I often write about the need for free market forces in our education system. The problem is that in a heavily-socialized, unionized system like K-12 education, market forces are a foreign concept.

Given this reality, it is hard to understand how good education COULD be. But, as Mark Perry points out on Jay Greene’s blog, we have myriad products available in the marketplace that have grown better and cheaper over time. Don’t believe me? Check the post.

You are invited to the following free event:
THE LIBRE INITITATIVE PRESENTS: FORUM ON ECONOMIC FREEDOM
Thursday, March 1, 2012 at 8:00 AM-1:30pm (MT)

Hotel Albuquerque at Old Town
800 Rio Grande Boulevard Northwest
Albuquerque, NM 87104

The LIBRE Initiative along with its partners seek to inform the community about how Economic Freedom is critical to our community’s Economic prosperity. Confirmed panelists and speakers include:

Jon Barela, Secretary of Economic Development
Paul Gessing, President, Rio Grande Foundation
Dennis Kintigh, New Mexico State Representative, District 57
Carla Sonntag, Presdient, New Mexico Business Coalition
Gerges Scott, Vice President, Energy Unit, DW Turner

Read more and register for free here.

We hope you can make it!

Want to know why America is in trouble? Take a look at this interactive website provided by the New York Times. It maps which counties throughout the US rely disproportionately on federal largess as a percentage of personal income.

Of course, New Mexico has more than its share of government-dependent counties, but we knew that already. The really scary thing is to click by the year (this map is from 2009) in the top right corner. Go back to 1969 and Americans are less than half as dependent on the federal government (7.8%) as they are today (17.6%).

In case you haven’t heard already, the US Supreme Court will be hearing briefs in a matter of weeks on the federal health care law colloquially known as “ObamaCare.” The Rio Grande Foundation (along with the Cato Institute, several other state and national think tanks, and a number of legislators) has signed onto an “amicus brief” relating to the “individual mandate” contained in the law.

According to the brief, the issue discussed in the brief is:

Can a limited government to whom a free people have delegated only certain enumerated powers commandeer that people into purchasing a product from a private business pursuant to its power to pass laws “necessary and proper for carrying into execution” the authority to “regulate Commerce . . . among the several States”?

For the lawyers out there and interested citizens, the full brief is available here.

Read my letter to the editor from the Business Outlook section of today’s Albuquerque Journal.

In his column on the various tax bills introduced in the 2012 legislative session Winthrop Quigley focuses on taxes, one reason that New Mexico is not economically-competitve.

However, economic policy is about more than just taxes. In terms of overall economic freedom, according to the Fraser Institute’s “Economic Freedom of North America,” New Mexico ranks 49th. Factors like work force freedom and regulations come into play in broader measures of economic freedom that are not reflected in studies of taxation. Yet their impact is very real.

Even on the issue of taxes, Bill Jordan of Voices for Children – an organization that has never met a tax hike it didn’t support – is simply wrong when he says that New Mexico usually is in the “middle of the pack.” Far more often, our tax code and tax burden places us in the bottom 10 among states.

While not a panacea, Gov. Richardson’s tax cuts did have a serious, positive, economic impact. New Mexico, a state that had been among the bottom 3-4 states in personal income saw income rise to 43rd in the nation. Yes, the broader national economy wiped out jobs everywhere, but New Mexico is better off than it was before.

Regardless who is right on the issue of whether taxes should be cut and how, passage of a “Right to Work” law as was just done in Indiana would be a no-cost way to make New Mexico more economically-competitive. I eagerly wait the day when Quigley and Voices for Children support such proven job creation measures.

Paul J. Gessing
President
Rio Grande Foundation
PO Box 40336
Albuquerque, NM 87196
505-264-6090

There has been a much needed discussion of government pension plans in the Albuquerque Journal and in the Legislature. Brad Day, a member of the Education Retirement Board, had a column here. Someone who disagreed with Day wrote his thoughts up here. Rob Nikolewski at Capitol Report has an even more thorough discussion with Day available here. The New Mexico Senate has passed SB 150 which would make several modest changes to the ERB’s pensions. Unfortunately, it seems unlikely that this bill will pass out of the House in the short time still left this session.

Rather than re-hashing Day’s comments, I want to rebut the rebuttal to his remarks point by point. That’s because it is a fact that New Mexico’s pensions are unsustainable. Day gets it while his rhetorical opponent does not.

First point: “Social Security is not a Ponzi scheme. Instead, Social Security the world’s longest-lived Ponzi scheme: self-funded and faithfully paying benefits as promised since the 1930s!” Yes, it is. In fact, Social Security is worse than a Ponzi Scheme as no one is forced to pay into a Ponzi Scheme whereas they are forced to pay into Social Security. Really big Ponzi Schemes like Social Security take a long time to run out of money. It has a $9.2 trillion unfunded liability.

Secondly, he writes that “the ERB has $9 billion in assets that are invested.” That may be true and $9 billion is a lot of money for you or me, but if liabilities are even bigger (which they are), the system can still be insolvent.

Lastly, the author states “The 9.4 percent ERB employee contribution is actually higher than the typical 7 percent that private-sector employees contribute to their 401(k) plans.” So what? Government pensions are far more generous than the retirement plans offered in the private sector (not to mention their guaranteed nature which puts all the risk on taxpayers).

The fact is that even SB 150, if it passed, would not be adequate to make New Mexico’s pensions truly solvent. Further changes, as outlined here are needed.

Before the legislative session got started, I sat down with Fred Martino with Las Cruces Public Television to discuss education policy in the 2012 legislative session. While it appears that many of our (and the Gov’s) education proposals are not going to pass this session, we are going to continue to push for reform because 49th is not good enough. The interview is about 30 minutes in length.

Should I be able to waive my rights to sue somebody if I engage in an obviously-risky behavior? It would seem obvious that one should be able to do so (particularly if they are paying $200,000 for the privilege) , but I’m not a trial lawyer (thank God!). Also, in case you missed it, we at the Rio Grande Foundation aren’t huge fans of the Spaceport.

Nonetheless, we do hope the Spaceport succeeds (as best it can) as taxpayers have spent upwards of $200 million on it already. So, it is shocking, but perhaps not surprising, that the trial lawyers have convinced so many legislators to oppose efforts to protect those who will be providing space flights out of the New Mexico Spaceport from legal action. After all, there is already talk of a “Spaceport Glut.” Do opponents of liability protection really think Richard Branson and his buddies are stupid enough to come to New Mexico if they can go elsewhere and not be exposed to these lawsuits?

In case you missed it, New Mexico was the only of 11 states to have been denied a waiver by Obama’s Department of Education under No Child Left Behind. Winston Brooks is “embarrassed” by this.

And, if you’ve been to the Roundhouse or follow education policy in this state, you’d know that APS is just one of many school districts in this state that has lobbied hard against serious education reform. Of course, many of these reforms are the very things that the Obama Administration has been looking for in order to decide if a state is serious enough about reform in order to receive the waiver in the first place.

So, you fight reform and then you cast blame on others when Obama’s Administration doesn’t see enough reform. Pretty embarrassing, I’d say. The solution? Ban publicly-funded agencies like APS from hiring lobbyists or cut their budget until they fire them all.

If you watched the Super Bowl, you probably saw this ad with Clint Eastwood which has caused some controversy. The folks at Reason have come up with a more realistic parody ad:

It’s tough these days for politicians to be against government transparency. With technology widely available, large majorities of Americans have decided that governments — which theoretically work for them, the taxpayer — should be as open and accessible as possible. And, with the Internet, that can be quite open as Albuquerque Mayor R.J. Berry has shown.

Unfortunately, when one is running for Congress, they have a need for grandstanding and appearing to be “for the people” when they are not. Enter Eric Griego and SB 30. SB 30, introduced by Sen. Sander Rue would simply enshrine in law that information currently available at New Mexico’s Sunshine Portal, will continue to be made available under future administrations.

Sounds like a slam-dunk, right? Not for Griego the opportunist. He submitted and convinced his fellow Democrats to support a floor amendment to create “a directory of all employee positions of every person, corporation or entity with which the state contracts, identified by position title, salary and the name of the individual that holds the position.”

For starters, this amendment would represent an administrative nightmare for New Mexico government and businesses alike. Imagine the state buying or leasing police cars from Ford. Do we really need to know everyone that works for those companies? What if General Electric provides some “renewable energy” for the state? Issues abound (like, how often does this list need to be updated?) and, more importantly, the employees of these businesses (and the hundreds of smaller ones that contract with New Mexico) are not government workers and therefore are not subject to the same level of transparency.

So, Griego may claim that he wants transparency and open government, but the reality is much different.

I read Sen. Tim Keller’s article on rebuilding our economic base this morning in the Albuquerque Journal. Another article not requiring a login can be found here. It really didn’t do much for me in terms of outlining a plan for developing New Mexico’s economy.

Two specific proposals were outlined. One would provide tax incentives for companies to hire graduates of New Mexico institutes of higher ed. The other would make “new investments in a state entrepreneurial fund.” Aside from those proposals, he rightly criticizes “tax giveaway’s to single companies or long-established industries.”

By way of serious economic reforms, these are weak proposals indeed. Incentives to hire New Mexico college grads? First and foremost, why do we need more incentives for businesses to hire the MOST educated and qualified members of our work force? These graduates are on average wealthier and whiter than the New Mexico population at large. Of course, these incentives, while spread out over New Mexico’s economy, won’t really do much to spur significant economic growth anyway. Are companies really going to set up shop here (and create new jobs) in NM because of a $5,000 credit?

In terms of the state’s entrepreneurial fund, New Mexico already has the State Investment Council. Keller led the charge in reforming this, so he should be more aware than most of the serious problems with government-driven investment of taxpayer dollars. This is a bad idea.

Lastly, it is hard to argue with Keller’s view that government should not favor one business or industry. One wonders where the Democrats were when Bill Richardson set up the Rail Runner, the Spaceport (two government-created businesses) and the film subsidies. Rep. Dennis Kintigh has introduced legislation to phase down the tax credit over the next several years. It would seem to fall directly within the paradigm that Keller is touting. Unfortunately, his colleagues don’t seem to have gotten the memo.

I’m not a big fan of Mitt Romney’s politics. His health care law was a bad enough affront to liberty. Now, only one day after I wrote this blog posting, I see this news story.

So, the presumed Republican standard-bearer for the White House is (still) pushing a proposal that I called the worst bill of 2012 in the New Mexico Legislature….yikes. The good news…Gary Johnson is still running.

Gov. Martinez won another victory for New Mexico’s utility rate payers and the economy with the unanimous repeal by the Environmental Improvement Board of the carbon caps originally advocated by Richardson’s Environmental Department.

This is step one of two as the Board still needs to consider repeal of the carbon cap advocated by the environmental group New Energy Economy. This will apparently happen in March.

Certainly, repealing a New Mexico-specific carbon cap is good news for our economy and — when complete — it will lift a burden of uncertainty that has surely made businesses less willing to invest in and do business in the state. However, the most amusing thing about the article on the repeal (the first link in this blog) is the bellyaching over the repeal vote on the part of the environmental groups. A staff attorney with the New Mexico Environmental Law Center is quoted as saying, “It’s obvious that anything that industry wants, they’re going to get from this board, whether it’s good for public health or the environment or not.” Well, pardon me, but wouldn’t the opposite have been true for Richardson’s board? Anything the environmental groups wanted, they could get.

That is the problem with an un-elected board with members appointed by one governor. It is why major decisions like capping carbon emissions should be made by elected legislators, not an un-elected, politically-appointed boards. But you won’t hear that from the enviros because they haven’t convinced the public of their point of view.

No man’s life, liberty, or property are safe while the Legislature is in session.”

No matter who said it first, the quote is accurate. Perhaps the worst bill of 2012 has been introduced by Rep. Miguel Garcia (yes, THAT Miguel Garcia) and it would amend New Mexico’s Constitution to increase the minimum wage annually based on the rate of inflation. Why is this a terrible idea? Following are just a few of the many reasons:

1) minimum wages by their nature increase unemployment among minorities and the young (those who are at the lowest rungs of the work force);

2) indexing the rate to inflation means that New Mexico (like the City of Santa Fe) will be increasing the minimum wage even in a recession;

3) if raising the minimum wage year-by-year is such a good idea, why not just make the wage $20 or $30 an hour? The fact is that even advocates won’t support such a move because it will cause a sudden, well-publicized wave of layoffs. The piecemeal approach is used to mask the real effects of the mandatory wage increase;

4) it is morally wrong for government to stand between a voluntary agreement made by a worker and their employer. If I want to work for free or sub-minimum wage rates, that should be my right.

5) raising the minimum wage is bad policy, but it is just that: policy. The advocates of this proposal know that Gov. Martinez will veto this business-killing measure and are attempting to do an “end-run.”

(Albuquerque) The Rio Grande Foundation and the Citizens’ Alliance for Responsible Energy (CARE) will host S. Fred Singer for a lecture and discussion of climate change and climate change policies. Singer is one of the most articulate and best-known “skeptics” regarding the supposed “consensus” on climate change.

The discussion will be held on Wednesday, February 15, from 6pm to 8pm in Room 2401 at the UNM Law School. Admission is $10, payable at the door, and includes light beverages and snacks. The Law School is located at: 1117 Stanford Drive Northeast, Albuquerque, NM 87106-3700.

Singer is Professor Emeritus of Environmental Sciences at the University of Virginia, President of the Science and Environmental Policy Project, a Fellow of the American Association for the Advancement of Science, and a Member of the International Academy of Astronautics. He received his Ph.D. in physics from Princeton University.

Dr. Singer is the author or editor of fourteen books on climate science, energy, and environmental issues as well as the author of over 400 articles in scientific and public policy journals plus over 200 articles in popular publications, Dr. Singer has been featured in articles in Time, Life, and U. S. News & World Report, and he has been interviewed on Nightline, Today Show, News Hour, Nightwatch, and other national and international television programs.

More recently, he co-authored the New York Times bestseller, Unstoppable Global Warming: Every 1500 Years (Rowman and Littlefield, 2007), and he was also the organizer of NIPCC (Non-governmental International Panel on Climate Change) and lead author in 2008 of its summary report, Nature, Not Human Activity, Rules the Climate.

The event is sure to be a lively and engaging one.

For an understanding of the legal issues involved in ObamaCare and some of the legal precedents that made such blatant federal overreach possible, check out this great video from Reason. By the way, the two presidents that had the most to do with providing legal precedents that will be used to support ObamaCare at the Supreme Court? FDR and George W. Bush.

Last year, we at the Rio Grande Foundation proposed capping annual outlays for New Mexico’s film industry subsidies (25% on the dollar is given to the industry) at $30 million annually. The ultimate agreement was to cap the subsidy at $50 million annually. This is a reasonable compromise, but the fact is that the film industry subsidies represent net spending (they are not a credit, thus representing foregone taxes) and are bad economic policy. Long-term, the subsidies should be phased out towards total elimination.

Unfortunately, liberals in the Legislature are hoping to eliminate the cap on TV shows, thus giving unlimited subsidies to the filming of television shows in New Mexico. SB 168 is terrible legislation. Rep. Kintigh’s HB 117 would move our state in the right direction by phasing out the subsidy at a rate of one percentage point annually.

Legislators are a bit more than halfway through the 2012 legislative session. While they meet, they (and their constituents) need to keep in mind that policies now in place — enacted over the years in Santa Fe — have led to New Mexico being among the most impoverished states in the nation. This poverty has been driven by an abject lack of economic freedom.

According to the Fraser Institute’s (the are the Canadian national equivalent of the Rio Grande Foundation) 2011 report “Economic Freedom of North America,” New Mexico is the 49th-freest state in the nation (check page 2 of the report). Or, put another way, we’re less economically free than any state besides West Virginia.

What makes a state free? Small government, limited or no arbitrary takings and discriminatory taxation, and labor freedom, are the main factors.

States performing well on the economic freedom report include Delaware, Texas, Colorado, and Nevada. A quick video explaining the importance of economic freedom can be found below:

As much as we all like shows like Undercover Boss (where the head of a major company does the job of the lowest-level front-line worker), it is fairly obvious that someone can run a company without having worked his/her way up every step of the ladder at a particular company. In fact, in many industries, business leaders take the reins of multi-million or billion dollar enterprises after having run an organization that is quite dissimilar to their next job. Again, these are major enterprises operating in a competitive marketplace with billions of dollars at stake.

So, it is silly to me — regardless of whether Sen. Michel Sanchez decides to allow Sec. (designate) Hanna Skandera’s confirmation to move forward — that New Mexico’s Constitution requires the head of the Education Department to be a “qualified, experienced, educator.” Certainly, Skandera seems qualified, but why does the head of this department need to be a teacher? The skill sets involved in running a multi-billion dollar department are simply not the same as are those of a classroom teacher.

It would be like requiring a doctor to manage New Mexico’s Medicaid program or mandating that the head of Corrections be a prison guard. It would be silly and it would unnecessarily reduce the pool of qualified applicants. It would also make it more difficult to find fresh, new perspectives outside of the status quo.

And that gets us back to Hanna Skandera and her problems in NM. Her opponents don’t like her because she threatens the status quo. She is trying to shake the system up and make reforms that will get our state out of the bottom of the educational basement. Unfortunately, Sanchez, a powerful Senator, is carrying water for those who are happy with remaining 49th.

This week is going to go down as one of the most important in Indiana history. While hosting the first Super Bowl ever to be held in the state is a big deal, the really big deal is that the state’s Gov. Mitch Daniels has signed Right to Work Legislation. Simply put, the legislation enacted in Indiana will barunion contracts from requiring non-union members to pay fees for representation. Kudos to Daniels who I recently criticized.

Simply put, Right to Work is one of the easiest ways for states to become more competitive economically. New Mexico is, of course, not a Right to Work state. Following are a few specific ways in which this legislation improves a state’s economic outlook.

Right to Work States Benefit From Faster Growth, Higher Real Purchasing Power – 2011 Update

Percentage Growth in Non-Farm Private-Sector Employees (2000-2010)

Right to Work States . . . . . . . . . . . . . . . +0.3%
Forced-Unionism States. . . . . . . . . . . . . . -5.5%
National Average . . . . . . . . . . . . . . . . . .  -3.3%
Source: Department of Labor, Bureau of Labor Statistics (BLS)

Percentage Real Growth in Private-Sector Employee Compensation (2000-2010)

Right to Work States . . . . . . . . . . . . . . . 11.3%
Forced-Unionism States. . . . . . . . . . . . .  . 0.7%
(2000-2010) National Average . . . . .  . . . . 4.3%
BEA; BLS

Cost of Living-Adjusted Compensation Per Private-Sector Employee (2010)

Right to Work States . . . . . . . . . . . . . $56,575
Forced-Unionism States . . . . . . . . . . . $55,420
National Average . . . . . . . . . . . . . . . . $55,896
Missouri Economic Research and Information Center (MERIC);
BEA; Department of Commerce, Bureau of the Census (BOC)

Testimony on behalf of HB 130 which was introduced by Rep. Strickler, Tuesday, Jan. 31, at 1:30pm in room 309.

Current New Mexico Corporate income tax rates are:

4.8% > 0

6.4% > $500K

7.6% > $1Million

This legislation would lower that rate to 4.8% across the board by 2015. In FY 2010, the corporate income tax generated $125 million in revenue. By its nature, this tax is highly volatile on a year to year basis, thus making it an inconsistent revenue supporter, particularly at higher rates. Reducing rates would improve the consistency of those collections and could, if it helped attracted one or more major businesses, result in greater overall tax revenue.

According to the non-partisan Tax Foundation, New Mexico’s corporate income tax was the 34^th– worst corporate income tax in the nation in FY 2011. In FY 2012, that ranking had dropped to 38^th.

For states with corporate income taxes, the three most relevant measurements are top tax rate, the level of taxable income at which the top rate kicks in, and the number of brackets.

This legislation would make New Mexico’s corporate income structure more competitive by addressing all three of the major factors impacting corporate income taxation:

• by reducing the top rate by 37%;
• reducing the number of brackets from three to one.

Why is reducing the corporate income tax a good idea?

Newman (1982) found that differentials in state corporate income taxes were a major factor influencing the movement of industry to southern states. Two decades later, with global investment greatly expanded, Agostini and Tulayasathien (2001) determined that a state’s corporate tax rate is “the most relevant tax in the investment decisions of foreign investors.”

The need to reduce corporate tax burdens is not a partisan issue. President Obama, during his recent State of the Union speech, has made reforming corporate income taxes a top priority. He said in his speech that reforming the tax code will help bring “jobs back” to the U.S and that “companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let’s change it.”

It is noteworthy that a state’s corporate tax is levied in addition to the federal corporate income tax rate, which varies from 15 percent on the first dollar of income to a top rate of 35 percent. This top rate is the second-highest corporate income tax rate among industrial nations. In many states, federal and state corporate tax rates combine to levy the highest corporate tax rates in the world.

This is a global economy and businesses look to locate and create jobs where they have the most favorable rules, regulations, and tax burdens. Even before Japan reduced its corporate income tax rate, New Mexico was one of 24 U.S. states have a combined corporate tax rate higher than top-ranked Japan.

On the other hand, according to the Federation of Tax Administrators, there are three states that levy neither a corporate income tax nor a gross receipts tax: Nevada, South Dakota and Wyoming. New Mexico’s corporate tax rate is the highest among states in the region — for example, Colorado’s rate is 4.63 percent, Arizona’s is 6.97 percent and Utah’s is 5 percent.

New Mexico’s corporate income tax as a share of total state/local business taxes is 6.6% According to the liberal Center for Budget & Policy Priorities, this is about the median.

According to the Tax Foundation’s 2007 report, “Personalizing the Income Tax”: One of the lowest-income households in America bear a large share of the corporate tax burden.

In total, the poorest 20 percent of households pay more in corporate income taxes each year than they pay in individual income taxes to the IRS each April. Households earning under $23,700 in 2004 paid $271 in corporate income taxes, compared to just $171 in individual income taxes.

As a share of their total tax burden, corporate taxes were 6.3 percent of low-income households’ tax bills compared to just 4 percent for individual income taxes. The only tax that hits low-income families harder than corporate taxes is the federal payroll tax, which is designed to pay for Social Security and Medicare.

“What this means is that cutting corporate tax rates is not about handing money to U.S. companies,” said Hodge. “It is about providing tax relief to American families, much of which will provide enormous benefits to the nation’s lowest-income wage earners.”

Cutting New Mexico’s income tax would be a move towards economic competitiveness. If the Legislature is serious about attracting job-creating businesses to New Mexico, reducing the corporate income tax would be a simple way to put our state especially relative to the myriad tax credits and incentives that are either on the books or under consideration.

I blogged my own thoughts about the “Occupy” attack on a peaceful group of legislators having a private dinner. Michael Swickard offered his own thoughts in a spot-on column as well. More coverage on the meeting disruption can be found over at New Mexico Watchdog here and here (including video).

“Protesters Scuffle with Lobbyists” reads the extremely misleading headline in the Albuquerque Journal. At least the New Mexican acknowledged that many of the attendees at ALEC’s recent dinner in Santa Fe were indeed lawmakers and thus deserving of more respect than reviled lobbyists.

But what if a group of right-wing goons (or heaven-forbid Tea Partiers) had forcibly disrupted a peaceful meeting of the ACLU or Friends of the Earth? Straight out of Germany in the 1930’s, right?

Of course, we already know that the “Occupy” movement is not keen on the first amendment. See here and here. So, what would a more descriptive headline have been? How about “Anti-free speech protesters forcibly disrupt peaceful, private meeting.”

Personally, I hope the “Occupy” folks continue their “brown-shirt”‘ tactics as it only further discredits their so-called movement.