One of my favorite economics quotes is from the Frenchman Frederic Basiat who says, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”
Nowhere is that more true than in a recent report that, according to reporting from Winthrop Quigley of the Journal, federal “cuts” could cost New Mexico 20,000 jobs by 2014. Leave aside the fact that sequestration will not actually “cut” anything in the federal budget (as seen in the chart below).
The fact is that reducing the growth of federal spending (or even cutting it) will free up resources for more productive uses. That is the “unseen” aspect of economics. Sure, anyone can see news reports of layoffs at the Labs and automatically assume that New Mexico’s economy is in deep trouble, but those resources (including human resources) will then be freed up for more economically-valuable uses in the private sector.
Now, it is true that New Mexico — especially if it remains so economically-unfree — may lose out to other states. That is the kernel of truth in the BBER report. But, who is to say that Gov. Martinez will not succeed in pushing a pro-growth economic agenda through the Legislature that makes New Mexico a more attractive place for business and leads our state to free market economic prosperity?