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.

My letter to the editor responding to a letter that appeared a few weeks before ran in today’s Albuquerque Journal business section. Full text below:

Deficit “deniers” like letter-writer Dan Metzger seem to believe that government, especially the US federal government, has magical powers. To them, federal debt and deficits are not a problem and in fact are good. How ridiculous!

For starters, Metzger seems to assume that research and development forms a large proportion of total federal spending. This is simply not the case. Total federal R&D spending is less than 5 percent of the overall budget. Far higher percentages go to transfer payments and other spending priorities that have no positive impact on economic growth.

Metzger is correct that the federal deficit has no “due date,” however interest payments on the ever-growing debt will kill economic growth if/when interest rates rise above their historically-low levels.

More importantly, the federal government simply wastes money on boondoggles costing millions or even billions of dollars including farm and ethanol subsidies (to name just two).

The economic problem we face today is not one of too little federal spending which has doubled since the end of the Clinton Administration; rather, it is too much spending which crowds out more efficient private sector investment and sustainable economic growth.

(Albuquerque) If the Obama Administration approves liquefied natural gas (LNG) exports to non-free trade nations (those that do not have separate trade agreements with the United States), New Mexico could see an immediate increase in economic output of $200 million and the addition of 2,000 jobs according to a new Rio Grande Foundation report.

The issue of whether or not to export a portion of America’s bounty of clean natural gas has generated heated debate pitting some environmentalists and manufacturers who oppose exports against producers and free trade supporters who wish to allow exports.

The Rio Grande Foundation has come down firmly on the side of free trade and those who wish to sell natural gas around the world.

Said Foundation President Paul Gessing, “Philosophically, this view flows directly from our support for free markets, but it also is a product of our desire to strengthen New Mexico’s economy by providing new markets for natural gas produced within our borders.”

To come to its conclusions regarding the jobs and economic input of natural gas exports, the Foundation relied on data available from IHS Global Insight which stated that “exports would create over 100,000 direct, indirect, and economy wide jobs and have an immediate impact resulting in between $3.6 and $5.2 billion in potential revenues.”

According to the US Energy Information Administration, New Mexico produces 5.3 percent of total US natural gas, thus making it likely that New Mexico would experience a similar ratio of economic benefits.

Continued Gessing, “The economic impact numbers outlined above are just a starting point in terms of economic impact, but 2,000 new jobs would be enough to qualify these new jobs as the 5th-largest private employer in New Mexico were they all at one company.”

In addition to New Mexico jobs, benefits of LNG exports include increasing tax revenues, reduced carbon emissions over other energy sources, reduced trade deficits, a display of principled support of free trade, and closer relations with foreign people and governments.

Concluded Gessing, “LNG exports are a true win-win-win policy, President Obama should act now.”

Gessing recently sat down with KNAT TV to discuss the issue of LNG exports. See that interview below:

Rio Grande Foundation president Paul Gessing discusses the potential for Liquefied Natural Gas Exports on Joy in Our Town from Paul Gessing on Vimeo.

Check out the following chart:

It shows that New Mexico is among the slowest states in the nation when it comes to releasing financial reports. This chart comes to us from our friends at the Institute for Truth in Accounting which advocates for clear, honest, and transparent governmental accounting. Once aspect of their mission is to encourage states to release their reports in a timely fashion, on which account New Mexico is not faring too well.

While corporations have to file their 10-K’s within 90 days or less of their fiscal year end, in 2011 New Mexico took 356 days. This year is looking little better as it has been 298 days since the end of the fiscal year, and the state has yet to issue the report.

Additionally, on January 10, Governor Martinez issued her Executive Budget Recommendations. This means that she was making budgetary recommendations for 2014 without knowing for sure what took place in 2012—and she still doesn’t know!

Recently, the Institute highlighted the state which took the longest to release their financial reports in 2011. That is the chart shown above.

It has been well-publicized that I am on the board of a new, completely virtual charter school called New Mexico Connections Academy. Well, the proverbial “rubber is hitting the road” and enrollment is happening now as is a series of information sessions on the school itself.

Information sessions, both online and in-person (throughout the state) are going on over the next few weeks. If you think digital learning might be right for your child, grandchild, or the child of a friend (grades 4-12), now is the time to find out more and reserve a spot for that child (enrollment is limited by law). Again, click here for additional information.

Contrary to New Mexico law which authorizes the Oil Conservation Division with the power to approve or deny drilling, the Mora County Commission has voted 2-1 to ban all drilling for oil and gas within its borders. Not ‘fracking’ which, while safe, has generated a great deal of concern among liberals and NIMBY types, but plain old oil and gas drilling.

This in a County where 23.8 percent of residents live in poverty and 15 percent of the County is unemployed. No jobs here!!!

Now, I honestly don’t have a moral problem with being against oil and gas drilling. It is illegal under New Mexico law and unfair even for, say 90% of the citizens of a given locality to tell the other 10% they can’t have a job, but it’s not inherently immoral. What is immoral is the fact that the folks in Mora County send their kids to schools that are funded largely by oil and gas, heat their homes and watch TV by the power of gas and/or some other nasty fossil fuel, drive on roads that have a petroleum base, and generally benefit from the fact that society around them embraces fossil fuels and oil and gas exploitation.

So, what can be done? First, it is time for our leaders to do everything possible to cut off severance tax dollars to the County. Secondly, I think Gov. Martinez and her Administration should do whatever they can to deny funding and services to the County. Need a pothole fixed or a road paved? Sorry, that requires petroleum…local welfare office or senior center not staffed appropriately…sorry, we just don’t have the money and you aren’t pulling your weight.

Freedom means responsibility. If Mora is free to deny basic economic activity on its hallowed land, then the leaders of the County should bear responsibility for those decisions and voters bear responsibility for allowing “Mora-ons” to represent them.

Like it or not, New Mexico is heading down the expensive path of Medicaid expansion under ObamaCare. One of the concerns we expressed in opposing the expansion was related to some preliminary data from Oregon which seemed to show that Medicaid doesn’t really do much to improve the health of its recipients.

Well, the data are no longer preliminary, rather they are confirmed. According to a new report from the New England Journal of Medicine, indeed, having Medicaid newly available “did not lead to big health gains” in Oregon.”

In other words, Medicaid expansion will likely result in a lot of additional spending for very little in the way of results.

On a related note, I found this story very interesting. There is a pilot program in Medicare that, if replicated nationwide, would save an estimated $122 billion a year and improve patient lives through reduced hospitalizations (a 33% reduction). Rather than expanding this program, the Obama Administration is going to kill it.

“Film Loans Fizzle.” That’s the headline of the front page story in today’s Albuquerque Journal. The rest of the story treats us to whining from the “usual suspects” on the difficulty of obtaining interest-free loans for film projects and their desire to alter the terms of such loans. It all sounds so sad…another government program that just isn’t being adequately funded.

The reality is much more optimistic, at least for taxpayers. After all, right there in the story is the explanation that the state made $1.4 million on loans totaling $240 million under the original, generous program, for a return of about 0.6 percent. Not exactly a stellar return on investment even in these low interest rate times. According to the story, the same $240 million invested in government treasuries instead of film productions would have generated more than $31 million over the same period. In other words, the changes to the program arguably saved taxpayers $30 million. This is GOOD NEWS!

Unfortunately, the author of the piece talked to film advocates, not taxpayer advocates, so the piece is gloomy in tone when it should be singing the praises of Gov. Martinez and the folks (like the Rio Grande Foundation) who advocated for these reforms.

John Fund is National Affairs Columnist for National Review magazine and an on-air analyst on the Fox News Channel. He is considered a notable expert on American politics and the nexus between politics and economics. He spoke at the Albuquerque Museum in Albuquerque on Monday, April 29, 2013. His presentation is below:

4-30-13 John Fund from Paul Gessing on Vimeo.

The Western Energy Alliance has put together a fascinating website that allows users to find out basic information about the impact of the oil and gas industries in their area whether that be congressional district or by county.

So, users can find for example that in San Juan County (which is located firmly in the oil/gas patch, the industry employs 3,656 workers directly in drilling and production with more than $288 million paid in wages in just those areas. When factoring in suppliers and other direct impacts of the industry, total jobs come to 4,618 with $348 million in wages paid.

Bernalillo County, on the other hand, is located outside of the oil/gas patch, but still has 86 jobs in drilling and production. Where Bernalillo County really benefits is in the follow-on impacts which came to 5,466 jobs and $260 million.

Fascinating stuff, available for every county and congressional district in the nation. New Mexico’s economy rests on two pillars: the extractive industries which are led by oil and gas and the federal government. Oil and gas are undergoing a technology-driven, transformative boom while the federal government tends to destroy wealth through taxation and regulation. I know which one I’d prefer to have here in the Land of Enchantment!

Unlike some conservative organizations, the Rio Grande Foundation speaks openly and frequently about the need to cut all aspects of federal spending, including the military. This news article highlights just one case of Congress forcing the Pentagon to an extra $436 million on a weapon the experts explicitly say is not needed (the Abrams tank). As the article notes, “Keeping the Abrams production line rolling protects businesses and good paying jobs in congressional districts where the tank’s many suppliers are located.”

Are some areas of the Pentagon being negatively-impacted by the sequester? Undoubtedly. But the issue is not inadequate spending (after all, military spending has exploded over the past decade); it is poorly allocated spending. This problem is rampant throughout government and was recently highlighted by the FAA’s ill-advised attempt to squeeze air travelers by cutting service.

Sure, when it comes to the military, the “free market” is not likely to take over soon; the best we can do as citizens is to demand that our elected officials be reasonable with their military spending priorities. The Abrams tank seems to be yet another example of “pork” taking priority.

The issue of “fairness” and taxation on sales made over the Internet is back in Congress with a bi-partisan group pushing for a new taxation scheme called the “Marketplace Fairness Act designed to collect taxes on ALL sales made over the Internet.

It sounds simple, but it’s not. Forcing mom-and-pop businesses and sellers on Ebay to collect taxes and fill out forms for 9,600 taxing jurisdictions is not simple and will inevitably kill jobs and economic growth…it’s not just about the taxes, rather it’s about the compliance costs….and the “Marketplace Fairness Act” doesn’t resolve these problems.

And, while some Republicans have joined many Democrats in supporting the scheme, some Democrats have also led the way in opposing the scheme (you can click here to share your opposition with Heinrich and Udall):

Now that Gov. Martinez has seemingly jumped on the film subsidy bandwagon and will be pushing to complete a study of the program’s impact, some are wondering if we’ll finally have an answer to the question of whether the film subsidy program is an economic winner.

Of course, this implies that there is some great controversy over the economic impact of film subsidies, but there’s not. The programs are economic losers and there is plenty of information available to this effect. There’s a study by the lefty group Center for Budget and Policy Priorities.

There’s the fact that other states have been slashing their film subsidy programs.

There’s a column by liberal Michael Kinsley.

The Economist has written numerous articles including this one on the negative impact of film subsidies.

And Massachusetts is just one of many states that have found the subsidy programs provide a poor return on “investment.”

So, why have New Mexico film subsidy recipients been so successful at obtaining and keeping very generous subsidies?

1) They are Hollywood and are great at telling stories (fiction);
2) They are “cool.” Hanging out in the oil patch is not nearly as fun as meeting the cast of Breaking Bad or Jessica Simpson.
3) Classic economic case of concentrated benefits and dispersed costs. The film people know they are getting a sweet deal from the State and are organized to defend it (and obtain even more). Average taxpayers don’t see that they are getting hosed and are disorganized.

So, it is a pure political power play. What can be done to stop it? Average taxpayers need to tell their elected representatives that the film program is not a good deal and hold their Representatives and Senators (not to mention the Governor) accountable for their support of a program that takes tax dollars from average people and gives it to Hollywood studios.