Last Thursday former Governor Richardson praised the Endangered Species Act for the way that “best available science” has informed decisions (and his role in them) based on the Act.

While I agree that species conservation is important to all of us, the former Guv overstates the Act’s effectiveness and includes nary a word about its cost. He cites three species (Gila trout, Aplomado falcons and Mexican gray wolves) that have benefited from the act. To that I ask, “compared to what?” Would they be extinct absent the Act or some other form of the Act?

He also says “the Act has prevented the extinction of 99 percent of the more than 1,400 species placed under its care.” Really? Without the Act (or some other form of the Act) more than 1,390 listed species would now be extinct!?

Professor Jonathan Adler’s scholarship suggests that the Act could be made more effective and its costs reduced. His testimony before congress is here. His reasons:

Private land owners have incentives that are counterproductive to the the Act’s stated intent. “the Act effectively penalizes the owners of land upon which endangered species depend.” Moreover, “regulatory provisions of the act can discourage the discovery and collection of needed scientific information about potentially imperiled species” by private land owners.

Decisions are often the result interest group conflicts, making them more politically based than scientifically based:

The listing of individual species, the designation of critical habitat and the implementation of conservation measures often prompt fierce legal and political battles. Sound science is often a casualty in these conflicts as the combatants twist and manipulate the available scientific evidence to support predetermined policy preferences. Activists on all sides claim that “sound science” supports their respective positions, and scoff at the “junk science” relied upon by the other side. In actual fact, what often divides the respective camps is not a devotion to science, but sharply divergent policy preferences dressed up in scientific garb.

Once a scientifically based prognosis is given for an endangered specie, we still need to determine what, if anything, to do about it. Science itself should play a pivotal role but it should not dictate policy. We need to estimate the costs (tradeoffs) involved. Are they worth it? That is the question we should answer for policy.

Only 22 species of the approximately 2000 listed as endangered or threatened since 1973 have been categorized as having recovered. The Endangered Species Act has met only one percent of its goal in 40 years — a far cry from Governor Richardson’s hyperbole.

The Endangered Species Act has ignored the incentives of those reacting to it. Shouldn’t an examination of those incentives be part of the science needed to improve the Act?

Charles Murray is unhappy with Frederick County Maryland’s interference with parents’ attempt to implement their new charter school (a school designed to emphasize a “classical curriculum”).

From the beginning, the administrators of the Frederick County Public Schools (FCPS) were openly hostile to the idea of a classical curriculum and threw up one frivolous bureaucratic roadblock after another. Now, in the last months before the school is finally scheduled to open this fall, the FCPS has informed these parents that they can’t hire the nine teachers that they had selected after vetting 300 applications. Instead, under Maryland law, the school can be forced to accept teachers on the county’s “to be placed list”—in other words, teachers who the FCPS would otherwise let go. Furthermore, the parents running the school cannot even interview them—nor learn their names, nor have any other way to get an idea whether these teachers have any understanding of the classical curriculum or the ability or motivation to teach it. The FCPS can simply force placement of the teachers it can’t use in any of its other schools.

This is a perfect example of the problem of interest groups, this time the teachers’ union, receiving special privileges via political process. See my study of privilege-seeking in political process and how it affects prosperity along New Mexico’s border. By guaranteeing a monopoly “privilege to government’s resource providers,” “provision of core functions (are) more costly than they otherwise would be.” (p.7)

Murray concludes with an indictment of our loss of liberty that should wake us up. This example:

is representative of the kind of naked display of power that increasingly happens throughout government—in the schools, the regulatory agencies, the tax authorities, at the county, state and federal levels alike. Americans who are acting in ways our civic culture has traditionally celebrated—harming no one, just trying make a living or build a business or, in this case, collaborate to educate their children—find themselves balked, forbidden, and in some cases prosecuted, by bureaucracies that increasingly exist to protect themselves and their own interests, and have gathered unto themselves the power to do so. This is not a partisan issue. It represents a betrayal of what America is supposed to be about.

From Don Boudreaux at Cafe Hayek:

Free markets are extraordinarily – tightly – ceaselessly – impressively regulated.  And nearly all of this regulation is spontaneous; it’s the result of the competitive market order.  Unlike that species of regulation called “government regulation,” the kind of regulation that remains dominant in markets is not designed by government officials; it doesn’t amplify collective manias; it doesn’t treat consumers, workers, or business people as morons; and it’s not able to be captured and corrupted by special-interest groups.

Don’s post includes a link to his opinion piece in Pittsburgh Tribune-Review.

The unceasing rivalry that produces spontaneous regulation is not “perfect.” Untoward outcomes will go unanticipated. But once they occur they become anticipated, and market rivals react quickly to preserve their reputations.

My study of how prosperity is reduced when privilege-seeking interest groups gain ever greater footholds via political process is here. Assuming we want to prosper, it is process of competition, not politics, that is the regulator we can trust.

The always perceptive Sheldon Richman weighs in on the Bangladesh tragedies. He starts by summarizing the status of the resulting debate over whether or not international standards on building safety should be enforced against Bangladeshi manufacturers:

“Proponents of standards argue that the costs would be small and the benefits great,” and “Opponents of government regulation argue that artificially raising the costs of manufacturing in poor countries would harm intended beneficiaries by destroying jobs.”

Then he identifies the real problem:

Unfortunately, the debate is unnecessarily narrow. What needs discussing — and radical changing — is the country’s political-economic system, which benefits elites while keeping the mass of people down. The economists are correct that under the status quo, imposing safety standards would raise costs, cause unemployment, and aggravate poverty. But we can’t leave the matter there. We must go on to examine how the political-economic system constricts people’s employment opportunities, including self-employment, and otherwise stifles their efforts to improve their lives. Thus, a debate over whether garment factories should be subject to safety regulations, while the status quo goes largely undisturbed, misses the point.

What Bangladesh needs is much more economic freedom. A system now controlled by landed elites stifles opportunity for the masses. Fix the problem of successful predation by privileged elites and Bangladesh would prosper quickly, including making voluntary improvements in building safety.

For evidence of how successful privilege-seeking reduces prosperity along New Mexico’s border look here.

From the constantly observant Mark Perry:

New Mexico and its neighbors have begun to enjoy the shale oil boom.

EIA attributed the production increase to the application of horizontal drilling and hydraulic fracturing technology to low-permeability rocks to the growth in U.S. oil production. Enhanced oil recovery techniques such as carbon dioxide injection also are boosting production from conventional reservoirs.

So, what is it, peak oil or peak idiocy? Take your pick.

Under the guise of “public awareness” the Center for Civic Policy has been calling legislators to complain about their support of the recent “tax package:”

A New Mexico nonprofit has launched a “public awareness” campaign highlighting the votes of state lawmakers on a massive tax package approved on the final day of this year’s 60-day legislative session.

They’re correct to criticize the haste and secrecy with which the “tax package” (the main feature of which was to reduce the corporate income tax rate from 7.6% to 5.9%) was put together at the end of the session. But did anyone happen to see if they made similar criticism of the way the (Un)Affordable Care Act was put together with the similar haste and secrecy? It would be nice if political process was open, careful and informative. But, unfortunately politicians, having incentives like the rest of us, act like politicians. It’s time we all recognized that as a fact of life.

Let’s clear up some of the Center’s economic confusion by briefly summarizing some basics of taxation related to NM’s corporate income tax:

Corporations may be legal entities responsible for the corporate income tax. But corporations don’t actually pay the tax, only people pay taxes. The actual tax is borne by the owners of the corporation and its customers.

Corporations are a source of prosperity in that they make up a potential supply side of voluntary exchanges between them and their customers. Those exchanges, voluntarily entered into, would not take place unless both parties to each exchange benefited. Onerous tax policies like NM’s corporate income tax reduce voluntary exchanges and prosperity.

New Mexico has the worst (or close to it) corporate income tax regime in the country. While the rate may now be a bit lower, its formula for determining the amount of income subject to the tax puts New Mexico corporations at a huge disadvantage compared to other states.

Since the corporate income tax is so awful, it’s quite possible that the reduction in its rate will actually increase revenue. That would certainly be the case with even lower rates and a more reasonable definition of income subject to the tax.

Further exacerbating the bleak tax picture for corporations is NM’s gross receipts tax. Since they pay gross receipts tax on many services that are inputs to production, they are at a disadvantage relative to other states where services are not taxed.

New Mexico needs further tax reductions by making the corporate income tax and gross receipts tax less onerous. But if the Center is really concerned about tax revenue (I’m not — government has already overreached), then they should be concerned about actually having someone to tax.

The following comment from one Hazel Meade appeared at Marginal Revolution today re problems with the (Un)Affordable Care Act:

The banning of catastrophic-only plans infuriates me the most. Those are the only plans that are actually financially sensible for a healthy individual to purchase. Everything else on the market is a perverse by-product of the employer-based insurance system.

Worst case scenario with a catastrophic-only plan is you end up with $10,000 in debt. That’s a debt load many times smaller than what the Federal government thinks students should take out to get a college degree. We’ll let you borrow $100,000 to get a sociology degree but, we think that $10,000 is an unconscionable amount to pay for medical expenses? So unconscionable that we have to FORCE YOU to buy a plan with more extensive coverage?

Of course, we all know the real reason for this. it’s meant to force healthy young people to subsidize healthcare for older sicker people. Just force them to pay more for insurance than they ought to, and force them to buy more extensive coverage than is rational.

I’m a nice guy and I’m getting up in years (at least that’s what my wife tells me). Yes, Hazel’s birth control pills and treatment of tennis elbow may cost a bit more as part of her “insurance” premiums; but she should feel rewarded rather than infuriated! She’s helping fund my health care.

Aren’t you sure that the wise folks who passed and are implementing the (Un)Affordable Care Act understand the trade offs involved? They understand that younger folks like Hazel need a little nudge (okay, a shove) to provide for us nice old folks. And they truly understand that now we will get all the health care we need.

Oh, and a good many of us nice old folks forget to say this, thank you, Hazel.

I spoke to the Farmington-based Tri-City Tribune recently on the issue of LNG exports. That article can be found here.

The Wall Street Journal had this extremely favorable editorial this week on LNG exports but criticized the Obama Administration for “regulatory indecision” that is threatening to cost US producers of natural gas in the battle to supply the fuel to customers around the globe.

Also, columnist James K. Glassman has a column explaining how, while President Obama may have had a tough hand when he entered office, he has (or could have been) the beneficiary of some significant, positive developments in the energy sector that would have the US economy humming into recovery rather than sputtering along.

Lastly, yet another study on fracking (this one from Arkansas) has found no groundwater contamination resulting from the drilling technique.

Apropos of Paul’s January series on needed regulatory reforms (examples here and here), John Stossel’s blog has a nice summary of how counterproductive regulations emerge in political process.

Even when regulators mean well – when they worry about safety or whether customers get basic services – regulations are based on the old, familiar ways of doing things, simply because regulators don’t know anything else. That’s great for old, familiar firms – but bad for the innovative startup that wants to try something different. And bad for consumers who might have benefitted.

The late Mancur Olson explained how privilege-seeking interest groups successfully obtain government favors. His path breaking book may be found online here.

Assuming that government exists to maximize prosperity within its jurisdiction, the problem is how to change the incentives of legislators, bureaucrats and regulators so that they are more resistant to privilege seeking. That is a steep hill to climb. Their human capital is invested in the status quo.

Go here to read my explanation of how government overreach reduces prosperity along New Mexico’s border.

One Dan Metzger and I have had a bit of an ongoing debate on the pages of the Albuquerque Journal business section recently (another installment from Metzger appeared today). My initial response is available here.

I don’t really think that Metzger brought up any new points in today’s letter and that the discussion has largely played itself out, I figure that an online response is worthwhile. Obviously, Metzger and I view the economy very differently.

His approach is very Keynesian. Government needs to spend more money in order to stimulate the economy. Nothing is said about the relative efficiency of government spending as opposed to private sector spending, nor are the inefficiencies inherent in the millions of government regulations foisted upon the economy that serve to create “wedges” between willing buyers and willing sellers in an otherwise free market.

Metzger mysteriously blames “private sector” for the economic crisis (omitting Fannie Mae/Freddie Mac, the Federal Reserve, and regulatory incompetence) and concludes by stating that the US will “always make its interest payments” because it can print the money.

Because hyperinflation is exactly what we need:

The US Senate, with the support of New Mexico’s Martin Heinrich and Tom Udall, recently passed legislation called the “Marketplace Fairness Act.” The idea behind the legislation is to set up a new taxation regime that would allow states to collect sales taxes on ALL online sales.

Currently, due to the US Supreme Court’s Quill decision of the early 1990s, online merchants must collect all sales taxes due if they have a physical presence in a particular state, but “mom and pop” merchants are not forced to act as tax collectors for the 9,600+ taxing jurisdictions throughout the United States. According to tables available online from New Mexico’s Tax and Revenue Department, there are 24 taxing districts in Bernalillo County alone and easily more than 100 statewide.

The complexity point is key because it is not that consumers do not owe taxes on online purchases, rather, the Court decided that the burden of forcing a small business to collect taxes at so many different rates with products defined differently, and with documentation required on a variety of schedules and in different formats, was unreasonable.

The Marketplace Fairness Act would require the creation of a complicated and expensive system for tracking where consumers live, what they buy and how much it costs. After all, as Overstock.com CEO Patrick Byrne notes, “In one jurisdiction, cotton candy is food; in another it’s entertainment or candy.”

Thankfully, Gov. Martinez has taken a firm stance against a convoluted system of Internet taxation, but the same cannot be said for many governors and legislators of both parties who, hungry for more revenue, are supporting a policy change that would undermine the small businesses that have sprung up to do business online, thus cushioning the blow of the current slow-growth US economy.

One Albuquerque-based business owner that I have spoken to has stated that he would no longer sell his product online under an Internet taxation regime as set up under the Marketplace Fairness Act. The issue is not an unwillingness to have his consumers “pay their fair share,” but the compliance costs that involve submitting documentation, often on a monthly basis even if his company has no sales in that particular jurisdiction.

He is by no means the only small business owner with an online presence to face negative repercussions from Congressional overreach on Internet sales. It is one big reason why Ebay, Etsy, and their small, but numerous sellers oppose the Marketplace Fairness Act while the online behemoth Amazon has become one of the primary advocates for the Act.

Of course, many governments are hungry for the revenues that Internet taxes would bring in. Many of them argue that these taxes will force online retailers to “pay their fair share” for all of the services they use. The reality is that Internet merchants don’t burden local infrastructure like traditional retailers and “big box” stores. These companies, not the online retailers, are using the roads, sewers and schools.

Rather than burdening small businesses with additional compliance costs, states should consider shifting to an “origin-based” sourcing rule for sales taxes.

A destination-based sourcing rule requires businesses to collect sales tax defined by the physical location of the buyer, whereas an origin-based sourcing rule would require sales tax collection defined by the physical location of the seller. After all, if the seller is burdened with collecting taxes on behalf of the government, the revenues generated should at least be used in part for the benefit of that seller.

Better still; unlike the Marketplace Fairness Act which relies on collusion among the states and thus requires the blessing of Congress, the origination-based approach encourages federalism and competition among the states to be as attractive as possible for potential Internet vendors.

Taxing Internet sales is a complicated issue. The trick is to balance genuine fairness and reasonable regulations while respecting federalism and encouraging interstate competition. We can do better on each of these fronts without the Marketplace Fairness Act.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility

I ran across this column from the Investors Business Daily which outlines some of the positive economic data coming from Texas and juxtaposing that data against the struggles of the national economy.

It’s a good article so far as it goes, but it doesn’t explain what makes Texas so darn attractive to entrepreneurs and businesses.

For starters, it has no personal income tax (New Mexico’s rate is 4.9% which is down from 8.2% a few years back thanks in part to Bill Richardson);

Texas is a Right to Work state meaning that workers cannot be compelled to join a union as a condition of employment (New Mexico has no such law);

Texas has a corporate income tax rate of zero while New Mexico’s will be 5.9% even after the recent corporate income tax cuts are phased in five years from now;

The aforementioned issues are all under the control of Texas’ elected officials, but Texas is also blessed to have less of its land mass owned by the federal government which allows the state to utilize and benefit from a far greater percentage of its land:

HT: Roger Mickelson

It has been a busy week, so I am just getting around to responding to an article by Winthrop Quigley that appeared in the Albuquerque Journal earlier in the week. The headline was “Health Exchanges Faces Challenges.” Well, of course, I thought, the “exchange” concept is unproven, the software needed is extremely complex, and requires input from disparate parties from several different parties. View the exchange flow chart that appeared at the Washington Post’s blog site from Xerox below:

But no. Rather than outlining the very real difficulties with setting up these exchanges (and why that presents problems for the law itself), Quigley simply attacks the views on ObamaCare expressed by Dr. Deane Waldman and HSD Secretary Sidonie Squier, both of whom are on the exchange board (implying that they are the aforementioned “obstacles”). Sure, it is a challenging position to be in to assist in the implementation of a law that you have serious misgivings about (and Quigley could also have done a piece exploring those realities), but apparently he’d prefer to disparage those who have expressed concerns about the law.

For the record, RGF has serious concerns about exchanges (which indeed have received support of organizations like the Heritage Foundation). I wish Waldman and Squirer the best as they work to implement this law (I could not do what they are doing).

The Japanese delegation came to town to talk about importing New Mexico’s liquefied natural gas (LNG) to their country. As I’ve noted before, this could be a real boon for New Mexico.

Rob Nikolewski at Capitol Report New Mexico has a great in-depth column about the visit and some of the issues standing in the way of this windfall for our state’s economy.

KRQE Channel 13 has a report here as well.

For a broader discussion of the political issues holding us back, check out this great column from libertarian syndicated columnist Steve Chapman.

Lastly, I visited Farmington recently (the Four Corners Region’s economy has been greatly harmed by depressed natural gas prices) and sat down with the folks at the Daily-Times which translated into this editorial on the issue (and other economic issues of interest to the Four Corners).

If you or I kill an eagle, we likely go to jail. If the wind industry kills multiple bald eagles with their turbines, they get a pass from the Obama Administration and their friends at the Sierra Club.

Kind of brings to mind Stalin’s quote “One death is a tragedy; one million is a statistic.”

But the issue is a serious one. Southeastern New Mexico is now facing yet another “endangered species” issue with the “Lesser Prairie Chicken.” Addition to the list could put a real damper on industry in Southeastern New Mexico.

I’m not saying that any wind farm that kills an eagle should be torn down; rather, I would say that the Endangered Species Act should be interpreted in ways that offer similar leeway to other industries and other uses of the land.

If you have been out of the country or living under a rock the last few days, you may not have heard that the Internal Revenue Service has admitted to harassing and generally making life difficult (by blatantly breaking the law) for conservative groups including the Albuquerque Tea Party. It seems hard to believe that directives were coming from anywhere but the highest echelons of the Administration, but proving that will be another matter.

If you think that’s bad (and it is), wait until the IRS gets its grimy paws on American health care. As CNBC noted prior to the IRS scandal:

Get ready for the Internal Revenue Service to play a dominant role in health care. When Obamacare takes full effect next year, the agency will enforce most of the laws involved in the reform—even deciding who gets included in the health-care mandate.

“The impact of the IRS on health-care reform is huge,” said Paul Hamburger, a partner and employee benefits lawyer at Proskauer.

“Other agencies like Social Security will be checking for mistakes, but the IRS is the key enforcer,” Hamburger said. “It’s also going to help manage who might get health care.”

If that doesn’t send chills up your spine, I don’t know what will.

Check out the following chart illustrating the IRS’s dramatically-expanded role in US health care:

The big point made by advocates for Mora’s policy of banning oil and gas drilling (as I discussed recently) is that water is more important than oil or natural gas. That may sound like a valid point, but this is a very interesting article which notes that fracking uses far less water in the United States than golf courses. See the following chart on water usage by fuel source:

Of course, water IS a precious resource and the free market HATES the loss of a valuable resources. So, naturally, there are companies out there that are working to recycle frack water. And, according to the article, 20% of frack water is already recycled.

Rather than banning a particular process (Mora County hasn’t just banned fracking, but ALL oil and gas drilling), it might be worth pushing for procedures like water recycling that will make fracking and oil and gas drilling more environmentally-friendly than they already are.

Then, why is the Obama Administration reaching out to industry groups to help sell the law? We’ve heard so much from ObamaCare supporters and the Administration about how the law is going to hold those evil drug and insurance companies accountable. If that is the case, it sure has a funny way of doing so.

The reality is (as libertarians and some conservatives have repeatedly pointed out), the reality is that some of the biggest players in health care (especially those that already garner significant government support) have put up a great deal of money lobbying for the law. Now that the law is being implemented and the American people refuse to be “educated” in support of the law, the Administration is reaching out to those very same businesses they say the law is meant to hold accountable…got it?

The idea of putting solar panels on the Roundhouse parking garage is being pushed by an environmental group. The group managed to convince legislators to set aside $185,000 of taxpayers’ money aside for solar panels during the last legislative session, but alas (for them) Gov. Martinez vetoed it.

Readers in this space will know that we are not big fans of subsidies for ANY energy source (see chart below):

But that is not even the point when it comes to questioning the merits of this particular project:

1) The Roundhouse sits largely empty for 10 months out of the year (yes, there are interim committee hearings), will the electricity generated by sold on the grid?

2) Top electricity usage in the Roundhouse would be during the legislative session which takes place during January-February (or March) when the sun shines the least. How is this cost-effective?

3) While the group claims a repayment schedule that clearly seems to benefit taxpayers, can we get a full accounting of the costs and benefits of this project (including all subsidies) from a third-party auditor?

In this case, it is to look at the potential for them to purchase our clean, affordable natural gas to power their economy. See this brief write-up in the Albuquerque Business First.

What is not touched on in the article is that the Obama Administration needs to approve exports of LNG in order for some of the infrastructure to be developed for such exports. According to the Washington Post, it does appear that the Administration is leaning towards support of exports, but such support is not guaranteed.

As I write here, the benefits of exports far outweigh the potential negatives (if there even are any).

So, welcome to the Japanese delegation and kudos in particular to Michi Takahashi and the folks at New Mexico Solar Station for organizing this delegation. Hopefully Washington can get its act together to allow nations eager to purchase our natural gas bounty to do so.

In today’s Albuquerque Journal, Winthrop Quigley writes (with a local angle) about a recent report in the Washington Post which “uncovers” the “shocking” information that hospital prices have no basis in reality.

I suppose that having the actual pricing data is somewhat interesting, but having welcomed two babies into the world in the last five years, the lack of correlation between hospital prices and reality was well-known and expected even prior to walking into the hospital for the first birth. After all, hospitals don’t operate in anything even remotely resembling a competitive free market.

With third-party payers (be they insurance companies or the government, not to mention charity care), hospital pricing has almost no bearing on reality.

A few good quotes from Quigley’s piece, “The charges vary a great deal among hospitals, but what they are actually paid is either set by Medicare or negotiated with insurance companies, said Stephen Forney, Lovelace Health System chief financial officer. Medicare payments vary by where a hospital is located, and hospitals like UNMH get higher payments because that’s how the federal government helps fund graduate medical education.

“Payments don’t vary a lot, just the charges.”

Transparency in hospital pricing is a nice idea, but ObamaCare is only further removing patients from having to pay the costs of their care, so I don’t see this data as being very relevant to the health care discussion until and unless patients have some “skin in the game” and are treated like adults who can shop for the best “deals” in health care.

Welfare reform in the mid-1990s was highly-successful both in getting people off of welfare, but also in pushing them to enter the workforce. While the primary tangible benefit of work is in the actual economic output of the activity that thus benefits society, there is no doubt that having a job leads to societal involvement, self-esteem, and pride that simply cannot be achieved by getting a monthly check from the government.

Is it any coincidence or surprise that the Tsarnaev family (Boston Marathon bombers) received $100,000 in welfare benefits over a ten-year span? It’s not that welfare creates terrorism (thank goodness), but that idle hands are indeed the “devil’s workshop.” After all, if you aren’t working, gaining new skills, and developing some kind of a relationship to the society around you, alienation and a lack of respect are more likely to follow, plus you’ll have plenty of time on your hands for mischief.

And, as if the Tsarnaev’s aren’t enough of a reason to reconsider our welfare policies, check out this story on Denmark where the population and government officials are re-thinking their nation’s hyper-generous welfare benefits. Increasing the number of “makers” relative to the number of “takers” may be the single greatest problem of our age, especially in light of the aging population and depressed work-force participation rates.

Interesting information from The Economist Magazine.