Can’t Someone Stop the Train to Nowhere?

By now it has become obvious that the planned “communter” train between Belen and Bernalillo makes no economic sense. Yet the legislature continues to debate this monstrocity. Can’t anyone step up and introduce a bill to put the train out of its misery?
It’s bad in so many ways:
–The cost will greatly exceed revenues.
–Ridership will be so small that no appreciable reduction in congestion will occur.
–The purchase of BNSF land and track holds many pitfalls, such as liability for damage claims and the loss of tax revenues on the land.
–What benefits there are (and these will be slim) will acrue to a very limited number of people, while taxpayers statewide pick up the tab. Better to use the money statewide for needed road improvements.
Now proponents of the rail line are asserting that even though the train will lose money, in twenty years it will begin to make sense. What a weak argument, unsupported by any evidence!
It’s time to pull the emergency cord and stop this monumental waste.

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Federal Flood I*nsurance: Yet another Taxpayer Rip-off

This is my first blog posting as the new CEO of the Rio Grande Foundation. I really look forward to getting out to Albuquerque — I am finishing up my last few weeks with National Taxpayers Union here in the DC area — and putting my full-time effort into getting the messages of free markets and individual freedom out in a state that badly needs them. On Thursday, February 2nd, I had the opportunity to testify before the Senate Banking Committee on a boondoggle of a federal program, the National Flood I*nsurance Program.
The flood i*nsurance program has been around since 1968 and has been subsidized by taxpayers ever since. Now, in the wake of the hurricanes of recent years, taxpayers are on the hook for $24 billion. This program should never have been created and I argued for repeal in my testimony, but repeal is unlikely given Congress’s lack of willpower. Spurred by bad publicity and massive losses, however, Congress may finally pass some needed reforms to the program. We’ll see.

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Three Cheers for Oil Dependence

In response to President Bush’s assertion that “America is addicted to oil,” Harry linked to this article in the Wall Street Journal. The author catalogues 35 years of failed energy initiatives designed to free us from dependence on foreign oil.
Time and time again politicians have been taken in by the fallacy of composition. Their logic seems to be something like this: Individual independence is good. Individuals are part of the nation. Therefore, national independence from foreign oil is good for individuals. It is not.
Any time politicians try to flex national power in order to make the country independent from a foreign supplier, they rob individuals of their own independent right to buy from whomever they wish. Thus in matters of trade, national independence can only come at the price of sacrificing individual liberty.
Americans buy a lot of oil from abroad. They do so because oil happens to be abundant abroad. There is some indication that domestic sources of oil are relatively underutilized due to environmental restrictions and the “not in my backyard” approach to building (or not) refineries. But even without these restrictions on American supply, Americans would probably still want to buy some oil from foreigners. It is a simple matter of fact that the world’s largest oil deposits are not located in North America.
It seems to me that allowing Americans to buy from abroad is both morally and economically correct. If a farmer named Chuck in Sterling, Ill. wants to buy cheap gas from Amir in Egypt, and Amir wants to trade his oil for Chuck’s cash, then who are we to stop these two from a mutually beneficial exchange? I suppose that nationalists and unionists like Pat Buchanan or Charles Schumer would respond by saying that Chuck should buy from a Texan named Billy Bob and not from a foreigner like Amir.
There are only three ways to make Chuck buy from Billy Bob rather than from Amir: The government can outright forbid Chuck from trading with Amir, it can highly tax his trade with Amir, or it can tax Chuck and all other Americans and use the revenue to subsidize Billy’s production and lower his price relative to Amir’s. All three of these options redistribute wealth from Chuck to Billy. There being little reason to suspect that oil men are any closer to starvation than farmers, I don’t see much of a case for this redistribution. Apparently folks like Buchanan and Schumer do. Furthermore, all three of these options involve redistribution from Amir to Billy. There being even less reason to believe that First-World Americans are worse-off than Third-World Egyptians I again don’t see the moral argument.
What of the economics? Some may claim that we will make America and therefore all Americans—even Chuck—better off by encouraging domestic producers. This was Alexander Hamilton’s point in his 1791 Report on Domestic Manufacturers. This point was no more correct when Hamilton made it than when today’s politicians make it. For one thing, a simple model of supply and demand will demonstrate that consumers lose more than producers gain when government plays favorites. For another, we all may lose from barriers to trade if other nations retaliate (just ask the Great Depression generation how they felt about the Smoot-Hawley Tariff). In the long run, in fact, we are probably doing Billy Bob and his fellow oil-men a disservice by protecting them from competition. As the economist Gordon Tullock pointed out in 1975, industries which enjoy government’s protection do not, in the long, earn higher profits than non-protected industries. Instead, there are only short-term or transitional gains to be had from redistribution. This is because as soon as government gives an industry an unfair advantage such as a subsidy or a targeted tax break, others enter the industry, increasing supply, driving down price and eliminating whatever above-normal profits the government hand-out precipitated. As David Friedman has said, “the government can’t even give anything away.” We can’t remain walled off forever. Eventually, we will have to trade. And when we do poor Billy will find that he and his fellow oil men are not nearly as productive compared to Amir and his fellows. By that time, how many young workers will we have tempted into an unproductive oil patch and how old will they be when they start looking for new jobs?
Adam Smith long ago demonstrated that the wealth of nations is made in trade and specialization. I am extremely thankful that I depend on others to make my clothes, husband my food and construct my shelter. It would take years to master any one of those trades. Luckily, I only have to learn how to teach economics and can trade with others for these staples. I am grateful that I depend on others. I am even more so when the government permits me the independence to make my own choices.

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Recall John Dendahl’s words in the Albuquerque Journal last Friday:

Sadly, most of New Mexico’s children will continue to be among those who either drop out of school or arrive at high school graduation inadequately prepared. …
How many chapters of “reform” must we endure before we adopt the one reform with real promise to restore educational opportunity for our kids? Why isn’t there a Gov. Bill Richardson’s School Choice Agenda?
There isn’t a snowball’s chance in hell that Richardson doesn’t know he could pitch a perfect game with choice. But teachers’ union bosses are among his owners, and they say “no” to competition. Monopolies never serve their markets well, but government schools must remain a virtual monopoly anyway

Now from our friends at NCPA comes a reminder of this by Andrew Coulson:

For many years, school choice programs have been at the center of the
education reform debate and many Americans are now convinced that the
education of disadvantaged children would suffer if the government did
not run schools and if poor parents were allowed to make choices, says
Andrew Coulson of the Mackinac Center for Public Policy.
However, according to studies of impoverished villages and urban
slums in India, Ghana, Nigeria and Kenya, school choice programs are
actually beneficial, says Coulson.
o On average, 75 percent of the students in these areas
attend tuition-charging private schools.
o More than one out of every six private school students pay
less than full tuition and one in 14 attends private
school for free.
o These private schools spend far less per pupil (their
teachers’ salaries are roughly one-third of those in the
public sector), but the schools usually enjoy lower
rates of teacher absenteeism and comparable facilities and
teacher satisfaction.
o Most importantly, the private schools significantly
outperform their government-school counterparts
academically — even after controlling for differences in
student characteristics between the two sectors.
These results are consistent with U.S. education research that
finds that inexpensive private schools serving the poor in the United
States produce achievement and graduation rates that at least equal,
and usually surpass, those of the highest-spending neighborhood public
schools, says Coulson.
Moreover, all those concerned with improving the state of American
education should feel compelled to expand access to independent schools
by the most effective means possible, including the use of education
tax credits; if we do so, we will begin to catch up with the generosity
already on display in the Third World, says Coulson.

Source: Andrew J. Coulson, “‘ Poor Choices’ Yield Better Education,”
Viewpoint on Public Policy, no. 2005-29, October 3, 2005.

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Going Ape in NM

Thanks to Dick Rowland’s staff at the Grassroot Institute of Hawaii, here is a nice behavioral analogy apropos to NM (perhaps you have seen it before):
The difference between a bureaucrat and a public servant is the degree to which an individual is empowered to take action for positive change in a system and the extent to which they exercise that power to benefit the common good.
Essentially, bureaucrats can be the source of the problem or victims of the system based on their actions or inactions. I think it is safe to say that bureaucrats ARE a large part of the problem in government. Most of you know that I like to tell a good story to illustrate my point….
Start with a cage containing five apes. In the cage, hang a banana on a string and put stairs under it. Before long, an ape goes to the stairs towards the banana, but as soon as he touches the stairs, spray all of the apes with cold water.
After a while, another ape makes an attempt with the same result – all the apes are sprayed with cold water. Turn off the cold water. If, later, another ape tries to climb the stairs, the other apes will try to prevent it even though no water sprays them.
Now, remove one ape from the cage and replace it with a new one. The new ape sees the banana and wants to climb the stairs. To his horror, all of the other apes attack him. After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted.
Next, remove another of the original five apes and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm.
Again, replace a third original ape with a new one. The new one makes it to the stairs and is attacked as well. Two of the four apes that beat him have no idea why they were not permitted to climb the stairs, or why they are participating in the beating of the newest ape.
After replacing the fourth and fifth original apes, all of the apes, which have been sprayed with cold water, have been replaced. Nevertheless, no ape ever again approaches the stairs.
Why not?
“Because that’s the way it’s always been around here.”
Sound familiar?
We should immediately ban the use of the phrase “We’ve always done it like that” by any public employee. They should be allowed and even encouraged to apply common sense in the workplace. We should pay people who work for government based on the service they provide versus the amount of paper they push. Maybe then we will create true public servants in government rather than bureaucrats.

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Two New Mexico’s?

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
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

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Minimum Wage Nonsense

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.

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Math and Science Education: Another Example of Government Failure

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!

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