According to the latest version of the “Rich States, Poor States” report (put out by the ever-so-controversial ALEC), Gov. Martinez’s modest tax reforms enacted during the last legislative session, resulted in New Mexico rising 4 places in the “Economic Outlook” index. New Mexico went from 39 in last year’s to 35 in this edition.

The full report is definitely worth the read as it covers a wide array of economic policy issues that drive or restrain economic growth along with some real-world examples. Jonathan Williams, one of the co-authors of the report, was in Albuquerque last year discussing the report and what policies lead to economic prosperity.

By the way, according to the latest version, Utah has the best economic outlook and New York the worst.

Voices for Children had an opinion piece in today’s Albuquerque Journal echoing Obama’s claims that the “rich” don’t pay enough taxes. He also repeats the canard that the federal government is somehow “integral” to the success of private sector businesses.

First, let’s tackle the tax burden issue which is really all about payroll taxes. The federal government stops collecting payroll taxes after the 106,800th dollar of earned income. That seems unfair, right? Why would Congress do such a thing to hurt low income Americans? Well, according to the Congressional Research Service, “[H]aving different bases for contributions and benefits would weaken the traditional link between the taxes workers pay into the system and the benefits they receive.” In other words, if it is supposed to be “social insurance,” Social Security can’t be welfare at the same time.

Of course, Social Security and Medicare ARE welfare and have been for some time, but that doesn’t mean raising the cap on payroll tax collections so the wealthy pay even more taxes is a good idea. Rather, it is time to “means test” the programs so the wealthy receive less. After all, is it really fair that Mr. Buffett’s secretary is being taxed to provide his Social Security and Medicare?

Then there are all the “essentials” that Bradley and liberals love to bring up whenever federal spending cuts are on the table: roads, research, air traffic control, the weather service, and courts. As the chart below points out, all of these services combined represent a tiny fraction (less than 5% at most) of the federal budget. Many of these “services” could be done more effectively by the free market if the feds got out of the way, but if we are going to have a serious discussion about the budget, people need to understand that it is Social Security, Medicare, Medicaid, and defense that eat up a bulk of the federal budget (and, yes, the chart has a separate category for “welfare,” but that does not obviate the reality that an overwhelming majority of Social Security and Medicare are welfare by different names.

And here I thought Republicans were obsessed with Ronald Reagan! The reality is that President Obama is obsessed with America’s 40th President, because he thinks (misguidedly) that he can win points with voters who may have forgotten Reagan’s record on taxes. Check out both the video and the text of his recent comments.

Obama seems to think that he is either following in Reagan’s footsteps or that Reagan was on net a tax hiker. Nothing could be further from the truth. Reagan dropped the top marginal tax rate dramatically as the chart below illustrates (see 1981-1989 for those with short memories):

Reagan DID in fact attempt to close some loopholes with his 1986 reforms, but unlike Obama, he was a net tax-cutter, not tax hiker. That is not to say that there are not plenty of loopholes in the tax code. There are and some, like the mortgage deduction and the tax advantages for businesses that purchase health care for their employees.

The simple fact is that spending is the problem, not taxation.

Leftists/Occupiers/and socialists of all stripes are frustrating. Many of them claim to be frustrated by wealth redistribution to the wealthy, but when I asked a purported “Occupier” about this at a recent protest, she told me that she supported the bailouts!

And then there is nonsense like this piece in support of legislation that would forgive all student loans. Yes, student loan debt — which now amounts to $1 trillion in the US — is a real issue, but such “debt forgiveness” schemes would be terrible policy for many reasons.

For starters, forgiving college debt would redistribute wealth upwards. Only 25% of the population graduates from college. These are the highest earners in our society. Doctors and lawyers pile up even more debt for their extended schooling, do we really need janitors and taxi cab drivers subsidizing them?

And, as the author points out, one bailout is inevitably used to justify another. So, if I’m a student, I’m no longer going to factor in my ability to pay into my decision, I’m going to get the most costly, prestigious, education I can. After all, the taxpayers are footing the bill!

Lastly, it has been argued by the Rio Grande Foundation and others that current taxpayer subsidies for higher education have caused the price tag of a college education to skyrocket. Once the government starts forgiving college loans, there will be no pressure at all to keep tuition prices down.

The new tactic from some on the left is not to debate and discuss, but to label and shout-down. The Koch Brothers are one group that has been “defined” as evil by the left even though they gave the ACLU $20 million. Another group that has been targeted is ALEC, the American Legislative Exchange Council. Here is ALEC’s statement on the smear campaign.

ALEC is merely one of literally thousands of organizations involved in the legislative process. Disagree with them if you want, but they have a right to promote a policy agenda. If you don’t agree with them, start your own policy organization to counter them. This shouldn’t even be an issue in a nation where free speech is protected by the First Amendment, but we live in strange times.

To say the least, we at the Rio Grande Foundation have had our differences with APS Superintendent Winston Brooks. However, I was heartened to see this story from KOB TV Channel 4 in which Brooks discusses the A-F school grading model that Gov. Martinez pushed through the Legislature and how it is pushing him to reform APS.

In the past, Brooks has seemingly denied that APS needs significant reforms. His recent statements, while not specific, would appear to be a major step in the right direction. If so, I’m encouraged that the A-F grading (the first part of the Florida-model to be implemented) is having a positive impact.

More is to be done, but it is good that Mr. Brooks is not professing to be “ecstatic” with “average” anymore.

We all know that monopolies are bad. But what about political monopolies? Is it bad for one party in government to have control for long periods of time? If so, New Mexico would be a good test case.

According to information from the NM Legislative Council Service going back to 1930 :

1. the last time the Republicans held a majority in the state house and senate at the same time was 1929 and 1930;

2. since 1930, the Republicans have held a majority in the state house on one occasion, 1953 and 1954;

3. since 1930, the Republicans have held a majority in the state senate in 1931, 1932, and 1986, and

4. the state senate was tied at 21 each in 1985, 1987 and 1988.

That is a pretty amazing run of dominance, but it may be coming to an end. Obviously, the New Mexico House is already very close and some think it could switch during the 2012 election cycle. The Senate is obviously in firm control of the Democratic Party, but high turnover rates in both houses have the potential to generate serious change. Also, as the Journal reported and I blogged about a few months back, the number of Democratic Party voter registrations in New Mexico is trending downward rather dramatically.

I was 11 years old the last time Republicans held even one of the two houses in the New Mexico Legislature. The Republicans held the House for the last time during Eisenhower’s first term.

Will the Republicans break through this year? I don’t know. Are they the answer to New Mexico’s policy woes? Maybe. Are political monopolies bad? Unequivocally, the answer is yes.

Note: RGF supporter Charles Sullivan provided much of the background research for this posting.

We all cross paths now and again with truly unique characters. In my 8+ in Washington, DC, most of which I worked for the National Taxpayers Union, I met senators, congressmen, and a cast of unique and ambitious people from all over the world. But, none of those people was quite as interesting as Sid Taylor who passed away recently at age 97. To get a glimpse of his character, read this excellent write up on Mr. Taylor’s work with NTU on limited government issue here.

It has been said that “No man’s life, liberty, or property are safe while the Legislature is in session.” Nowhere does this statement hold truer than New Mexico which, according to most national measures, ranks highly on the things that it is bad to rank on (crime rates, tax burdens, poverty) and low on the things that we’d like to rank highly on (graduation rates, income levels). The good news is that New Mexico’s Legislature is only in session 30 or 60 days per year depending on the year (a 30 day session was completed this year).

There are many – of all races and political persuasions – who blame New Mexico’s unique cultural milieu for our problems. While well-intended, I believe that the preponderance of economic data and hundreds of years of experience has shown us that poverty and educational underperformance are self-inflicted problems, not the result of culture or a lack of natural resources, but of policies that either promote or hamper economic and social freedoms.

Unfortunately, while there have been and continue to be plenty of good, caring people in the Legislature over the years, the Legislature has adopted policies that have led us to where we are today. Why do I lay all of this at the feet of the Legislature? The single biggest indictment is that over the years they have enacted policies that restrict our economic freedom. This freedom allows individuals and entrepreneurs the freedom to generate wealth for themselves and those who use their products.

According to the Canada-base Fraser Institute (a Canadian free market think tank), New Mexico is ranked 49th of the 50 US states. It is no coincidence, then, that New Mexico is also among the poorest states in the country.

If you still believe that it is culture, not policy, that drives policy, I encourage you to check out this map of the Korean peninsula at night. While Communist North Korea is nearly dark, capitalist South Korea is bright. Clearly, economic activity is happening in the South. People are living lives in relative comfort while in the North a vast majority of people are literally “in the dark.”

Some would argue that all of this light and economic activity in South Korea is pollution. Certainly, it may be somewhat easier to see the stars at night in the North, but overall, the data have shown that the environment in wealthy, economically-developed areas is cleaner than it is in impoverished, under-developed areas.

The experience of North and South Korea is starker than most. But what it means for New Mexicans is that we cannot use culture as a crutch for our failures. We have to overcome them ourselves and, to the extent that anyone is holding us back, it is the elected officials that make the policy decisions that determine whether our economy and our educational systems are strong and competitive or whether they fall short.

Labor freedom means that one can choose for themselves who to work for and on what terms. Labor unions do not necessarily inhibit this, but workers should have the choice as to whether they want to join them, not be required to as a condition for employment. Also, mandated minimum wages should be kept low and should not be used to hinder volunteer work, internships, apprenticeships and efforts by young people to enter the work force.

In terms of taxation, the ideal tax burden is light, but focused on consumption and wealth, not economic activity. In other words, taxes on income should be low or non-existent with a vast majority of taxes collected on consumption and accumulated wealth or property. New Mexico no longer has an onerous personal income tax, but our corporate tax rate is high. Property taxes in most areas of the state are low. Our gross receipts tax is primarily on consumption, but has the negative impact of hindering business by taxing inputs and services.

The GRT has another negative feature in that it is not easily understood by the public and is thus violates another principle of sound taxation being transparency.

Lastly, it goes without saying that New Mexico’s education system is among the worst performing nationally. Despite consistently ranking 49th in the nation in graduation rates and performance on respected national tests, New Mexico’s Legislature has killed school choice proposals year after year and only grudgingly gone along with enhanced school and teacher accountability measures.

I blame the Legislature for a lot here in New Mexico, but ultimately, it is “we the people” who put these people into office. Without our support and acquiescence, they lose their power. If you want to make New Mexico a better, freer, and wealthier place, I encourage you to vote for the Legislature to change in 2012.

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

The City of Las Vegas, NM has voted to ban the process of “fracking.” I’m not sure how much fracking could or would go on in the City, but it is big news and a big statement. Unfortunately, it is a statement of willful ignorance and dependency by one of the poorest communities in New Mexico.

For starters, fracking or hydraulic fracturing has been around since 1947. It isn’t new. What is new is that it has been used in new and innovative ways to squeeze oil and gas out of the ground. It is why President Obama can take credit for oil and gas production increasing even if he and his Administration opposes them.

Former Gov. Bill Richardson (who else?) decided to allow counties to regulate the oil and gas industry. This was, of course, a highly-political decision. But, with oil and gas generating $358 million annually for schools (not to mention all of the other tax revenues it generates), perhaps local governments that ban oil and gas from their communities should see a reduced allocation for their schools? After all, it is easy to generate opposition by scaring people about fracking if there are no costs (except potential new jobs in the community), but losing money for the schools would ensure that the NIMBY crowd understands that there are trade-offs.

It is conventional wisdom among many that Americans were extremely lucky that the Bush Administration did not succeed in its efforts to reform Social Security. As is so often the case with “conventional wisdom,” what you think is so is often not so. This is the case with Social Security reform.

As Michael Tanner of the Cato Institute points out in a recently-released paper, regardless of the economic crisis of 2008 and the subsequent “Great Recession,” the returns associated with individual Social Security accounts (as laid out in a previous Cato plan) would be superior to those of the existing system. Of course, that doesn’t even note the very real issue of Social Security going bankrupt. If you don’t want to read the entire paper, check out the basics in this blog posting from Dan Mitchell, also of Cato.

I’ve previously volunteered to forego all of money I’ve put into the Social Security system in my career in exchange for the ability to hang on to the money the government will take in the future and invest that for my retirement.

Our former Gov. and still-candidate for the White House stopped by Comedy Central to talk to Stephen Colbert. Enjoy the video below:

A favorite theme on the left is that the Republican Party, the Tea Party, and conservatives in general are “far to the right” relative to their brethren of the past. See E.J. Dionne’s national perspective here and a local perspective here (March 15 post).

I’ve always had problems with the left-right paradigm as it doesn’t adequately differentiate between social conservatives and fiscal conservatives. Nor does it measure adherence to the US Constitution. This political quiz does a much better job.

Anyway, when it comes to fiscal issues (assuming that “right” means limited government), it seems hard to claim that many in Congress are on the “far right.” Back in 2000, the US federal government was indebted to the tune of $5.6 trillion and the federal budget was $1.8 trillion. Today, the federal debt is $13.5 trillion and the annual budget is $3.8 trillion (more than double what it was 10 years ago).

Aside from Ron Paul, I haven’t seen ANYONE in Congress of either party far enough to the “right” to propose immediately shrinking the sizes of the federal budget and the debt to anything like what it was at the end of the Clinton Administration. So, at least in fiscal terms, NO ONE in Washington (save Dr. Paul) is to the “right” of Bill Clinton who Dionne once called “progressive.”

Perhaps the “right” is more socially-conservative than it was in the past. I don’t know, but by any reasonable measure, the “right” today is not further right than it was in some halcyon (in Dionne’s view) past.

Twenty years ago Ross Perot claimed that the North America Free Trade Agreement would create a “giant sucking sound.” Unfortunately, there is a “giant sucking sound” these days and it is not coming from foreign nations, but from Washington, DC.

Joel Kotkin has an excellent blog posting detailing the statistical realities of this:

The DC area last year grew faster in population than any major region in the country, up a remarkable 2.7 percent;
Since 2007, notes Stephen Fuller at George Mason University, the D.C. region’s economy has expanded 14 percent compared to a mere 3 percent for the rest of the country;
Washington’s unemployment never scaled over 7 percent, well below the national average, and is now down to around 5.5 percent;
Over the past decade 50,000 bureaucratic jobs have been added in the area while local federal spending grew 166 percent;
Nine of the top 15 counties in terms of income are located in the Virginia and Maryland suburbs around the capital Yes, Los Alamos is one of these). These counties all enjoy median house incomes over $100,000, twice the national average.

Of course, a pro-government leftist, unfamiliar with economics, would likely say: “this is great, look at all the wealth Washington is creating!” When, in reality, Washington’s track record in destroying wealth is unparalleled in human history.

Of course, our own Los Alamos County has high incomes, also from massive federal spending, but I’d like to think that while Washington cuts back there, its overall size and scope can be reduced, thus helping our nation’s and state’s economies at the same time. A fella can dream, right?

Another liberal is on the pages of the Albuquerque Journal claiming that the new health care law known as “ObamaCare” (a term that has now been embraced by the Administration) will spur New Mexico’s economy on to new heights.

Our own Dr. Deane Waldman has previously outlined the myriad reasons why the new health care law is a bad idea, but the real issue is that this whole discussion highlights the fact that many on the left simply don’t understand how economies develop and grow.

Government spending of any kind is at best a “zero-sum game.” It represents the proverbial pie that is to be split up among various groups (redistributed). This can be done more or less efficiently (usually less), but there is no innovation inherent in government spending (when is the last time government created something like the IPod?). Innovation, the development of new products and efficiencies is what drives our economy and our living standards. It is derived from the human mind, builds on the ideas of previous innovators, and thus improves our living standards.

Government cannot do this. Therefore, leftist claims that we’ll develop our economy based on trillions of additional federal debt, wealth redistribution, and putting more people on welfare are simply hot air.

I found the article in today’s Albuquerque Journal regarding a federal report detailing disparities in various education measures between Hispanics and whites to be incredibly problematic and designed to misinform rather than inform.

For starters, the disparity in numbers of Hispanics in advanced classes and that are suspended has little to do with “discrimination” on the part of APS (here I am, defending APS). Rather, it is more likely that the Hispanic students APS is dealing with are less-prepared academically and prone to more discipline problems. I know it is not politically-correct to say so, but the truth hurts sometimes. That is not to say that APS and other school districts in New Mexico cannot do a better job of educating our kids, but to label this “discrimination” is simply unfounded and unwise.

Also of interest were the measured remarks of Ralph Arellanes of LULAC. Despite what amounts to accusations of “racism” at APS by the US Department of Education, he never attacks APS Superintendent Winston Brooks. Contrast that with the harsh rhetoric towards Secretary Skandera in a recent article on the “achievement gap.” Perhaps this is because Skandera is “rocking the boat” demanding tough reforms while Brooks is part of the establishment?

School reforms are needed. In New Mexico, with a majority-minority student population, making all our schools better will inherently help Hispanics and other minorities avoid some of the problems this study highlights. Levying charges of “discrimination” based on these data differences is not going to move the discussion in the right direction.

Nathan Ashby, author of the “Economic Freedom of North America” report spoke in Las Cruces recently. His full presentation is posted below:

Untitled from Paul Gessing on Vimeo.

While the Supreme Court wraps up its hearings on ObamaCare, the birth control debate rages on, especially on the letters pages of the Albuquerque Journal. I previously blogged about the issue here, but the controversial nature of the issue could be mitigated significantly if our health care system was not so poorly designed.

By accident, the US has a third party payment system that I have called the “original sin” of US health care. It resulted from wage and price controls during WW II and created a system under which patients are not in charge of purchasing their own health care and health insurance.

The fact that we don’t pay for our health care is the biggest single factor that has driven costs up over the last several decades. It has also led to the attitude that we should get things “for free” in health care (like birth control). However, I understand the frustration that proponents of birth control coverage have over the lack of control in choosing a health care plan that covers what they want. After all, the beneficiaries of “free” birth control are likely young people who hardly use other aspects of their health insurance plans…shouldn’t they get something?

Interestingly enough, the individual mandate in ObamaCare will only further pile the costs of health care on young, healthy people of both sexes. This will make the “benefit” of “free” birth control look trivial by comparison.

Check this article out from The Economist which discusses the relative debt-to-GDP ratios of various states in the US relative to what they would look like if they were independent states within the European Union (as Greece is).

As I wrote recently in the Albuquerque Business Journal, the transition from dependency to fiscal and economic independence will not be easy, but it is necessary and it can be a very good thing for our state’s economic health:

Winthrop Quigley recently discussed a study by New Mexico’s Bureau of Business and Economic Research which found, among other things, that our state could lose 20,000 jobs by 2014 due to the failure of the so-called “SuperCommittee” in Congress and the use of sequestration to “cut” spending.

While Quigley represented the study well, there are a few points that need to be made. First, the sequestration process contains no cuts. Rather, the process only slows the projected growth of the federal government slightly between now and 2021. If we as a nation are ever to get our fiscal house in order, far more dramatic cuts are essential.

The other point to be made is that BBER assumes that money not spent on federal projects in New Mexico will not be spent at all. For starters, policymakers could, responding to these cuts, make policy decisions that spur economic growth. Also, the folks working at Los Alamos and at other federal installations are among the brightest members of our society.

Surely, they could do equally-innovative work in the private sector, probably far more efficiently and targeted at the free market rather than government.

Yes, shifting New Mexico from a federally-dependent economic model to a market-dependent model will not be easy or pain-free, but short term pain will create long-term gain, especially if our legislators realize that federal reliance is no longer an option.

Tomorrow (Wednesday the 28th) evening in Las Cruces, the Rio Grande Foundation is hosting a discussion of economic freedom issues in New Mexico. Specifically, the author of this outstanding international report will be presenting his thoughts on what economic freedom means, what causes New Mexico to score so poorly in the report, and how we can do better.

The author, Nathan Ashby, is an economist at UTEP and he wrote a column that appeared today at NMPolitics.net.

When I saw Winston Brooks’ recent column in the Albuquerque Journal on education reform, I knew right away that he was using weasel-words and was not telling the truth about the role of APS in the last legislative session as it relates to education reform. I noticed for example, that Brooks did not offer any specific reforms that they support. Rather, he and his highly-paid lobbyists (paid for by the taxpayers) in Santa Fe merely supported watered-down versions of real reforms.

He also, again, touted APS’s “average” results among some of the largest and poorest school districts in the nation.

Thankfully, a separate article written by Michael DeWitte And Larry Langley of the New Mexico Business Roundtable set the record straight. They explain how APS worked to kill or weaken each reform proposed by the Gov., but it is worth noting that APS has worked to block the way for a host of other reforms including school choice tax credits (sponsored by Democrats) and charter schools (to name just a few).

I discussed this topic in a letter that appeared this week in the Alibi:

I feel compelled to respond to the letter to the editor outlining the myriad, alleged justifications for population control and using government power to reduce populations. They are all based on the faulty assumption that we are running out of (insert natural resource here).

The reality is far different and was largely settled back in 1980 when free market economist Julian Simon made a wager with Paul Ehrlich who continues to make a living spreading fear about “overpopulation” and other supposed crises.

The two men bet on a mutually agreed-upon measure of resource scarcity over the decade leading up to 1990. Simon had Ehrlich choose five commodity metals. Copper, chromium, nickel, tin, and tungsten were chosen and Simon bet that their prices would decrease, while Ehrlich bet they would increase. Ehrlich ultimately lost the bet, and all five commodities that were selected as the basis for the wager continued to trend downward during the wager period.

Prices of these and other commodities fluctuate in the short-term, but over the long-term, humans use the one unlimited resource that exists (human ingenuity) to find and put new resources to use for human benefit. The centuries-long trend is for more people to live more comfortably where their governments allow them to do so.

We at the Rio Grande Foundation love to be attacked by our opponents. It shows that we are making a difference in the policy debates and are threatening the status quo. The latest such attack can be found below. It is an ad that is supposedly running on several morning cable news shows.

The ad attacks the Rio Grande Foundation, Gov. Martinez, and a variety of education reformers in New Mexico and levies the accusation that each of these groups is attempting to “privatize” education because we support charter schools.

The ad doesn’t talk about what’s best for students but focuses on politics. Choices and meeting individual learning needs are good things for students. Does it matter where student success comes from? It should be about the kids – not politics.

Now, we DO support charter schools, but charter schools are public schools open to all children, they’re NOT private.

Rather than attacking those who are attempting to reform New Mexico’s schools, why not be honest and up front about a few facts:

Today, over 14,000 New Mexico students attend one of 82 charter schools across the state. Obviously, many parents feel that their children are not being served in traditional public schools;

This search for options is the result of New Mexico’s education system having struggled for decades.

According to the “Diplomas Count 2011” report from the Education Research Center, New Mexico’s real graduation rate is 57.1 percent. That is 49th in the nation.

On the 2009 reading version of the National Assessment of Education Progress, New Mexico 4th graders beat the reading scores of only one other state.

Clearly, charter schools are a popular option for many parents and students. We at the Rio Grande Foundation are trying to expand the number of options available while increasing accountability within traditional schools. Unfortunately, some special interests don’t like accountability and choice.

As the Supreme Court gets set to determine the immediate future of US health care, the Rio Grande Foundation is again making the case that the new health care law is not what we need to make health care better and more cost-efficient. Our own adjunct fellow, Dr. Deane Waldman had an excellent opinion piece in today’s Albuquerque Journal which explains some of the flaws in the plan that is being touted as a solution for rising costs and lower quality of care.

Parts of the piece respond directly to Sen. Dede Feldman’s defense of the law which appeared in the paper here.