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.

According to a new report from the Friedman Foundation for Educational Choice, government school populations are slowly increasing while administrative and teacher hiring has exploded. According to the report:

Between FY 1992 and FY 2009, the number of K-12 public school students nationwide grew 17 percent while the number of full-time equivalent school employees increased 39 percent, 2.3 times greater than the increase in students over that 18-year period. Among school personnel, teachers’ staffing numbers rose 32 percent while administrators and other staff experienced growth of 46 percent; the growth in the number of administrators and other staff was 2.7 times that of students.

New Mexico’s bloat was even more extreme than the rest of the nation due in large part to its slow-growing student population which rose at 7 percent, less-than half the national average, while hiring kept pace with national trends.

Meanwhile, total school personnel in New Mexico increased 39 percent, teacher hiring rose at the slightly lower rate of 30 percent, and administrators and other staff grew by an astonishing 47 percent.

Check out the interactive map associated with this report here. Note that the bloat affecting New Mexico has not happened in many other states, including neighboring Arizona.

This story from Capitol Report New Mexico explains how the Public Employee Retirement Association (PERA) saw its unfunded liabilities jump by an astonishing $1.2 billion over the last year alone. That jump means the unfunded liability has risen from $5 billion to $6.2 billion. In the last three years alone, the unfunded liability has nearly tripled (it was $2.3 billion in mid-2009). But that’s not the worst of it.

The situation has deteriorated despite relatively strong performance in the stock market this year (the S&P 500, for example, returned nearly 15% over the past 12 months). That rate of return exceeds even the optimistic 8 percent rate assumed by New Mexico’s pension funds, so after a number of down years, things should have started looking up, not further down.

Of course, there are options for real reform, but they won’t be as popular as the milquetoast “reforms” the Legislature will be considering during the 2013 session.

As RGF experts J. Scott Moody and Wendy P. Warcholik, Ph.D wrote in a paper on needed pension reforms a few years ago, the solutions needed are:

Step 1—Fix the Public Sector Over-Employment Problem
Step 2—Transform Defined Benefit System into a Defined Contribution System
Step 3—Continue to Increase Employee/Retiree Contributions to the Retiree Healthcare System
Step 4—Expand the Private Sector

Once the election is over, Medicaid expansion and whether New Mexico should accept the federal government’s bribe, er, “support” to massively expand Medicaid. Of course, the results of the election could have an impact on whether New Mexico legislators are inclined to follow the diktats of ObamaCare and whether the president and Congress intend to keep the program in place.

John Goodman of the National Center for Policy Analysis discusses New York Times columnist Paul Krugman and his clueless statements/outright lies on Medicaid and health care in general.

In a separate brief, the Heritage Foundation outlines potential scenarios under the new health care law and how much it is likely to cost taxpayers at the federal level and in the individual states. According to the analysis, New Mexico will spend at least $330 million more on Medicaid under ObamaCare from 2014-2022.

The National Taxpayers Union has released its ballot guide for issues and amendments. Check the New Mexico version out here. The full report with ballot measures for the other 49 states is available here. Share it with your friends, family members, and others in search of information on ballot measures in their state.

This is short, entertaining video showing just some of the miseries of a world without capitalism and free markets.

The fact that New Mexico’s education system is in dire need of reform is not lost on citizens of our state. Recent polling found that 75 percent support the simple act of holding back third graders who can’t read.

This is good news! People clearly want to see reform — and our children deserve the best education possible for them.

While eliminating the social promotion of third-graders who cannot read would be a good start for the Legislature next session, we need to use all the tools at our disposal to ensure that kids can read and their schools are successfully teaching them to do so.

Hopefully, voters focus on this issue in the upcoming election and weigh support for such modest education reforms in deciding who they wish to represent their interests in Santa Fe.

The reality is that banning third-grade social promotion is not enough to improve our schools. In fact, no single education reform is going to solve the problems that have been with us for generations.

One reform that is sweeping the nation — but is being hindered here in New Mexico — is the fast-growing virtual/digital learning model.

Why is New Mexico, once again, falling behind in education?

We do have the state’s first full-time virtual charter school up and running in Farmington because an innovative school district saw the possibility of virtual education. But, New Mexico Connections Academy, a proposed full-time, statewide public virtual school that applied for another charter for the 2013-2014 school years, was denied on a 6-3 vote by the Public Education Commission.

Despite strong interest from parents, a thorough application, committed volunteer board, and no opposition voiced at a public meeting, the PEC turned down the New Mexico Connections Aca-demy charter application.

The application is now on appeal to Education Secretary-designate Skandera.

There are countless examples of how technology has positively impacted virtually every aspect of our lives. It is only now getting started in truly changing education.

The PEC’s decision was based in part on a Richardson-era legal opinion that questioned the legality of “virtual” charters. With such a mind-set, it is a wonder that New Mexico students are not forced to use only an abacus to learn math, or a wax tablet to learn how to write.

Michael O’Leary is an adjunct scholar with New Mexico’s Rio Grande Foundation, a limited government proponent.

Why do conservatives and libertarians tend to support markets over “democracy?” The following video provides a strong justification for that view:

While the ignorance and willingness to just make stuff up on the part of these people may seem reprehensible to some, the reality is that it is a direct result of “rational ignorance.” That is, given their likely minimal impact on the outcome of a given election, most people don’t pay that close attention to the issues. That is why “democracy” is inherently flawed. Interestingly, I’d say the interviewees are likely voters because they cared enough to lie about having seen the debate. A truly ignorant person would flat-out say “what debate?” and not really care. These people were trying to put up a front of being “good citizens.”

Free markets, on the other hand, create incentives (financial ones being preeminent) for all parties to become informed. And, even if you don’t understand all of the inner workings of an automobile (as I don’t), it is relatively easy to pick up a copy of Consumer Reports and find out what the experts say or rely on the power of market forces that kill off inferior products while boosting superior ones.

While politicians make promises that may or may not be kept, there are some issues on this fall’s ballot that voters have direct control over. One such issue is whether the City of Albuquerque should meddle further with the wages paid by local businesses. Check out the new advertisement below: