According to a new report from a group called Economic Modeling Specialists, Albuquerque has been the 2nd least competitive metro area since 2010. The report relies on a concept called “shift share” with which I was not previously familiar and I’m not sure that the report effectively describes the economic reality in Albuquerque, but it is most definitely relevant that we were ranked 99th out of 100 metros.

Richard Florida has an article about this at The Atlantic.

The same outfit did an analysis of the 50 states recently and New Mexico did not fare especially well in that either. Not surprisingly, Texas ranked highly.

Bernalillo County has posted its payroll including names and pay online. You can find this information here. Previous efforts to make the County truly transparent had failed in the Commission, but the Rio Grande Foundation went ahead and requested the information and posted it online on our own website.

Kudos in particular to Commissioner Wayne Johnson for his steadfast leadership on transparency at the County. It is our hope and assumption that the push for transparency will continue at the County regardless of its partisan makeup.

I recently attended a presentation by the Federal Reserve Bank in Albuquerque. At the event, this very informative powerpoint presentation was given. As the presentation illustrates, New Mexico is one of two states to have lost a significant number jobs over the past year (coal-reliant West Virginia being the other). Here is the data in another format.

Why is New Mexico lagging? As the charts on pages 7 and 8 of that report illustrates, New Mexico is over-reliant on Washington as a basis of its economy. And, with the recognized need for Washington to start to reverse spending growth, the decline in federal spending is going to hit New Mexico especially hard.

Not to be one to say “I told you so,” the need to diversify our economy away from the federal government was a topic of RGF back in 2007. It is time for policymakers to realize that the Washington gravy train has left the station. It is time to adopt proven, free market policies that will make New Mexico attractive to businesses.

Obviously, there are different visions for our economy, but I’ll put our ideas up against anyone else’s in terms of proven effectiveness.

(Albuquerque) The Competitive Enterprise Institute and Rio Grande Foundation today released a joint working paper criticizing the Regional Haze settlement agreement recently proposed by the New Mexico Environment Department. The study is the first independent analysis of the settlement, which would resolve an ongoing dispute between the state and the Environmental Protection Agency over the haze-causing emissions from the San Juan Generating Station.

“EPA’s Regional Haze plan would impose almost $375 million in compliance costs on PNM ratepayers, in order to achieve an “improvement” in visibility that is imperceptible,” said CEI policy analyst William Yeatman, who authored the report. “Unfortunately, the state’s alternative proposal is even worse—it would cost almost $20 million more, yet it would significantly diminish PNM’s firm generating capacity. To put it another way, the state’s alternative would cost more, for less.”

At issue is an EPA regulation, known as Regional Haze, which requires that states improve visibility at federal National Parks. In June 2011, New Mexico proposed a Regional Haze plan that required a $36-million retrofit at the San Juan Generating Station. Three months later, in August 2011, the EPA rejected the state’s plan, and imposed a federal plan that required a $375-million retrofit at the power plant—more than ten times the cost of the state’s original plan. During the summer and fall of 2012, the New Mexico Environment Department led negotiations, in an attempt to reach an alternative agreement that would bridge the gap between the state and the EPA on Regional Haze.

In early October, after months of negotiation, the New Mexico Environment Department proposed a settlement agreement, which was then sent to EPA for review. Unfortunately, the Environment Department refused repeated requests for details on the settlement agreement. Despite the lack of specifics, it is nonetheless possible to perform a line-item cost analysis of the proposal, using regulatory filings submitted by PNM and conservative assumptions.

“New Mexico is much better off continuing to fight for its original, affordable Regional Haze proposal in court,” noted Yeatman, referencing litigation launched by the state against the EPA over the Regional Haze regulation in late 2011. The case is pending before the Tenth Circuit Court of Appeals. He continued, “Due to the unique prerogatives accorded to states under the Regional Haze program, New Mexico’s lawsuit has good prospects for success. Even were New Mexico to lose its case, suffering the EPA’s regulation would be better than the settlement negotiated by the New Mexico Environment Department.”

Added Rio Grande Foundation President Paul Gessing, “New Mexico rate payers deserve the best rates possible. While environmental concerns are important as well, the original proposed retrofit is far more sensible and cost-effective than the other two options.”

To read the report, click here.”

I sat down with Mike Jaxson of “This Week in Chaves County” to discuss the election results and what they mean for New Mexico. Take a listen here.

From all of the talk about sequestration, one might be led to believe that it will result in “massive” spending cuts. That could not be further from the truth. What’s massive is our 16+ trillion dollar national debt and the trillion+ annually being added to it. Sequestration is not ideal, but as the Rio Grande Foundation and several other prominent free market groups point out in this newly-released letter, it is necessary to start this nation moving towards fiscal sanity.

It might be self-evident after Tuesday’s election, but I just ran across the interesting chart below which was put together by the Manhattan Institute. It illustrates the relative strength of public-sector labor unions. It will come as no surprise that New Mexico’s public-sector labor unions are the strongest in the region by far and are among the strongest in the nation. To be sure, many of the states with strong public employee unions are also the wealthiest in the nation. They are also the “bluest” (probably a lot of both “cause” and “effect” there) and are generally seeing slow population growth or even loss). This, despite relatively high incomes, makes one wonder why more Americans are moving to middle-income, non-union states rather than high income, heavily unionized states. Lastly, New Mexico is easily the poorest state to have public-sector unions as strong as it does. I can’t get the table to go past Florida, so go to the main paper by clicking here to find it.

The damage that was brought upon the coastlines of New York and New Jersey by Hurricane Sandy, estimated to cost up $50 billion, has some economic analysts stating that the tragic event could be an economic blessing (as discussed in a November 5 article). These individuals believe that the disaster could provide a desperately needed boost for the sluggish economy due to reconstruction. The idea that massive destruction is good for the economy should be seen as absurd on its face, but many economists – including Nobel-winner Paul Krugman – subscribe to this fallacious argument.

The great political economist Fredric Bastiat challenged this erroneous view back in 1850. Bastiat used the example of a broken window to illustrate how although we may see the new work which has been provided to the glazier to fix the window, but we do not see where that money could have been spent or invested absent of the damage. By simply replacing the broken window with a new one, no new wealth has been created; rather society is one window poorer than before.

The scarce resources that will be employed to rebuild the infrastructure destroyed by Sandy will be denied of their other potential uses. Of course, the rebuilding of damaged property is necessary, but it robs us – especially those directly impacted – of wealth. Disasters should not be confused with economic stimuli.

Ben Sugg
Policy Analyst
Rio Grande Foundation

Much will be said and hashed over regarding the federal elections, but there is no doubt that the 2012 elections were a mixed bag at best for New Mexicans of a limited government bent.

The good: All three PRC reform Constitutional Amendments passed;
While more was hoped for, the Legislature did not get markedly worse, despite a tough election nationwide.

The bad: New Mexico voters had a chance to shake up the Legislature and did not do it, thus missing out on a chance to end one of the oldest legislative monopolies in the Western Hemisphere.

Albuquerque voters, throwing basic economics to the wind, adopted an increase in the minimum wage mandated under City law.

In addition to the Legislature, reform-minded judicial candidates were defeated. Apparently, having a terrible judiciary is just fine with a majority of New Mexico voters.

We’ll keep educating New Mexicans on these and other important issues. Because the ideas of limited government are rather counter-intuitive (as John Stossel points out) we are likely to lose more than we win.

The ongoing decline of America’s economic freedom has been going on for more than a decade. And, the latest report which ranks nations on their relative levels of economic prosperity shows that for the first time, the US is not among the 10 most prosperous nations in the world. The English “Legatum Institute,” with which I was not previously familiar (but sounds a lot like a British version of the Rio Grande Foundation) has been ranking the nations of the world based on economic prosperity for the past six years. You can see their latest report here and watch a “Yahoo News” report on the report here.

Interesting tidbits from the report: America’s greatest declines in recent years come in the categories of “entrepreneurship,” “economy,” and “personal freedom.”

The report ranks the US 2nd on health (only behind Luxembourg), far better than Canada’s 15th position despite Canada’s overall better rank. American education also performed respectably on the report with a 5th overall ranking.

Fascinating report and more evidence that whoever we elect as the next president and congress of this country, they have got to make the restoration of economic freedom a top priority.

Corporate income taxation is a complex issue. It will be on the 2013 Legislature’s reform agenda as it should be. New Mexico’s corporate tax rate, as Winthrop Quigley accurately points out in his article, is too high. Then, things get complex. Single factor and a host of other issues come into play and Quigley seems to side with his left-wing friends at Voices for Children who of course can “put lost tax revenue to use elsewhere” as they’ve never met a tax cut they liked or a tax hike they didn’t like.

While reforming or even eliminating New Mexico’s corporate income tax would not be a “panacea” for the state’s economy (you don’t rank 49th in economic freedom based on one bad tax), the fact is that the corporate income tax is a poor source of revenue for New Mexico. For starters, it is too volatile: According to the LFC, it collected about $230 million worth of revenue in FY 2011. That was an 83.7 percent increase from the previous year. That kind of volatility makes budgeting susceptible to wide economic swings. It ratchets the budget up in good times only to leave painful cuts (or tax hikes elsewhere) in the bad times.

It also, of course, negatively impacts business location in New Mexico. The oldest principal of taxation is: “If you want more of something, tax it less, if you want less of something tax it more.” New Mexico is among the poorest states in the nation and also happens to have zero Fortune 500 companies headquartered within its borders. Perhaps it is time to try something new by making businesses WANT to come here?

If outright tax cuts are not in the offing, may I suggest restoring lost revenue by eliminating film subsidies and some of the “economic development” programs offered by the state (like JTIP and LEDA)?

We at the Rio Grande Foundation have often lamented the state of New Mexico’s education systems (both K-12 and higher ed). Well, an experience this weekend has given me some hope that our K-12 system can be reformed. I’m referring to the new “Estancia Valley Classical Charter School” which opened in Moriarty at the start of the 2012-2013 school year. I was privileged to attend its grand opening gala which took place on Friday.

Why would a new charter school bring me such optimism? After all, New Mexico already has more than 100 such schools. Estancia Valley Classical is unique in the charter school world because of one of its major supporters, Hillsdale College. It is one of two charter schools in the NATION to have received Hillsdale’s support through its charter school initiative. Hillsdale too is unique in that it is a liberal arts school with an avowedly free market/liberty-oriented approach to the world. Among other unique features, Hillsdale does not accept federal or state taxpayer subsidies for any of its operations.

How committed is Hillsdale to this school? Their president, Larry Arn flew out for the event and gave a great talk about the importance of moral virtue in learning and how studying the universal truths in Shakespeare can help students achieve that rarest of all traits, wisdom.

Obviously, this is a great opportunity for New Mexico in general and Moriarty specifically. The crew at Estancia Valley Classical are just getting their “sea legs” after a long and difficult charter application process (I know something about that myself). It will take some time to fully develop as an institution and to “hit its stride,” but I know that I will be watching its development with great anticipation.

If there is one we have learned in the last month about University of New Mexico, it is that their leaders and supporters are die-hard Keynesians. A few weeks ago, as I note in this posting, new UNM president Robert Frank’s justification for the now-delayed UNM Hospital was built on the shakiest of foundations. His argument was essentially that the project would create jobs through Keynesian stimulus, not that we need a hospital or some other sensible justification.

In today’s paper, we see proponents of Bond Measure C (the bond for higher education) make similar arguments on the supposedly stimulative nature of higher-ed construction.

As I wrote in a brief posting about the various ballot measures:

Bonds may not raise taxes, but they do cost real money that could otherwise remain in your pockets. If a project is indeed a priority like the Paseo del Norte Interchange, by all means vote for it, but also realize that higher education in New Mexico is bloated and recently handed out a $453,093 parting gift to departing NMSU President Barbara Couture.

In other words, money that will be spent on higher ed facilities could remain in taxpayers’ pockets. That money doesn’t disappear into thin air as Keynesians would have you believe. Rather, savings and investments are used elsewhere in the economy. That’s not to say that a bond measure can’t have a positive economic impact. I think the case is strong that the Paseo interchange will generate returns in terms of less time wasted in traffic, less pollution, and higher quality of life. While higher education can have similar stimulative impacts in the long term, New Mexico needs to focus on the quality of its institutions, not the quantity of campuses and/or buildings (as we’ve pointed out).

So, by all means, vote for bond measures if you think they are a worthy investment, but don’t fall into the Keynesian stimulus trap.

A short, nice video from Arthur Brooks of the American Enterprise Institute:

No matter who controls the White House and Congress after this election, there is no doubt that a close look at Canada’s successful deficit reduction policies are in order. Check out this article from the Washington Post written by the head of a Canadian think tank.

Also, see this chart from the Cato Institute which shows just how much spending has declined north of the border:

Lastly, it is worth noting that while spending in Canada is a big factor in their recent economic prosperity, our neighbors to the north have seen economic freedom increase as ours has declined in the USA.

As Americans head to the polls to vote, the issue of “ObamaCare” and health care reform in general remains one of the most heated points of contention. Unfortunately for all of us, both major party candidates for President have supported centralized, bureaucratic control of health care and thus the issue of true health care reform remains elusive as a campaign point.

The good news is that free market health care, also known as “consumer driven health care” is working, and that includes new data from New Mexico (since I have a BlueEdge health savings account, my family and I were likely part of this particular report).

As free market health care expert Greg Scandlen writes:

We’ll start with a study by the Health Care Service Corporation (the Blue plans in Illinois, Texas, Oklahoma and New Mexico) on the experience of their customers with their CDH plan, known as BlueEdge. Enrollment in BlueEdge has passed 1.5 million people this year and this study tracks them from before they entered the Consumer-Directed plans, which include both HSAs and HRAs.

A press release reports that BlueEdge enrollees –

Were four percent more likely to use preventive services.
Reduced overall utilization by 12 percent.
Were 10 percent more likely to use generic medications.
Spent 24 percent less on inpatient and 8 percent less on outpatient services.
Reduced hospital ER care by 12 percent.

These are changes in behavior by the same people before and after they joined the BlueEdge program. Unfortunately, the study itself is not available to the public, but a summary on the company web site reports that the reductions grew over time, dropping by 9.1% in the first year, but by 11.4% over three years.

In other words, those who use consumer driven health care are more conscious about costs, but also are using preventative services at a higher rate than others in traditional insurance plans. To paraphrase the “Occupiers,” THIS is what health reform looks like!

Check out this new one-page report from the Rio Grande Foundation detailing potential job-loss scenarios if the minimum wage hike ballot measure passes in Albuquerque.

Jon Barela and the Economic Development Department have rolled out their legislative agenda for the 2013 legislative session and, presumably beyond. There is a lot of good here and we hope the Legislature will act on several of the proposals. There are plenty of other economic development ideas that could/should be considered and there are also some ideas that we’d question the merits of. First, the proposal includes the following (explanatory links have been provided):

—Single Sales Factor
—Corporate Income Tax Reduction
—Local Economic Development Act (LEDA) – $10 million
—Job Training Incentive Program (JTIP) – $4.75 million
—Capital Outlay Reform
—Spaceport Informed Consent
—MainStreet Investment

Simply put, corporate income tax reforms and reductions are great ideas and long-overdo as are the legal protections needed for the Spaceport (although it is doubtful that the Spaceport could ever be a building block of NM’s overall economy). We also support and have supported in the past, reforms to New Mexico’s capital outlay system.

Unfortunately, JTIP, LEDA, and Main Street all represent bad tax and economic development policies. They are narrowly-targeted (as opposed to broad-based) and involve government taxing productive economic activities and shifting funds to other, less-productive uses. See our 2011 Piglet Book for details as the MainStreet and JTIP programs are prominently mentioned. LEDA became a center of controversy relating to subsidies for a big-box store in the South Valley. It may not be quite as problematic as the other two programs, but with government managing the process and targeting taxpayer dollars, it still defies the principles of good tax policy.

Some policies we’d like to see mentioned include: “Right to Work,” the adoption of regulatory cost-benefit legislation like that adopted recently in Indiana, and adoption of market, not “prevailing” wages for government construction projects in New Mexico. There are several other policy changes that could be adopted by the Legislature to spur economic growth, but these are just a few of the big ones.

Leave it up to Bill Richardson and New Mexico’s government to construct a fancy $200+ million taxpayer-financed Spaceport without making sure that New Mexico’s laws are in order to make the project a success. Richard Branson recently stated that he has “quit counting the days” to first launch and that it is at least “12-18 months away,” an eternity in the business world. In other words, “who knows” if and when Virgin Galactic will truly use Spaceport America as a launch site, thus, hopefully spurring economic growth in southern New Mexico?

Interestingly, back in 2009, Virgin was saying “18 months” to launch. While this is starting to feel a bit like Lucy and the football, it is hard to blame Virgin for wanting to have liability protections in place for parts suppliers. Of course, they knew at the outset that New Mexico’s legal climate was close to that of a third world country, that we have high taxes, high crime, and bad schools, but they had nothing to lose since New Mexico taxpayers were on the hook for the project anyway.

A note to state policymakers: before blowing taxpayer dollars on speculative ventures like spaceports, let’s get the basics of good government under control. Let’s reform our legal and criminal justice systems, reduce tax burdens on businesses and entrepreneurs, and improve our schools. Until we do the basics, the success of ventures like the Spaceport are just a mirage.

I responded to some recent statements on energy subsidies made by NM Sen. Jeff Bingaman in a recent article in the “Business Journal.” As this is an online format, I have taken the liberty of adding the link to information from the Energy Information Administration by way of a footnote. See my letter below:

Letters to the Editor
Albuquerque Business Journal

In reading the recent article regarding the “renewable” industry’s pleas for ongoing subsidies for their businesses, Sen. Jeff Bingaman’s statement that “the tax code has become intrinsically lopsided against renewables in favor of fossil fuels” jumped out at me.

If not an outright lie, Bingman’s statement is at very least entirely inaccurate. According to data from the Energy Information Administration, Coal receives subsidies of about 6/100ths of a cent per kWh while solar receives an enormous 96.8 cents per kWh. Wind receives 5.25 cents per kWh and nuclear receives just under 1/3 of a cent per kWh.

In other words, wind receives 87.5 times the subsidy that coal and natural gas receive while solar receives an astounding 1,600 times the subsidy of coal and gas. To say that the tax code has become lopsided would be an accurate statement on Bingaman’s part only if he stated that it was lopsided in favor of politically-favored “renewables.”

Of course, their advocates will claim that wind and solar have fewer “externalities” in the form of pollution, but wind and solar require backup (usually natural gas) and even with the addition of expensive carbon sequestration technologies, both coal and gas are far cheaper and more reliable than so-called “renewables.”

Sen. Bingaman should correct his misstatement and Congress should recognize that energy subsidies of any kind are a fool’s bargain.

Paul Gessing will be on the Terri Q. Sayre show on 770 KKOB from 8:30am to 10am discussing the Albuquerque minimum wage issue.  Call in!

It is hard to believe that you can be too liberal and too supportive of big labor and more costly government for extremely liberal Santa Fe, New Mexico, but that may be the case. The Santa Fe City Council will vote next week on repealing an ordinance giving labor unions control over large taxpayer funded construction projects.

Earlier this year, Santa Fe Mayor Coss was able to get enough Santa Fe City Council members to agree and pass something called a Construction Workforce Agreement (CWA).  It is an ordinance that discriminates against 96% of New Mexico’s construction workforce who chose not to join a labor union.  The ordinance requires contractors on most Santa Fe public works projects to have CWAs (read union contracts) in place.

A number of city councilors have agreed to re-visit the issue on Tuesday, October 30.  Elected officials will respond to the voice of those who have the power to vote – but they need to hear from you!   Read more from the New Mexico Business Coalition on why this ordinance should be stopped.

The Rio Grande Foundation urges you, if you live in Santa Fe, to contact the City Council and ask them to repeal this ordinance.

HT: New Mexico Business Coalition

I discuss the major issues on the 2012 election ballot with Mike Jaxson of KSVP Radio in Artesia. You can tune in here.

Last evening, US Senate candidate Martin Heinrich had an event with US Sen. John Kerry. Rob Nikolewski who happens to work for the Rio Grande Foundation, but runs Capitol Report New Mexico, received an invitation to the event as did several other media outlets. Rob attempted to go to the event to cover it, but was denied access by Heinrich’s staffers.

Read the full story and see video of the encounter here. As Rob points out in his story, he has covered Heinrich as a Representative and as a candidate many times over the years and has always treated him fairly. I’m not sure what Sen. Kerry was going to say that was so mind-blowing or controversial, but it certainly makes the campaign look like they have something to hide.