarily work for Wal-Mart rather than someone else? If employment at Wal-Mart is so bad, then why don't they make different decisions?

Posted by Harry Messenheimer at 01:39 PM | Permalink | Comments (0) | TrackBacks (0)

While New Mexico's state government gears up to build a spaceport, Space.com reports on a similar endeavor underway next door in Texas.

Both projects were initiated by brazen billionaires, Virgin's Sir Richard Branson seeking to launch his Virgin Galactic in Southern NM, and Amazon.com's Jeff Bezos and his Blue Origin setting up in West Texas. Both are supposedly private endeavors, with private companies and investors seeking to make a profit through space development.

The difference? Blue Origin is building its launch site with private funds, on private land, while billionaire Sir Richard Branson is taking advantage of the relatively poor New Mexico taxpayer, conning Bill Richardson and the New Mexico Legislature out of $100 million in public funds, plus a sizeable chunk of public land.

We're told that a billionaire needs our hard-eared tax dollars for "economic development," while at the same time we're asked to forget about the negative impact on economic growth of high taxes and reckless spending by the state government. Given the Texas economy outperforms NM in almost every measure, it's clear which approach works better.

Low taxes and limited government lead to real economic development, not welfare for billionaires.

Posted by Justin Smith at 12:19 PM | Permalink | Comments (1) | TrackBacks (0)

Should New Mexico replace the state income tax with an immigrant tax?

No country can let in an infinite number of immigrants. And, if we allow immigrants to take advantage of public schools, welfare, social security and Medicaid, it will cost us a lot. Tech Central Station has come up with a strategy: tax the immigrants. According to the plan, each immigrant must put the dollar amount necessary to pay for his own deportation into an account; if he is ever unable to support himself, the money will be used to pay for his removal; in addition other taxes are levied on his wages that don't apply to citizens. This way we could be sure that there is no drain on the economy of taxpayer funded programs and instead immigrants create more revenue.

Why not replace some current taxes with a tax on immigrants? Nobody can argue against a tax refund for all citizens. In any case, it is an interesting and innovative idea for an old and sometimes divisive problem.

Posted by Guinevere Nell at 12:18 PM | Permalink | Comments (1) | TrackBacks (0)

Today’s Albuquerque Journal reports on HB80, Equitable Sentencing Schedule, which among other things doubles the threshold at which shoplifting becomes a felony from $250 to $500. This bill was passed during the 2006 legislative session and is set to go into effect on July 1.

The bill’s sponsor, Hector H. Balderas (D), argues the change is necessary to keep up with inflation, one of the chief tools in the belts of those seeking higher minimum wages at the local, state, and federal levels. Professional shoplifters will now be able to steal just under $500 at a time to avoid a felony arrest, instead of the presumably inadequate bundles of grifted goods available today. I guess even Jane’s Addiction needs to make a decent living.

But it’s certainly not good for New Mexico retail businesses and their law abiding customers. According to the Online Lawyer Source:

The consequences of shoplifting cause one third of all new businesses to fail. Businesses lose sixteen billion dollars annually in lost revenue as a result of shoplifting. In addition to lost profits, the consequences of shoplifting also force businesses to raise prices and take other costly preventative measures to reduce their vulnerability to shoplifting… The average family in America spends $300 every year in order to subsidize the cost of what shoplifters steal.

So who does benefit, beside those employing the five-finger discount ? Following the nail-bitingly close presidential election in 2000, Richard Romero’s 2001 Restoration of Felony Voting Rights act allowed an estimated 50,000 convicted felons to return to the polls after completing their sentences, and passed after:

Every Democratic member of both the House and the Senate received copies of a study in progress which demonstrated that Democratic defeats in several close elections in various states could be attributed directly to felony disenfranchisement.

Lawmakers should concentrate on protecting the property of the state’s businesses and providing a secure environment in which residents can engage in mutually-beneficial trade. Easing the lives of criminals, and their voter eligibility, in order to maintain entrenched political power is as perverted as special interest politics can get.

Posted by Justin Smith at 11:52 AM | Permalink | Comments (0) | TrackBacks (0)

Some additional context on the previous entry resurrected by Jason Kottke, hat tip to Marginal Revolution.

As the Economist showed back in 1997, consumption of Coke correlates strongly with both health, measured by the UN human development index, and freedom as reported by Freedom House:

Ah, now the American Medical Association's attempt to reduce soft drink consumption by restricting economic freedom makes sense.

But won't reducing our soda intake make us less healthy? I guess I'm still confused.

Posted by Justin Smith at 02:17 PM | Permalink | Comments (0) | TrackBacks (0)

America's doctors, fresh out of lollipops, are demanding that government do something about sweeteners in our sodas. Specifically, they want a 'fat tax' imposed to reduce demand and fund "health education."

Delegates at [the American Medical Association's] Chicago conference are gunning in particular for high fructose corn syrup, the sweetener which is added to everything from ketchup to cola.

One American politician labeled it the 'crack of sweeteners' because it is so widespread.

Before begging for government intervention in the sweetener market, it may help to ask "how did we get here?"

The 'crack of sweeteners' epidemic broke out in 1984, when both Coca Cola and Pepsi switched from using sugar to high fructose corn syrup. Why switch? Protectionist sugar tariffs and import quotas, designed to keep domestic producers happy, had made sugar prohibitively expensive. America's clever entrepreneurs found a more profitable alternative, corn syrup.

The domestic sugar market crashed, as soda manufacturers weren't the only ones to respond in ways unpredicted by the politicians:

Entrepreneurs were importing high-sugar content products, such as iced-tea mix, and then sifting their sugar content from them and selling the sugar at the high domestic price.

Given this history, and the size of the soda market, legislative efforts to increase the cost of certain sweeteners will be met with the full force of American ingenuity. American consumer demand for cheap, sweet drinks will not go unsated.

As for the proposed "massive public health education campaign" funded by any corn syrup tax, this is also unlikely to make Joe Sixpack-of-Sodas less likely to obey his thirst. If people don't listen to these concerned doctors face to face, in their offices, they're not listen to them in a public service message.

Doctors are among America's most educated and intelligent of citizens. Unlike politicians, they have a hard time succeeding in their profession without understanding that their charge, the human body, is complex, often responding in unpredictable ways to their interventions. Drug interactions are one example among many. Doctors would do well to apply this same understanding to an economic body before rushing to treat the patient.

Posted by Justin Smith at 11:51 AM | Permalink | Comments (0) | TrackBacks (0)

Today's Sunday Journal reports on the failure of one of the state government's many 'investments.' TCI Medical, which was to build a nuclear medicine plant in Carlsbad, has ceased business after receiving $7 million from New Mexico's taxpayers.

The immediate cause of TCI's closure? Private investors realized the company simply wasn't competitive with others in the industry, and pulled their financing. New Mexico's taxpayers have all lost money on an investment they never chose to make.

If an endeavor is unable to generate private financing, this is likely because investors have decided the risk of losing their own money is greater than the potential returns. With personal wealth at stake, those with money to invest must be cautious, targeting their investments towards those enterprises most likely to succeed. Even an investment firm working on behalf third-party clients is held to this constraint, for any such firm that doesn't find profitable returns will lose customers to those that do.

Politicians and bureaucrats, on the other hand, face little personal risk in investing other peoples' money. Brian Birk, vice president of New Mexico Co-Investment Partners, which funnels tax-payer money to companies who haven't earned it in the marketplace, laments the failure of "an opportunity that people thought could bring high-paying jobs to rural New Mexico." Mr. Birk himself mustn't be too sad at his failure, however, as he is unlikely to find his own job and salary at risk as a result.

Simply put, "thought" and "could" are not sound investment principles. With the risks of investments minimized, Mr. Birk and his colleagues are more susceptible to making decisions based on wishful thinking, how they think and hope things might turn out, rather than any underlying economic reality that actually does bear on the success of such investments.

Meanwhile, the economic harm from stripping this money from the state economy is hard to measure. That $7 million, which could have supported 140 salaries of $50,000 each if left in the hands of the businesses and residents of New Mexico, has simply fizzled away.

The Journal assures us, however, with a meaninglessly broad figure, that "from 20 percent to 90 percent of an investor's equity portfolio will likely fail." Often, a few big successes will make up for many individual losses. Given the incentives in play, it would be safe to assume that investments from personally uninvested bureaucrats and politicians lie closer to that 90 percent failure rate.

The verdict is still out on the other technology companies receiving these massive subsidies from tax payers. The state's dabbling in the film business, however, has shown more rapid results. Of the 4 state funded productions as yet released, none have reported any profits from which New Mexico taxpayers can claim a share, and the state isn't expecting profits from 9 other productions any time soon. 100 percent failure rate so far.

The use of forcibly confiscated tax dollars in such 'investments' is typically justified for 'creating jobs' or 'economic development.' Never mind the impact on jobs and economic growth of stripping money from productive earners in the first place. Politicians can't take credit for jobs the private sector creates, and usually escape blame for the jobs they destroy. A politician can count as a victory the hidden destruction of two jobs in creating one high-profile job.

$7 million in state funds wasn't enough to keep this unprofitable firm in business. You might ask, how many tax dollars would have been required to keep TCI operating in NM, producing pharmaceutical radioisotopes less efficiently than its competitors? In this case, we may never know, but with other investments, in tech companies, movie productions, etc., we've so far seen no limit to what Santa Fe is willing to throw into this risky business.

The surest way to see that New Mexicans' money ends up investing in successful, profitable, job-creating businesses is to simply allow New Mexico's residents and businesses to keep more of their own money, which they can spend and invest as they see fit.

Posted by Justin Smith at 03:07 PM | Permalink | Comments (0) | TrackBacks (0)

As Harry mentioned, a majority of Senators sought today to permanently end the federal death tax, but could muster only 57 of the 60 votes needed to advance the measure.

New Mexico tax law links the state's death tax to the federal one. By 2005, recent abatement of the federal estate tax effectively eliminated the state death tax. If nothing is done in Washington, however, New Mexico's death tax will return, along with the federal tax, in 2011.

New Mexico's Jeff Bingaman spoke out on the floor of the Senate against killing the death tax, before voting against the tax's repeal. Given the strong tradition of family-owned businesses in New Mexico, one would think all of our representatives in Washington would know better.

Bingaman excuses the confiscation of the fruits of a lifetime of effort, effort that has already been subject to income and other taxes, because before the reductions, "there were only 200 people dying with any estate tax liability" in NM in 2001. That's 200 of our favorite restaurants, our historic tourist-drawing ranches, our most productive family farms, even many of the funeral homes New Mexico families have relied on for generations.

And that's only taxed deaths occuring in one year. The number of New Mexicans who will be subject to the death tax at the end of their lifetimes is much greater, unless the current federal law is changed.

It's time the death tax itself took a trip to the funeral home.

Posted by Justin Smith at 01:48 PM | Permalink | Comments (0) | TrackBacks (0)

This morning I was pleased to receive the following links from John Goodman, President and Ph.D. economist for National Center for Policy Analysis. If you would like to be enlightened on the "death tax," international trade, the connection between social security and high tax rates on the elderly, the benefits of Roth IRA's and/ or the harm done by minimum wage laws, then check out these links:

We All Pay for the Estate Tax -

Who would benefit from a Roth IRA?

Taxing the Elderly -

Trade & Economic Growth, Part I -

Trade & Econmic Growth, Part II -

The Negative Effects of The Minimum Wage -

Posted by Harry Messenheimer at 09:32 AM | Permalink | Comments (0) | TrackBacks (0)

The U.S. Senate will be debating permanent repeal of the so called "death" tax this week. I am seeing a lot of misinformed opinion about the effects of its repeal. For example, the SEATTLE POST-INTELLIGENCER thinks the true cost will be a trillion dollars in lost revenue over the next decade. WAPO has a similar view.

What these views miss is the dynamic effects of the tax. There is massive avoidance of the tax. That massive avoidance would vanish with repeal; and the net effect would more than replace the lost revenues via more tax collections on capital gains and increased incomes. Here is an economically literate debate on the merits of repeal.

Posted by Harry Messenheimer at 09:23 AM | Permalink | Comments (0) | TrackBacks (0)

Paul's New Mexico government "Spend-o-meter" is spinning away and will soon reach $11 billion dollars for the fiscal year ending June 30 (yes, that's billion!). That is almost 23 thousand dollars per second or nearly 1.4 million per hour. How does this relate to us as individuals? The government spends your money at the rate of $115 per person per week.

Posted by Harry Messenheimer at 12:53 PM | Permalink | Comments (0) | TrackBacks (0)

How do you drive up the price of homes beyond reasonable reach? Try land use restrictions. I am not hopeful that ABQ city councilors will pay attention to this anytime soon.

Posted by Harry Messenheimer at 12:08 PM | Permalink | Comments (0) | TrackBacks (0)

Greg Mankiw is one of the more interesting economists around. He is known in the field as one of the leading exponents of “new-Kenysianism.” These are folks who believe that the macroeconomy occasionally suffers from large-scale failure and that government intervention is occasionally necessary to put the economy back on track. Unlike old-Keynsians, however, new-Kenysians are not single-mindedly fixed on aggregate demand shortfalls. Many largely accept the lessons of the “new classical” and “real business cycle” schools of thought and believe that fluctuations in both aggregate demand and aggregate supply determine the economy’s path.

In my mind, the single most important contribution of new-Keynsian analysis was to provide microeconomic theoretical and empirical justification for the notion that occasionally prices and wages do not move as fluidly as might be ideal. This seems far more realistic than the mathematically-precise but unrealistic assumptions which dominated the profession for so long.

One of the most interesting things to note about the new-Keynsians, though, is their ideological diversity. As one might expect, their ranks include a number of old-style Kenysians who prefer that government take an active role in the economy. These are folks like David Romer and Joseph Stiglitz. They also include a number of relatively free-market economists, however. And in this camp, one must surely put Greg Mankiw and the new fed chair Ben Bernanke.

Mankiw, of course, recently served a stint as President Bush’s economic advisor. He has a new blog here which is very readable and very interesting. He also has a forthcoming article with Weinzierl in the Journal of Political Economy. In it, he finds empirical justification for “dynamic scoring,” the old supply-side notion that when you estimate the impact of a tax cut on treasury revenues, you should account for whatever boost the cut will provide the economy. While tax cuts hardly pay for themselves (sorry conservatives), they do find that 17 percent of the revenue loss from a reduction in labor taxes is recouped by the treasury because of greater economic activity. Moreover, fully 50 percent of the revenue loss form a cut in capital taxes is recouped. Personally, I think tax cuts are good for their own-sake, irrespective of their impact on the treasury. Still, this is a powerful refutation for those who say that tax cuts will bankrupt the government.

Posted by Matthew D. Mitchell at 09:28 AM | Permalink | Comments (0) | TrackBacks (0)

Paul and I visited the construction site at Paseo-Journal Center station. Something seemed to stand out when we read the sign explaining the project:

Posted by Harry Messenheimer at 06:26 PM | Permalink | Comments (1) | TrackBacks (0)

Arnold Kling wonders: Imagine that Mitt Romney were about to sign legislation that said that from now on, all citizens of Massachusetts may leap from the edge of a cliff, flap their arms real hard, and fly. All I can say is, "Try it and see what happens."

He goes on to raise his specific objections to the new Massachusetts Health Plan:

1. Because it is a political compromise it is not a clean experiment. It is certainly not a market-oriented healthcare reform, but neither is it pure single-payer. I would like to see them try single-payer, since they are hot to do so. Instead, their experiment has been disowned by single-payer advocates, who will blame its failure on the fact that the private sector was left standing.

2. It completely denies that there is any need to re-consider the cost-effectiveness of health care procedures in order to address the issue of affordability of healthcare. All of the painstaking research I did for my book suggests that if there is anything to be done to significantly slow the growth in health care spending, it has to involve cutting back on discretionary spending, particularly on specialists and high-tech diagnostic procedures.

3. A market-oriented health care system would have health insurance policies with high deductibles. For the most part, this plan goes in the opposite direction.

4. It projects a myth that policy wonks can, with sheer cleverness, come up with a way to make health care affordable for everyone. It overstates the benefits of wonkish solutions like electronic medical records. Again, I take great pains in my book to point out that we will have to make difficult decisions to address health care, rather than use wonkish tricks.

Suppose that five years from now, everyone in Massachusetts has health insurance and the cost of the state subsidy is minimal. In that case, I am wrong about the program, and I will gladly admit it. Meanwhile, since none of the critical details have been implemented, I am in the awkward position of telling people who really want to fly that I think they will wind up smashed at the bottom of the cliff.

Read the whole thing here.

Posted by Harry Messenheimer at 08:27 AM | Permalink | Comments (0) | TrackBacks (0)

Massachusetts' new universal health care plan reminds me of a quote from P.J. O'Rourk that goes, "If you think health care is expensive now, wait until you see what it costs when it's free.!" Let's hope New Mexico has the sense to postpone being a Massachusetts copycat until we see how the new law pans out. We know that Tennessee's big-government attempt to universalize health insurance was a disaster.

Thanks to Grace Marie Turner for sending us this excellent assessment of the law:
April 13, 2006 The new Massachusetts health plan has dominated the policy conversation over the past week, causing more division among conservatives than liberals.

The law, designed to make the state the first in the nation to achieve universal health coverage, was signed on Wednesday by Gov. Mitt Romney. He was flanked at the invitation-only ceremony by the Democratic leaders of the Massachusetts legislature and by Sen. Ted Kennedy, a long-time advocate of universal health coverage.

The biggest concern among conservatives is the requirement that every individual in the state must purchase health insurance or face financial penalties.

Mandates are almost impossible to enforce, even with the fines and other enforcement provisions in the law. Further, the state must specify what kind of insurance people are required to buy and how much they should pay, taking away the ability of markets to freely compete and for people to purchase the coverage of their choice.

We were also concerned about the back-door employer mandate. The legislature wanted to force employers with 11 or more employees to pay a $295 annual fine for any employee without health insurance. The Governor vetoed the provision, but leaders of the heavily Democratic House and Senate have said they will override.

House Speaker Salvatore DiMasi called the veto disingenuous, saying the law was crafted with concessions and compromise. "To change anything will disturb the delicate balance that made this law possible," DiMasi said. Note to employers: $295 is only the beginning.

While many conservative groups, like the Pacific Research Institute, the Cato Institute, and the Council for Affordable Health Insurance, have been highly critical of the plan, The Heritage Foundation has been very involved in helping the Governor craft the legislation. The Governor credits Heritage with creating the new FEHBP-like insurance connector to offer insurance options and collect and distribute premiums. Bob Moffit of Heritage stood behind the Governor at the signing ceremony. [Harry's note: yes, you read that correctly; Heritage is partially behind this abomination.]

An integral provision is the requirement that every employer with more than 10 employees - think your local automotive garage - must offer a Section 125 cafeteria plan so employees can use pre-tax money for their insurance premium contributions.

And that's only the beginning of the reporting requirement, mandates, penalties, and other enforcement provisions in the new law, for example:

The law requires every employer and employee in the state to sign "under oath" a Health Insurance Responsibility Disclosure form, testifying to whether the employer has offered insurance and whether the employee has accepted or declined.

It creates at least 10 new boards and commissions to create and run the new health system, such as the Health Care Quality and Cost Council, the Payment Policy Advisory Board, and the Health Access Bureau.

New and existing state agencies will be checking on individuals' insurance status, monitoring their income to see if they qualify for subsidies, and tracking individual health habits (like smoking and wellness activities) to determine their insurance rating category.

There also is a major expansion of Medicaid and S-CHIP to cover children up to 300% of poverty, and the state makes it clear that it is doing all it can to maximize collection of federal matching funds to help finance the new plan.

My biggest concern is over the financing. The state says it is just moving money around - redirecting about $1 billion in uncompensated care money to subsidize health insurance for those under 300% of poverty (about $50,000 a year for a family of four).

But there is nothing in the law to keep health insurance costs from soaring. Policies offered through the new health insurance Connector must have first dollar coverage and include all of the 40 coverage mandates on the books, with none of the provisions that are working in the private sector to engage consumers as partners in managing health costs. Estimated premiums are unrealistically low and will quickly lead to higher taxes and "assessments" on individuals and employers.

Nonetheless, newspapers around the country are falling over each other in their effusive praise of a Blue state, led by a Republican governor, building a bridge across the political chasm to go where no other state has gone before.

Gov. Romney's term ends this year, and he is likely to be spending a lot more time in Iowa and New Hampshire than in Massachusetts as this plan gets up and running. But I worry that he has laid the foundation for what can become a very intrusive, onerous, and expensive health plan for Massachusetts. Other states, which are firing up their Xerox machines now, should wait to see how this works out before rushing to follow the Bay State's lead.

Posted by Harry Messenheimer at 05:48 PM | Permalink | Comments (0) | TrackBacks (0)

I am thrilled to see GMU's basketball team make it to the final four. But did you know that (unlike its basketball team) its Department of Economics has long been in the top tier? For more on Professor Buchanan look here. If you really want to understand economics, Don Boudreaux and Russ Roberts display clear explanations here. And, of course, many of you have probably heard Walter Williams on the radio.

Posted by Harry Messenheimer at 07:37 AM | Permalink | Comments (1) | TrackBacks (0)

Speaking of Henry Hazlitt, here is a nice tribute to one of Hazlitt's inspirations, namely Professor F.A. Hayek -- the greatest social scientist of the 20th century.

Posted by Harry Messenheimer at 10:03 AM | Permalink | Comments (0) | TrackBacks (0)

When it comes to saving your life or someone else's wouldn't you like to avoid the busybody elitist bureaucrats who think they know best?

If so, the voluntary organization LifeSharers is probably for you. Here is the latest report from LifeSharers:

LifeSharers is an innovative approach to increasing the number of registered organ donors in the United States. Members agree to donate their organs when they die. They also agree to offer their organs first to other members, if any member is a suitable match, before making them available to the general public.

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St. Paul Asian-American Press
http://www.aapress.com/Archive/2006/webfeb17/h-organs.htm

WTNH New Haven TV Channel 8
http://www.wtnh.com/Global/story.asp?S=4498034

Longmont Daily Times-Call
http://www.longmontfyi.com/Health-Story.asp?id=6003

COMMENTARY

A decision to inspire us all
http://www.venturacountystar.com/vcs/opinion/article/0,1375,VCS_125_4501227,00.html

New approaches needed to secure organ donations
http://toledoblade.com/apps/pbcs.dll/article?AID=/20060227/COLUMNIST29/602250331/-1/NEWS33

OTHER NEWS

New heart alternative expanding the transplant field
http://www.wowt.com/news/features/2/2352651.html

Livers from non-heart beating donors would boost organ supply
http://www.sciencedaily.com/releases/2006/02/060218114144.htm

Scientists want to ‘print’ organs rather than wait for them to be donated
http://abcnews.go.com/Technology/story?id=1603783&page=1

2005 sees record number of organ, tissue donations in Illinois and Northwest Indiana
http://releases.usnewswire.com/GetRelease.asp?id=60823

Organ transplants increased 10% last year in Southern California
http://biz.yahoo.com/prnews/060207/latu131.html

What to do about the diabetes epidemic
http://www.prweb.com/releases/2006/2/prweb340394.htm

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Posted by Harry Messenheimer at 08:49 AM | Permalink | Comments (0) | TrackBacks (0)

Read Russ Roberts's comments on the trade deficit nonsense here. Also, he provides a link to Don Boudreaux's clear thinking about it.

Posted by Harry Messenheimer at 07:53 AM | Permalink | Comments (0) | TrackBacks (0)

As Ken points out below, Albuquerque suddenly has a desire named streetcar: another example of the perverse incentives in government.

Posted by Harry Messenheimer at 05:00 PM | Permalink | Comments (0) | TrackBacks (0)

It is strange that national boundaries also become barriers to clear thinking. The so-called "trade deficit" may even surpass "oil dependence" in the confusion it plants among us. Find out why you should not worry about the "trade deficit" here. Indeed you should be happy about it.

Posted by Harry Messenheimer at 07:08 AM | Permalink | Comments (0) | TrackBacks (0)

There you go again.

Update: moreon MEOW here.

Posted by Harry Messenheimer at 08:24 AM | Permalink | Comments (0) | TrackBacks (0)

Does this sound familiar?

o The unionization rate has dropped to single digits in Connecticut's private sector, but the portion of public employees covered by collective-bargaining agreements is over 80 percent.

o In most job categories, public sector employees earn more
than private sector workers -- sometime as much as 95
percent more -- and health care benefits in the public
sector are substantially better, including the portion
of insurance plan cost that is covered by employers and
the quality and variety of coverage offered.

o Paid leave is also substantially more generous in the public
sector.

o While defined-benefit pension plans are shrinking and job
growth may be stagnant in the private sector, they
continue to remain common in government employment.

o But strong anecdotal evidence suggests that misbehavior,
cronyism, nepotism and even criminal activity may be
far more common in the public sector.

Read "The Two Connecticuts"
Yankee Institute, January 10, 2006 by D. Dowd Muska and Philip Gressel

HT: NCPA

Posted by Harry Messenheimer at 09:32 AM | Permalink | Comments (0) | TrackBacks (0)

Last Thursday afternoon I testified in opposition to Ben Lujan's minimum wage bill before the house Labor and Human Resources Committee. The hearing was scheduled to begin at 1:30 and was gaveled to order at 1:55 (so much for economizing on labor and human resources -- but after all this is government).

The economic nonsense I heard was unbelievable. No one seems to know this (or even care):

Most economists believe that the minimum wage is an unwise policy, not because they are against helping the poor but because the minimum wage is such an ineffective way to achieve this goal.

There seems, instead, to be this belief that there is a big pot of money held by the rich, and those rich ought to be giving it to the poor in the form of higher wages. One lady testified that she had no problem paying her employees $9.50 per hour, so why shouldn't everyone be willing to pay 7.50 per hour? I wondered what her position would be if the government suddenly "forced" her to pay her employees $11.50 per hour.

An "economist" (and advocate) spoke for Rep. Lujan on behalf of the legislation. His empirical analysis of Santa Fe's "living" wage was so full of holes I don't know where to begin. The big problem from a real economists standpoint is that he made no attempt to isolate the effect of the "living" wage ordinance on unskilled workers. If he is an economist he should know this, otherwise it is fraud pure and simple.

Posted by Harry Messenheimer at 11:14 AM | Permalink | Comments (0) | TrackBacks (0)

Today's New York Times editorializes (rr) about the sorry state of math and science education in grades k-12. The editorial is motivated by this report from the National Academies. The report contains a hodgepodge of incentives for training more teachers, more government spending on sexy, high tech stuff and more corporate welfare. The Times does not think the report goes far enough:

But, commendable as this impulse is, it hardly addresses the central problem of teacher preparation. Many education colleges have become diploma mills where the curriculum has little or nothing to do with the employment needs of the public schools in the state. Thanks to poor planning - or no planning - they place no particular emphasis on training teachers who actually major in subject areas like math and science. The data suggests (sic) that more than 60 percent of the public school students in some areas of math and science learn from teachers who have not majored in the subject taught or have no certification in it.

I tend to agree that we should be providing our kids with more opportunity in math and science. But more government? Give me a break! Instead of union-driven, uniform, soviet-style compensation for all teachers why not the simple, productive solution of markets in education? Let consumers and education providers interact in education markets to determine the compensation of math and science teachers. School choice would lead to smaller government and solve the problem!

Posted by Harry Messenheimer at 07:06 AM | Permalink | Comments (0) | TrackBacks (0)

Here is another fine essay by Arnold Kling. It raises some questions for New Mexicans: 1. Who do you think benefits from raising the minimum wage? 2. Who do you think benefits from trains to nowhere? 3. Who do you think benefits from a publicly financed spaceport? 4. Who do you think benefits from expansion of welfare?

You might be thinking about these questions as you listen to or read about the governor's state of the state speech today.

A final question: who do you think pays for the groups' benefits in the questions posed above?

Posted by Harry Messenheimer at 09:16 AM | Permalink | Comments (0) | TrackBacks (0)

Dave Barry's take:

Of all the wonderful things government says, that's always been just about my favorite. As opposed to if you get to keep the money. Because what you'll do is go out and bury it in your yard, anything to prevent that money from creating jobs. They never stop saying it. They say it with a straight face and we in the press will write that down. We will say, "This is expected to create x number of jobs." On the other hand, we never say that the money we removed from another part of the economy will kill some jobs.

How many net jobs do you think will be created by Medicaid spending, the Spaceport, the train to nowhere? Inquiring minds want to know.

Read entire Dave Barry interview here.

Posted by Harry Messenheimer at 09:54 AM | Permalink | Comments (0) | TrackBacks (0)

You mean the government itself would actually enforce a cartel agreement so as to boost the prices you have to pay?

Government enforced cartels are pervasive in NM too. You can begin to find their sources here and here and here. Notice that the so-called "missions" of these cartel sources generally produce results that are just the opposite of the "mission" statements.

Posted by Harry Messenheimer at 08:55 AM | Permalink | Comments (0) | TrackBacks (0)

Why does a poor state like NM rank among the highest in mortgage closing costs? Could it be excessive regulation?

HT: Craig Newmark

Posted by Harry Messenheimer at 02:26 PM | Permalink | Comments (0) | TrackBacks (0)

New Mexico has its train to nowhere, and now it looks like Alaska is actually going to get its bridge to nowhere! Wouldn't it be cool if the train to nowhere could take passengers to the bridge to nowhere (we have already bought some track in Colorado)? And while we are making such wise use of the taxpayers money, let's not forget the run the nowhere train down to the spaceport that takes passengers to nowhere.

Update 12/23/05: Alaska is actually getting its BRIDGES to nowhere. At least Alaska is in the national news with its taxpayer ripoff. In New Mexico we ripoff the taxpayer while managing to keep the train to nowhere under the radar.

Posted by Harry Messenheimer at 12:22 PM | Permalink | Comments (0) | TrackBacks (0)

The new spaceport will cost our taxpayers an estimated $225 million. The recipient of this corporate welfare will be Virgin Galactic. Virgin Galactic estimates that up to 2300 jobs will be created as a result of them receiving the welfare. That estimate is somewhat vague since we don't know whether that is all for direct employment or some of it is for businesses that would have sprung up somewhere else absent the welfare. Also, we are told that 100 "founders" have paid $200,000 each for the cost of a flight. In any event, let's take the 2300 jobs estimate and ask the following questions:

1.) How much is it costing our taxpayers for each job "created?"
2.) How much are our taxpayers subsidizing each founder for his/her flight?

Continue reading "Questions for the Astronomically Challenged" »

Posted by Harry Messenheimer at 09:23 AM | Permalink | Comments (1) | TrackBacks (0)

Anybody for a $9.50 "living" wage? Then we can really do some damage!

Check this for damage already done by the $8.50 "living" wage (thanks to NCPA for alerting us):

Aaron Yelowitz of the University of Kentucky found that Santa Fe's
minimum wage had significant and negative effects on the labor market.
Even more troubling, he found that the negative effects of the wage
hike were concentrated on the least-skilled members of the economy --
the very individuals the increase was intended to help.

He found:

o The likelihood of unemployment for employees in Santa Fe
went up by 3.3 percent.

o For less-educated employees, however, the results were much
higher, with their likelihood of unemployment
increasing 8.3 percentage points.

o The usual hours of work fell by 1.0 hours for the full
sample and 3.2 hours for less-educated individuals.

o There was significant evidence to suggest the displacement
of adult employees by unmarried high school age
employees.

These are all unintended consequences that should give pause to
any claims of success of the ordinance, says Yelowitz.

Source: Aaron S. Yelowitz, "How Did the $8.50 Citywide Minimum Wage
Affect the Santa Fe Labor Market? A Comprehensive Examination,"
Employment Policies Institute, December 6, 2005.

We told you so.

Continue reading "Santa Fe's "Harm the Poor Ordinance"" »

Posted by Harry Messenheimer at 05:53 PM | Permalink | Comments (0) | TrackBacks (0)

Alaska has (or had) its bridge to nowhere; New Mexico has its train to nowhere. It will be interesting to compute how much this ultimately costs the taxpayer per rider.

Posted by Harry Messenheimer at 07:37 AM | Permalink | Comments (0) | TrackBacks (0)

With all the Wal-Mart bashing going around can you believe that the Washington Post is defending Wal-Mart?

About 8 years ago my daughter was really having difficulty making ends meet. I remember well when she said, "dad, I just don't know what I would do without the Wal-Mart Supercenter." Bottom line: Wal-Mart overwhelmingly helps the poor. Read all about it.

Update 11/30/05: Article is in today's ABQ Journal. Be sure to read it.

Posted by Harry Messenheimer at 04:24 PM | Permalink | Comments (1) | TrackBacks (0)

It is hard to believe that we have a brand new entitlement mess on our hands. We can't even fix the Social Security mess we've already got. The new mess is the Medicare Prescription Drug Benefit entitlement.

In its editorial yesterday the Wall Street Journal correctly points out that the political process is sure to make things even worse:

...the new benefit will be a poor substitute for the drug coverage that some three-quarters of seniors already have, and which it will undoubtedly do much to replace.

In particular, seniors are nonplussed by the "donut hole" they see in the new coverage. The benefit envisaged by our Capitol Hill solons has coverage starting after a $250 deductible and continuing until annual drug expenses reach $2,250, after which it will disappear again until total costs reach $5,100. That means that if you spend $2,000 annually on drugs, Medicare will cover 66%. But if you spend $5,000, Medicare's share will be only about 30%.

It goes on:

We also can't forget how damaging the shifting cost estimates for this program have already been to the Administration's credibility. Everybody knew the original 10-year, $400 billion figure that Congress was shooting for was a polite fiction. But that figure is now more than $700 billion, and both parties did their best to cover that fact up during the debate that led to the benefit's passing the House by a single vote in 2003.

Do you know how your representative voted? There cannot be any ducking of responsibility on this one, Heather.

Finally:

Politically, the worst is probably yet to come as private employers start ditching retiree drug coverage and throwing more people into the government system. And as costs for the program inexorably increase, so will the pressure to raise taxes.

And don't forget about pressure to do something in the form of price controls.

In a few years we will be in for an intergenerational battle royal as old fogies like me seek to tax our working kids to pay for our government goodies.

Posted by Harry Messenheimer at 09:02 AM | Permalink | Comments (0) | TrackBacks (0)

Absent because of the vision thing. Bush is economically incoherent:

"Bush's reputation in at least the academic community is about as low as you can imagine," said William A. Niskanen, who was a member of the council during President Ronald Reagan's first term and is now chairman of the Cato Institute, a libertarian research group. "A lot of people would not be willing to give up a good tenured position for a position in the White House."

Posted by Harry Messenheimer at 08:17 AM | Permalink | Comments (0) | TrackBacks (0)

It has too many type M thinkers who hate economics. The latest proposal for a minimum wage hike is an example of type M thinking.

Posted by Harry Messenheimer at 11:59 AM | Permalink | Comments (0) | TrackBacks (0)

Here is an interesting perspective on the prospect of a bird flu pandemic. I did not know that the bird flu has been around since at least 1959 and has yet to mutate. Did you?

Posted by Harry Messenheimer at 11:46 AM | Permalink | Comments (0) | TrackBacks (0)

Would you like to know how to easily reduce the likelihood of future scandals? See our research director's recommended reforms here.

The problem is not merely some sticky fingered officials, but rather the way the operation ignores some obvious lessons of economics. Incentives really do matter.

Check it out.

Posted by Harry Messenheimer at 08:46 AM | Permalink | Comments (0) | TrackBacks (0)

Good economic evaluation by Professor Henderson of so-called "windfall" tax here, including why it is unjust. Check it out.

Posted by Harry Messenheimer at 10:18 AM | Permalink | Comments (0) | TrackBacks (0)

According to the Albuquerque Journal today (subscription) New Mexico's two senators are not in favor of implementing a "windfall" profits tax on oil companies. This is good news. Our senators are not joining the illiteracy stampede.

I nonetheless sent them both a letter today. Here it is:

Dear Senator

I encourage you not to make matters worse for oil and gasoline consumers by imposing a “windfall” profits tax on oil production. I am a consumer of gasoline; and I am as unhappy as anyone else about higher prices. But a windfall profits tax would make me unhappier, since it would insure that oil and gasoline prices would be higher than without such a tax. The reason: it would undermine the roll of profits in that sector of our market economy.

Seeking profits (and avoiding losses) is what drives all sectors of our prosperous economy; and it is why we are prosperous. When we see rising profits we can be sure that more resources will be devoted to the profit generating activity. It may come about a bit slower in the case of oil and gasoline (compared, say, to Microsoft) because of the difficulties of bringing new wells into production or of building and expanding refineries. The high prices associated with high profits should be viewed as our friend. This friend encourages economizing on the part of buyers and more production on the part of sellers. That is just what we want to reduce the scarcity of oil and gasoline and what we cannot accomplish with windfall profits taxes and price gouging laws. Unfortunately we seem to forget how bad the results were when government last felt it had to do something about prices. The roll of price in making good things happen in a market economy seems to be universally misunderstood by the public; and I am always amazed by the vilification of profits.

Profits have recently been analyzed and compared by my good friends at the Tax Foundation. They have found that oil companies’ profits may be a little higher than their long-term average; but those profits are not unreasonable compared to other industries. They have a good point that helps put recent energy trends in perspective; but that point tends to deflect attention from the crucial roll of profits (and prices) in guiding the behavior of buyers and sellers in energy (or any other) markets.

There is a change in energy policy that would be helpful. It seems to me that you could strike a better balance between benefits and costs when it comes to regulation. Why not allow the building of new refineries? Why not allow transportation of gasoline between geographic areas of the country? Why not relax restrictions on drilling and exploration for oil? All of these actions would reduce the costs and risks for producers, benefiting us all.

Sincerely,

Harry Messenheimer, Ph.D.
President and Co-Founder, Rio Grande Foundation

Posted by Harry Messenheimer at 07:40 PM | Permalink | Comments (0) | TrackBacks (0)

I have posted here, here and here about the counterproductive effects of price gouging laws.

Have you heard about the awful gas lines in Florida following Hurricane Wilma? Were you able to figure out what the problem was? Think about it before you read Russell Robert's explanation here. Were you able to do better than the news media?

Posted by Harry Messenheimer at 10:08 AM | Permalink | Comments (0) | TrackBacks (0)

Colorado may be losing its effective limits on government growth. Since 1992 the envy of the rest of the country, it now looks like they are falling for the seductive promises of big government. Check out this fine CATO piece that explains what is really going on.

Alas, it looks like November 1st will be a sad day for the prospects of liberty, opportunity and prosperity in Colorado.

Posted by Harry Messenheimer at 09:25 AM | Permalink | Comments (0) | TrackBacks (0)

Suppose an unskilled worker is fortunate enough to retain her job with a government mandated "living wage" increase in pay and no reduction in any other job related benefits. Even in that case she is unlikely to gain much (if at all). The reason is that she loses government sponsored cash and in-kind transfers, offsetting the increase in pay.

Here (pp. 12-17) are my 2002 estimates of the loss of government transfers as pay increases.

Posted by Harry Messenheimer at 08:34 AM | Permalink | Comments (1) | TrackBacks (0)

Here is an excellent piece by Frank Furedi. Excerpt:

"Political debate is often reduced to competing claims about what to fear. Claims about the threat of terrorism or child obesity or asylum seekers compete for the attention of the public. In this way, our anxieties become politicised and turned into a politics of fear. Health activists, environmentalists and advocacy groups are no less involved in using scare stories to pursue their agenda than politicians devoted to getting the public's attention through inciting anxieties about crime and law and order."

I recommend you read the whole thing. Hat tip to Craig Newmark.

Posted by Harry Messenheimer at 08:48 AM | Permalink | Comments (0) | TrackBacks (0)

Here is the reason we are unable to break the legislative monopoly in NM. Worse yet, unlike California, we don't have initiative or referendum.

Posted by Harry Messenheimer at 08:52 AM | Permalink | Comments (0) | TrackBacks (0)

I am off to the annual SPN meeting and won't be blogging for a few days. But before I leave I wanted to write a few thoughts about the special session. The details of the upcoming special session are still pretty sketchy. It is being cast by the governor as �relief� for high-energy prices. You have already heard from me on the counterproductive proposal regarding �gouging.� So how about the �relief?�

For the most part it constitutes increased spending on welfare. Most of the tax rebate �relief� and all of the low-income �relief� will go to residents who do not pay taxes. I have already cast doubt on the effectiveness of the state�s welfare programs. The mishmash allows politicians and �advocates� to take credit for individual programs (such as low-income housing energy assistance) while they ignore the big picture. Oh, well.

The state should give relief to all; and it should get its explosive spending under control. One really helpful way to do that in the special session: Reduce the statewide gross receipts tax rate by one percentage point (from 5% to 4%); and pledge to keep spending under control. The real tax reduction would provide proportionately more help for the poor while boosting the economy. There is plenty of revenue surplus right now to do it.

Posted by Harry Messenheimer at 06:00 AM | Permalink | Comments (0) | TrackBacks (0)

We are speeding down the road to denying reality. We will be there on October 7th when the special session is supposed to end. Governor Richardson actually said this (subscription) to help speed us down the road:

"I don't believe that these profits that are being generated are being done without some kind of manipulation," he said.
While he couldn't articulate during a news conference on Monday how New Mexico might quantify exploitation, the governor reiterated that most residents are feeling the pain of high gasoline prices.
"It's hurting consumers, it's hurting kids, schools, agriculture," Richardson said. "In essence, the first step has to be, let's have a law that protects our consumers, and the state does not have a law."

But the Guv is going to insure that we suffer the unintended consequences of this phantom menace based on his "belief." No one can deny that we are harmed when the price of something (such as gasoline) goes up. When that happens we have to give up more of other things to get that something. That hurts.

What is not well understood, however, is how the higher price acts as a signal that will mitigate the suffering. In response to the higher price consumers immediately begin to reduce their consumption of gasoline. Firms immediately begin to bring more gasoline to where it is needed. As the late, great Professor Hayek said here:

"The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly; i.e., they move in the right direction. This is enough of a marvel even if, in a constantly changing world, not all will hit it off so perfectly that their profit rates will always be maintained at the same constant or "normal" level.

I have deliberately used the word "marvel" to shock the reader out of the complacency with which we often take the working of this mechanism for granted. I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind. Its misfortune is the double one that it is not the product of human design and that the people guided by it usually do not know why they are made to do what they do. But those who clamor for "conscious direction"�and who cannot believe that anything which has evolved without design (and even without our understanding it) should solve problems which we should not be able to solve consciously�should remember this: The problem is precisely how to extend the span of out utilization of resources beyond the span of the control of any one mind; and therefore, how to dispense with the need of conscious control, and how to provide inducements which will make the individuals do the desirable things without anyone having to tell them what to do."

Of course, in the recent case of rising gasoline prices many people may think they know the cause. But they don�t. And the only thing they will have to �marvel� at is how the government further gouges us by not letting price signals guide our behavior.

Posted by Harry Messenheimer at 10:46 AM | Permalink | Comments (1) | TrackBacks (0)

Our governor has signed the letter to the FTC requesting an investigation into "price gouging" and "excess profits." Here is what Lynne Kiesling has to say:

"Remind me to add that [excess profits] to the list of economic non-concepts, right behind "price gouging" and "windfall profits."

"If you are analyzing price effects along a vertical supply chain, and you have a capacity bottleneck in the middle of that chain, how can you expect historic relationships between the price of the initial input and the price of the final product to persist? That is incredibly naive and reflects a lack of understanding of how vertical supply chains work.

Of course the price of crude oil and the price of gasoline are going to become more disconnected as your refining capacity becomes the binding constraint. Furthermore, when a natural disaster exacerbates that bottleneck, you should expect a further deviation from that historic relationship.

More work for the FTC, which routinely investigates claims of "price gouging" when one politician or another raises the populist hue and cry. The FTC has studies stretching back for almost two decades that show no evidence of anti-competitive outcomes in gasoline markets."

Posted by Harry Messenheimer at 11:05 AM | Permalink | Comments (0) | TrackBacks (0)

Hawaii has attempted to deal with price "gouging" by capping the amount that gasoline refineries can charge for their product. Now it is estimated that Hawaiians are paying 51 cents more per gallon at the pump than they would without their government's "help."

The long term effects of this misguided government gouging are going to be even worse. There is no incentive on the part of refiners to improve or expand their facilites. And there is certainly no incentive to increase the supply of crude oil to the Islands. That means future prices at the pump will be even higher.

This silly cap encourages illegal behavior. There will be tremendous incentives to engage in fraud rather than innovation. Refiners have a limited amount of product and pump prices are much higher than fundamental economics would indicate. Look for some side payments and favors from gas stations to refiners as ways to increase their supply and thereby the profits of both.

Posted by Harry Messenheimer at 10:06 AM | Permalink | Comments (0) | TrackBacks (0)

Check out this new site. It contains accurate information about the economics and politics of the so-called living wage. This acorn needs to be squashed.

Posted by Harry Messenheimer at 12:23 PM | Permalink | Comments (0) | TrackBacks (0)

The Albuquerque Journal again reports uncritically (subscription) the findings of a camp following whore.

This time it's Olivier Uyttebrouck who uncritically reports what an "economist" says:

"Workers who would be affected by the proposed minimum wage average 31 years old, said Robert Pollin, a University of Massachusetts at Amherst professor."

And:

"Of workers who earn less than $7.50 an hour, 27 percent are ages 15-19 and 73 percent are 20 or older, he said."

Let me expose these misleading statistics by way of an example: Suppose we have 4-20 year olds and 1-70 year old working below the proposed $7.50 per hour threshold. Their average age is 30! Does that give a clear picture of that population? If we switch one of the 20 year olds to 19, then 80 percent of the population is over 20. Does that give a clear picture of the population?

What really gets me about local reporting on the minimum wage is that not one reporter (that I know of) recognizes that the vast majority of the economics profession concludes that "living wage" ordinances are harmful to the workers they are purported to help.

Posted by Harry Messenheimer at 09:34 AM | Permalink | Comments (0) | TrackBacks (0)

Russell Roberts has a great article here. Some excerpts:

"Understanding the emergent phenomena economists call a market is the essence of the economic way of thinking. In contrast, the human brain seems more accustomed to what might be called the engineering way of thinking where human action and human design work together. If I'm dissatisfied with the size of my kitchen, I make a plan and by following the plan, if it's a good plan, the result is a bigger kitchen. A person who sits around hoping for a new kitchen without design or action is going to be disappointed. Or if I notice the leaves falling from the trees, I don't hope that they're going to clean themselves up. I have to plan to rake them and then do the actual raking. Changing my thermostat to alter the temperature inside my house is another such example.

But the engineering way of thinking doesn't work with emergent phenomena. Trying to change emergent results is inherently more complex than building a bridge or expanding your kitchen or even putting a man on the moon. Understanding the challenge involved is to begin to answer the old question that asks why we can put a man on the moon but we can't eliminate poverty. Putting a man on the moon is an engineering problem. It yields to a sufficient application of reason and resources. Eliminating poverty is an economic problem (and by the word "economic" I do not mean financial or related to money), a challenge that involves emergent results. In such a setting, money alone�in the amounts that a non-economic approach might suggest, one that ignores the impact of incentives and markets�is unlikely to be successful.

Thomas Sowell likes to say that reality is not optional. But we oh so want it to be. We want to change outcomes without consequences with the ease of adjusting the thermostat on the wall of our house. We want to dial incomes upward and gasoline prices downward. We want to blame Wal-Mart for the fact that its employees earn below the national average. We want to blame China (or Mexico or Japan or India) for our trade deficit. We want to blame or honor the occupant of the White House for whether new jobs are high-paying or low-paying. This worldview that flies in the face of reality and that ignores the inherent complexity of the real world is the bread-and-butter of journalism and the breeding ground for unintended consequences."

Following a cogent explanation of the confusion of well-meaning opponents of Wal-Mart (that you should read), Roberts goes on:

"As I write these words, New Orleans is in chaos. A number of oil refineries have been knocked out of commission by Hurricane Katrina. Gas prices have spiked upward. Politicians are threatening suppliers with legal action for "price gouging," raising prices at a time of crisis. Politicians from President Bush on down are asking drivers to drive less or "only when necessary" as if that phrase had meaning. These politicians evidently believe that begging and lecturing citizens can perform the role that prices do in creating and sustaining order, an order where I never have to think twice or even once about whether gasoline will be available at the corner for my vacation or drive to work or to take an emergency trip to the hospital.

But reality is not optional. You cannot have a sudden reduction is gasoline available to the market and low prices at the same time. There is no dial for gasoline prices. The result of these threats is easily predicted�suppliers are already rationing. Drivers are worried about shortages and in the face of threats to punish 'gougers.' They are right to worry. As a result, lines are forming in some cities, and gasoline retailers are closing early in the day, out of gasoline, the same results we saw when explicit rather than implicit price controls were put in place in the 1970s.

Friedrich A. Hayek, in The Fatal Conceit, wrote that "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." Unfortunately, when politicians try to dial down prices to preserve order, they only worsen the problem. We would do well to remember the emergent nature of prices, especially in times of crisis."

I recommend you read the entire article.

Posted by Harry Messenheimer at 09:40 AM | Permalink | Comments (0) | TrackBacks (0)

Kudos to Winthrop Quigley for his ABQ Journal article (subscription) about price "gouging." I often complain about the economic ignorance of journalists, so now I am delighted to see one get it right. Well worth reading the whole thing.

Excerpt:

"While price gouging makes a great sound bite, it has virtually no economic meaning. As with most attempts to control prices, however well intentioned they might be, most economists will tell you pricing laws do little except create shortages."

Quoting economists Walter Williams and Thomas Sowell, Quigley even gives us good insight into the misunderstood and under appreciatied roll of price as a coordinating mechanism: "if the legislature decides what the price of gasoline should be, two things will happen. Gasoline will flow out of the state to people willing to pay the market price, and the only people who get gasoline in New Mexico will be those who happen to be at the pumps before the fuel runs out."

As far as political opportunism goes, Quigley points out that prominent federal and state politicians on both sides of the aisle are calling for investigations and possible control of the so-called "gouging."

Posted by Harry Messenheimer at 08:03 AM | Permalink | Comments (0) | TrackBacks (0)

SUPPLY AND DEMAND

"When Jill puts her house on the market for $450,000 -- triple what she paid 10 years ago, but the going price in her neighborhood today -- the politicos understand that the 200 percent markup is the result of supply and demand in the real estate market. Senators don't call press conferences to denounce Jill as a profiteer. Attorneys general don't threaten to prosecute her. Governors don't compare her to looters.

"But when Joe's service station ups the price of gasoline by $1 a gallon, the political world freaks out. Never mind that a Category 4 hurricane has devastated oil production throughout the Gulf Coast, depleting the nation's already strained refining capacity by 2 million barrels a day and driving up the price Joe's wholesaler is now charging *him*. For some reason, politicians forget everything they learned in Economics 101, and rush to savage Joe for 'gouging' his customers."

- Boston Globe columnist Jeff Jacoby

Hat tip to Chuck Muth.

Posted by Harry Messenheimer at 10:47 AM | Permalink | Comments (0) | TrackBacks (0)

The Albuquerque business community has mobilized to oppose the "living wage" measure that would impose a $7.50 an hour minimum wage. So far, their main argument against it is the bothersome clause that would give access to businesses to "inform employees of their rights."

Clearly this is a bad feature of the ballot initiative, but is it the right one to stress in a campaign against the measure? I don't believe it is.

The "access" clause is rightly opposed by business, but I doubt whether the the voting public cares much one way or the other.

Anti-minimum wage advocates should, in my opinion, stress the traditional economic arguments: It costs jobs, raises costs, and forces buwiness to move away.

Posted by Kenneth M. Brown at 10:13 AM | Permalink | Comments (0) | TrackBacks (0)

Yesterday I reported Thomas Sowell's prediction that the government is sure to come in and make things worse. Sure enough, momentum is now building for COMPLETELY ABSURD FUEL ECONOMY STANDARDS.

Posted by Harry Messenheimer at 10:36 AM | Permalink | Comments (0) | TrackBacks (0)

No, according the the Wall Street Journal's summary of economists' rankings. The article (subcription) opens with a question:

"Can economics save you from losing your shirt in the housing market?"

It goes on:

"Spurred on by the growing concern that America's housing market is heading for a crash, a number of top economists are producing lists that rank the metropolitan areas most likely to experience a sharp drop in housing prices. The problem is that these studies, which look at factors from local income to lending practices, come to strikingly different conclusions. Even so, the raft of data can provide useful clues for home buyers and investors wary of getting in at the top."

Here are the rankings. Notice that Albuquerque is not on the list. But if you happen to be moving (say because of high taxes or the living wage) it should give you a clue about where not to buy a home.

Posted by Harry Messenheimer at 09:40 PM | Permalink | Comments (0) | TrackBacks (0)

Prices have been going up; but there is no "crisis." Get ready, though: Politicians are almost certain to make things worse. Check out this piece by Thomas Sowell.

Posted by Harry Messenheimer at 07:44 AM | Permalink | Comments (0) | TrackBacks (0)

The Albuquerque Journal is up to their usual hyperbole about gasoline prices. There is no question that gasoline prices have been going up; and that hurts. We never like it when the price of something goes up; but we enjoy it when the price of something goes down.

The problem with the Journal article is that it provides no context as to your tradeoffs today versus those in the past. Albuquerque's reported price per gallon of $2.44 is still 85 percent of the inflation adjusted price in 1981. The 1981 price still holds the record in inflation adjusted terms.

More importantly, on average you "empty your wallet" a lot less today than you did in 1981. In 1981 if you "emptied your wallet" of 10 percent of New Mexico's average annual disposable income of $8,255, you could buy you 611.5 gallons. Today if you "emptied your wallet" of 10 percent of New Mexico's average annual disposable income of $25,100, you could buy 1,028.7 gallons. In other words, New Mexico's average annual disposable income can buy 68 percent more gasoline today than it could in 1981!

That's not all. Vehicles get some 30 percent more miles per gallon than they did in 1981. The result: New Mexico's average annual disposable income today can buy 117 percent more vehicle miles than it could in 1981!

Posted by Harry Messenheimer at 03:26 PM | Permalink | Comments (0) | TrackBacks (0)

I have pointed out that the so-called "living wage" ordinance will actually hurt the poor. That raises a question: who will actually benefit from this wage floor? The answer: labor unions. They enjoy the spoils of reduced competition.

Here is a great summary of the logic by John Stossel in context of Davis-Bacon. And New Mexico exacerbates the situation with its "little Davis-Bacon."

And now Albuquerque may increase the spoils of these selfish scoundrels with its "living wage" proposal. The voters have the opportunity to say "NO" on this October 4. And they will have future opportunity to say "NO" to the state's union-legislature monopoly.

Posted by Harry Messenheimer at 10:19 AM | Permalink | Comments (0) | TrackBacks (0)

Most people do not understand inflation. They notice the price of gasoline increasing; and they think that is inflation. They may also notice that housing and health care prices are rising; then they are really convinced that inflation is on the rise.

They are wrong. And Craig Newmark briefly explains why here, while correcting the errors of some thoughtful commenters. I recommend you check it out.

Robert J. Samuelson's recent article in the Washington Post got the discussion going. Newmark provides a link to Samuelson's article.

Speaking of inflation, we can now obtain all kinds of insights from scholars like Craig Newmark for practically nothing (all you need is access to the Internet). Insights at a price of almost zero -- and they are not included in measuring inflation!

Posted by Harry Messenheimer at 08:58 AM | Permalink | Comments (0) | TrackBacks (0)

Check out this great article in the Washington Post. Thanks to Professor Tabarrok at Marginal Revolution for the link.

Posted by Harry Messenheimer at 07:52 AM | Permalink | Comments (0) | TrackBacks (0)

In today's Albuquerque Journal journalist Colleen Heild (subscription) summarizes Bill's $3 millon marketing campaign for the state. She makes the following statement:

"The $3 million to be spent in the first year under the new contract pales in comparison to what some states spend on such promotions. Texas, for example, planned to spend nearly $14 million on domestic advertising while Arizona budgeted $8.5 million last fiscal year, according to the Travel Industry Association of America."

Journalists (and even some economists) need to do a better job of interpreting such figures rather than taking them at face value. The three states are not alike. The Bureau of Economic Analysis estimates NM's 2004 population at 1,903,000; Texas at 22,490,000 and Arizona at 5,744,000.

That means NM's planned expenditure is roughly 6.5% higher per capita than Arizona's last expenditure this year. And NM's planned expenditure is a whopping 153% higher per capita than Texas.

Guess who is going to get the Bill for this marketing? (Hint: It won't be Bill.) Will Bill's spending binge never end?

Update 7/25/05: If we calculate the Bill based on personal income in each state, we find that NM's planned expenditure will take some 18 percent more of personal income than Arizona's last year expenditure. And we find that NM's planned expenditure will take some 186 percent more of personal income than Texas's planned expenditure.

Posted by Harry Messenheimer at 04:13 PM | Permalink | Comments (0) | TrackBacks (0)

Albuquerque is ranked 27 out of 50 cities for high-deductible health insurance plans according to research by eHealthInsurance. Of course we could do much better if we did not penalize such plans. Thanks to NCPA for the link.

Posted by Harry Messenheimer at 08:45 AM | Permalink | Comments (0) | TrackBacks (0)

Not likely according to this (thanks to Craig Newmark for link).

While you may now have confidence in getting good value for housing in Albuquerque, this will not help.

Posted by Harry Me