Winthrop Quigley, business journalist at the Albuquerque Journal, had another economically-confused column on New Mexico economic policies and our potential for economic growth. Quigley questions efforts to lower New Mexico’s tax burden and make the state more attractive to businesses.
As Quigley notes, “our state’s corporate income tax changes were designed to signal…that New Mexico is open for business…competing with the rest of the country on the basis of price.”
Well, I’m not sure it is quite so simple. True, our state has relatively low wages and that can be a selling point, but this is an information economy. Quigley is right about that and the fact that we need an educated, entrepreneurial work force. But that doesn’t mean that you can’t be competitive on taxes and economic policy.
Ultimately, businesses and individuals want to work where they can keep a higher percentage of their incomes (low income taxes, both corporate and income) and control who they hire and fire with fewer hoops to jump through (Right to Work) to name just two policies that impact where businesses locate.
New Mexico has not been “in the game” when it comes to being economically competitive for much of its history. That can change, but even if it does, it will take time to transform and improve New Mexico’s economy. The flip side is that New York and California do very little well when it comes to economic policy. They are high-tax states with heavy regulatory burdens. They also have some specific industries that have developed there over the decades.
However, the reality is that people are leaving economically-unfree states like New York and California and moving to economically-free states like Texas. The reality is that New Mexico can be a destination for highly-skilled workers and jobs, but we need public policies in place that give people a reason to set up shop here.
For the first time ever, during the 2013 legislative session, the Rio Grande Foundation created a tool called “Freedom Index” which allowed legislators and constituents alike to see how our representatives voted on freedom issues on the floor of the Legislature.
We have created infographics for each house and each region of the state to allow users to compare their legislators against each other within the same region. Check out the following documents:
Eastern New Mexico
Western New Mexico
Southern New Mexico
Northern New Mexico
Santa Fe area
Rob Nikolewski over at Capitol Report has done a great bit of reporting/research on our state’s exploding “disability” population. Between 2003 and 2011, the population rose by an astonishing 58.7%. Given that, it is no surprise that our state’s work force participation rate is among the lowest in the nation and the lowest in our region (see chart below):
SSDI (disability) is ripe for reform and even liberals like Joe Klein writing over at Time “get it.” Problem is that it is politically-tough to end government programs that encourage dependency.
Rep. Yvette Herrell had an excellent opinion piece in the Albuquerque Journal on Sunday that speaks to the merits of local decision making on a wide variety of issues. One that she did not mention was education which was discussed in an article that ran in today’s paper.
The gist of the story from today’s paper is that during the worst of the recent economic downturn, New Mexico policymakers had to reduce spending, including education spending. These reductions may have caused the state to spend too little under a federal formula that may cost New Mexico $34 million in special education funding. Interestingly, despite reduced funding, the education system has cannibalized funding for the broader system in order to preserve funding for special ed lest the state again fall below the federal thresh hold.
See the problem here? Washington is using our own money to hold our state representatives hostage in order for the state to receive even more of our money. And, while special ed is held relatively harmless, the rest of our kids suffer thanks to Washington’s arbitrary and inflexible formulas.
Education should be funded and administered as close to the people as possible, not by bureaucrats in Washington (I prefer total school choice, but at least state politicians are a bit more accountable to local control). If there is one federal agency that has completely failed and should be gotten rid of, it is the Department of Education.
I found this article from Albuquerque Business First at once fascinating and terrifying. The idea that any one entity employs 1 of every 14 workers and accounts for $7.8 billion in economic impact is shocking. The fact that this is just the DOE and DoD impact on our local economy is all the more astonishing.
To call Albuquerque itself a “one horse town” when it comes to its economy would be an understatement. Of course, the flip side is that I shudder to think what would happen to the local economy were Kirtland to ever close or even face significant cutbacks. RGF has been sounding the warning bell about the need to diversify New Mexico’s economy.
And, while the tax deal in the last legislative session may have a positive impact, there is much to do to reform the regulatory, tax, and education systems that hold us back from true prosperity.
Our friends at the Manhattan Institute have a new report, written by Senior Fellow Mark P. Mills, which drives home many of the points we’ve made about the positive economic impacts for New Mexico of exporting Liquefied Natural Gas (LNG).
According to the report, the US could eliminate its trade deficit and stimulate the economy to the tune of $600 billion annually through greater exports of energy. What can/should the government do to seize this opportunity?
Executive actions that would lead quickly to major economic benefits and send the right signals to domestic and world markets include:
Approving the application of any and all qualified entities seeking to export natural gas;
Approving the Keystone XL pipeline; and
Directing the Department of Commerce to approve any application to export crude oil.
In the near term, the administration and Congress should work together to:
Encourage private investment in hydrocarbon production.
Direct all relevant federal agencies to identify and resolve unintentional impediments to increased development of refineries, pipelines, and oil and gas production on private lands and, collaterally, avoid imposition of any proposed new rules or regulations on any industries and practices that are already heavily regulated at the state and federal level.
Open up greater access to hydrocarbon resources on federal lands.
Modern technology makes such development safe and environmentally responsible. The federal government controls and restricts access to 50 percent of all onshore hydrocarbon-bearing territory and 100 percent of the offshore territory, wherein 80 percent of that territory is off-limits to exploration or development.
Help the Bureau of Land Management (BLM) set administrative and budget priorities.
The BLM recently announced that it was postponing oil and gas lease auctions on land that it controls in California because of demands on its resources to deal with environmental litigation and because it is “concentrating its limited resources on … other priorities, such as granting renewable energy permits.” Thus, the BLM is giving priority to projects that require federal subsidies resulting in purchases of Chinese solar technology rather than facilitating oil and gas development that is subsidy-free and results in exports to China and other nations.
New Mexico is by no means the worst state when it comes to indebtedness, but 21st from the top isn’t that great either. Per the usual, New Mexico performs worse than its neighbors including:
Texas – 46th;
Arizona – 42nd;
Utah – 34th;
Oklahoma – 32nd;
Colorado – 29th;
The heaviest state debt burdens are concentrated in the Northeast.
There has been a lot going on recently relating to the ObamaCare health care law. From the IRS scandals and the fact that the IRS will play an integral role in implementing the law to the Obama Administration looking for “donations” from major insurance and drug companies to assist with the law, the signs of disaster are becoming more prevalent as the law’s full implementation approaches.
I recently spoke to Mike Jaxson (see interview link) with Pecos Valley Radio about the health care law and some of the most important issues surrounding it.
From Investopedia: Regulatory Risk: The risk that a change in laws and regulations will materially impact a security, business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape.
What does this mean? Quite simply, while governments often attempt to regulate on behalf of consumers or the environment, the reality is that government regulators are often arbitrary, captured by special interests, and make decisions based on misinformation or biases.
Check out this story from Dan Mayfield at Albuquerque Business First in which the author discusses the downgrade of the stock of the company looking to purchase the New Mexico Gas Company. The analyst who downgraded the stock notes that the deal “adds ratebase in a less-favorable regulatory jurisdiction … the deal clearly adds to TECO’s overall regulatory risk and could widen the company’s discount.”
In other words, New Mexico’s PRC is a highly-volatile organization fraught with regulatory risk. Doing business with it may be harmful to your bottom line…Beware.
And with people like Karen Montoya residing on the PRC (having previously exempted convicted felon Manny Aragon’s house from property taxes), wouldn’t YOU feel a little leery doing business in New Mexico?
The following letter to the editor ran in Saturday’s Albuquerque Journal west side edition relating to the finances of the Santa Ana Star Center in Rio Rancho.
The fact is that arenas — even when they have full-time sports teams as tenants — are notorious for losing money. Fortunately (as an Albuquerque taxpayer) Albuquerque did not build an arena. Unfortunately, Rio Rancho cannot go back on its bad decision. The best that we can do is learn from our mistakes.
The articles that appeared recently discussing the Santa Ana Star Center’s ongoing struggles, highlights problems that are by no means unique to Rio Rancho. Around the country and locally, government officials have big dreams of using taxpayer dollars to spur development. These dreams are often shattered when they hit reality, but elected officials are at worst booted out by voters while taxpayers are left paying the bills.
The Star Center was a costly mistake that will never pay for itself, even if the so-called “multipler” of benefits to local businesses is taken into account. According to stadium expert Andrew Zimbalist of Smith College, “the independent economic research that’s been done on the question of whether such facilities have an economic impact on an area has uniformly found that there is no positive impact.”
And this is for cities that have major league sports franchises filling the venue dozens of times per year. The Star Center has struggled to find regular, full-time occupants.
This is not to beat up on the Star Center or even the Rio Rancho officials who brought us this mess, but to spur the public – both in Rio Rancho and in Albuquerque – to recognize that spending 6.5 percent of your annual budget on a sports arena or events center is a bad idea.
Government should take care of the basics while leaving costly amenities like arenas and events centers to the private sector.
Paul J. Gessing
Rio Grande Foundation