Recently, Kansas City Federal Reserve Bank President Thomas Hoening was in New Mexico and sat down with Albuquerque Journal writer Winthrop Quigley for an interview. That interview is available here. While Hoening had many good things to say about reducing government spending and stabilizing the US economy, he left out or advocated for some very questionable policies. I responded in a letter to the editor that was published on Monday.

Unfortunately, three things jumped out at me about the article that cause serious problems with Hoenig’s outlook for the U.S. economy and what we need to do moving forward.

First and foremost, Hoenig is quoted as saying “too little taxation” harmed the economy. This is simply wrong. Federal spending as a percentage of U.S. GDP has remained relatively constant at 20 percent for decades. Only in recent years has spending grown out of proportion to the economy.

One major reason for this imbalance is entitlements like Medicare and Social Security. Hoenig does not address the dire need to reform these programs lest they continue to eat up ever-greater percentages of economic output.

Lastly, and perhaps least surprisingly, Hoenig fails to mention the role his own institution, the Federal Reserve (and government in general) has played in the current economic crisis. While the crisis was caused by multiple factors, the Federal Reserve embarked upon an “easy money” policy to prop up the economy after 9/11.

This flood of money and the federal government’s use of Fannie Mae and Freddie Mac to funnel money into the housing market were integral to the creation of the bubble that popped a few years ago.

Economic stability is indeed important, but government policies in Congress and at the Federal Reserve have been the leading causes of instability over the past decade.

Paul J. Gessing
President
Rio Grande Foundation
Albuquerque

As if to underline what I blogged about yesterday, my article on some of the economic issues associated with renewable energy appeared in the Albuquerque Journal today.

The basic points are twofold: Yes, PNM (to name just one New Mexico utility) is raising rates for reasons unrelated to the state’s renewable mandate, but the mandate itself will drive up prices even further by mandating more expensive solar, biomass, and so-called “distributed” technologies.

I love environmentalists like the folks from the Renewable Energy Industries Association who just had an opinion piece in the Albuquerque Journal. The author asserts that solar power is the solution to higher electricity costs. That is news to me because those noted right-wingers at the <em>New York Times say that: “The cost of solar thermal electricity, made by using the sun’s heat to boil water and spin a turbine, would be nearly three times that of coal and more than twice that of natural gas. (It would be almost double the cost of wind energy, too.)”

Sounds more, not less expensive to me, but what do I know. And that number doesn’t even include the federal subsidies for solar which cost taxpayers money on the front end (along with higher rates on the back end). Oh, and yes, while PNM is raising rates for electricity consumers in part to maintain infrastructure, solar and wind will need their own investments in infrastructure in order to transport power from solar fields to urban centers.

For the record, we at the Rio Grande Foundation are against ANY subsidies from Washington (or Santa Fe). Utilities and their customers should be able to choose the energy source that works for them, without government interference or manipulation. This includes solar, wind, and any other power source that entrepreneurs can dream up. If government got out of the way, we’d all be better off.

Our new Capitol Reporter, Rob Nikolewski wrote a really interesting story over at Capitol Report New Mexico today about the lack of responsibilities, and heavy costs of, the Lt. Governor’s job in New Mexico. Given the budget problems facing New Mexico these days, it would seem that now is as good a time as ever to cut spending, even if it means pulling the rug out from under government workers looking to rise in the political ranks.

Anyone got a specific objection? I’d love to hear it. It certainly doesn’t seem that NM taxpayers are getting their money’s worth!

According to a recent analysis by the Rio Grande Foundation, Doña Ana Community College (DACC) is New Mexico’s low-cost leader when it comes to higher education. This is certainly praiseworthy and laudable, but it brings up even more questions.

1) What can other institutions of higher ed learn from DACC?
2) How can those institutions maximize student (and taxpayer) value by leveraging the resources of DACC and other low-cost providers:
3) What information can and should the schools share to explain why some are so much more efficient than others?
4) Would students be better off if funding was directed to them in the form of a voucher rather than “trickled down” through the higher ed bureaucracy?

Higher education is just one area of New Mexico budget that is in need of serious reform, but it is a worthwhile place to start. We can take a moment to congratulate DACC for doing something right and hopefully learn what that something (or those somethings) are.

It’s never a good idea to politicize a pending criminal case just to score points in an election campaign.  There are consequences.  NM Watchdog reports.

Whether you agree with him or not, George Will is consistently one of the most insightful pundits in America. His recent article, which ran in today’s Albuquerque Journal, but can be found on the Washington Post website, views the last 100 years of public policy debates through the prism of the differing worldviews of James Madison and Woodrow Wilson.

Madison and the Founders believed:

believed that free government’s purpose, and the threats to it, are found in nature. The threats are desires for untrammeled power, desires which, Madison said, are “sown in the nature of man.” Government’s limited purpose is to protect the exercise of natural rights that pre-exist government, rights that human reason can ascertain in unchanging principles of conduct and that are essential to the pursuit of happiness.

According to Wilson and the so-called “progressives” (who really tend towards socialism), “Government exists to dispense an ever-expanding menu of rights — entitlements that serve an open-ended understanding of material and even spiritual well-being.” In practice, this means that that government has no limits.

This is the battle that is being waged in America today. It is not new, but Will certainly frames it in an interesting way.

Recently, Albuquerque resident David L. Jackson replied to an article by RGF scholar Micha Gisser’s article on property taxes. As you may recall, Gisser’s basic point was that “If in the marketplace your home is worth twice as much as my home, the dollar value of your property tax must be twice the dollar value of my property tax.”

Jackson disagrees, and, while he certainly makes some valid points in asserting that a system involving property tax caps like the one New Mexico adopted in 2001 can be useful, his assertion that we should adopt “progressive” tax rates for property taxes as we have done with income taxation in this country is wrongheaded and dangerous. After all, a rich person who lives in a bigger house (say, twice as expensive as a poor person) will already pay twice as much in property taxes. The last thing we need to do is to further ratchet up rates on certain segments of the population simply because we can.

New Mexico should consider applying the 3% tax cap to everyone or it should throw it out and follow Gisser’s model. Regardless, it is time for the Legislature to address “Tax Lightning.”

This isn’t how anyone would invest funds for their child’s college tuition and expenses.  But New Mexico, under the Richardson/Denish administration, has invested state funds in a fish company, an electric libretto designer (appropriately named “Figaro”) and a company that uses crushed glass to produce toilet bowl scrubbers (what, you don’t have one of those in your home?).  Nearly $400 million has been committed to a program most known for its bad bets on Eclipse Aviation and Advent Solar (remember them?)

The latest report shows not much has changed in this bad bet for taxpayers.  Word is the new State Investment Council and State Investment Officer are giving this Richardson favorite a much-needed hard look.  Here’s the report from New Mexico Watchdog.

ObamaCare was supposed to force health insurance issuers that provide dependent coverage of children to make that coverage available until that child reaches the age of 26. But it looks like someone at the New Mexico Public Schools Insurance Authority didn’t get the memo. So, according to this recent article from the Albuquerque Journal, a woman has had her 24 year old son dropped from her coverage.

Obviously, this is just one, relatively minor, bureaucratic snafu within a very complex piece of legislation, but one has to ask: if a state insurance agency set up for the sole purpose of insuring its members can’t get it right, how should small businesses and other private-sector employers? The answer, quite simply, is that they won’t. They’ll drop coverage instead.

Reality intrudes.  Where’s the money?  Cut through the hype, the warm fuzzies of “green jobs,” and you still need money, lots of it.  There’s lots of gullibility in the mix–from Bill Richardson to Jeff Bingaman to the city fathers of Rio Rancho–what’s missing is real money. New Mexico Watchdog still on the trail of Green2v and the elusive half a billion dollar letter of credit that’s not worth the paper….. Well, you know how that sentence finishes.

Awhile back, our higher education analyst Kevin Rollins outlined the need for greater efficiency at UNM in particular and higher ed in general. This generated an immediate and somewhat hostile response from the University’s president David Schmidly.

In today’s Journal, yet another response to Rollins’ piece appeared. This article, while unfairly criticizing Rollins for conflating CNM and UNM (he simply questioned ways to leverage the best features of the lower-cost institution for the benefit of all students), the author, a former professor at UNM, cited several possible areas for budget savings. This is exactly the type of discussion we were trying to spur with this effort. There is, after all, no question that higher education is a bloated area of New Mexico state government. Input from education experts, former university employees, students, and policymakers is necessary to getting the most bang for our bucks in a strained budget environment.

My cousin graduated today from the Digital Arts and Technology Academy (DATA) here in Albuquerque. More than four years ago, when I got to Albuquerque, he was headed to high school and was not finding either the situation in terms of school size or studies that he was looking for. This was no small matter as he had already been held back a grade and he was not enthusiastic about high school. The last thing we wanted was for him to become yet another New Mexico dropout.

So, with a little help from Lisa Grover and the New Mexico Coalition For Charter Schools, we found DATA, which is a vocational charter focused on the film and computer animation. Now, he has graduated. I’m certainly pleased that we have some type of school choice in New Mexico in the form of charter schools, but we have a long way to go before New Mexico — or any other state — realizes the benefits of a truly “free market” education system.

Interested in finding out what the candidates themselves felt about their performance in the debate. How about undecided voters? For some post-debate interviews and analysis, check out Capitol Report New Mexico. Post-game analysis from the candidates can be found here while thoughts from two undecided voters can be found here.

In case you missed it in person or on Channel 4 last night, the Rio Grande Foundation along with KOB TV Channel 4 and 770 KKOB hosted a televised debate — the only one I am aware of — between all 5 GOP candidates for Governor. While the candidates were by and large discussing their goals for New Mexico’s future and turning around the state, some sparks did fly.

Watch the entire debate here:

I have a fair amount of respect for the folks at Albuquerque Studios. After all, they plopped down a lot of private money to build their studios just south of Albuquerque. Certainly, they did this with the intent of taking advantage of New Mexico’s massively-subsidized film industry, but unlike the Santa Fe Studios which are again subsidized, the Albuquerque Studios themselves were not. Unfortunately, in a sign that the film industry is not economically-viable in New Mexico — perhaps even with massive taxpayer handouts — it has come to light that the folks at Albuquerque Studios owe $334,000 in unpaid property taxes. This comes on top of the Studios’ recent flirtation with bankruptcy.

If the film industry is so great, shouldn’t SOMEBODY in this state be able to create a going concern without directly relying on government handouts?

Oh, and then there is this nice analysis of that state’s film industry subsidies from our friends at the Mackinac Center, a free market think tank based in Michigan. Despite $117 million in film subsidies over two years, there are fewer people employed in the film industry now than before the program took effect!

With a new governor coming into office this November and the economy (and budget) still in the tank, now would seem to be a great time to discuss the future of the film subsidy program and whether we can eliminated or at least limit its negative impact on taxpayers.

Great story by Kim Holland of KRQE-TV.  http://bit.ly/blHbcI

But the new members on the SIC, due to their independence from Governor Richardson, and the new State Investment Officer, who also has newfound independence from the Fourth Floor of the Roundhouse, are also cause for hope.  The latest report from New Mexico Watchdog on what’s happening with our $14 billion in permanent funds.

In his response to my Albuquerque Journal article last month, University of New Mexico president David Schmidly announced that UNM had “identified $6 million in cost-containment measures in developing its fiscal 2011 budget.”

The Strategic Advisory Team made a report, which included short term reductions (summarized by RGF’s Corey Davis):

Short term recommendations are as follows, preceded by estimated cost-savings:
$173,184–1% invoice discount with vendors by paying in 10 instead of 30 days from date of invoice;
$315,000–provide capital projects’ vendors with PDF instead of printed docs;
$83,000–eliminate water coolers in offices;
$198,532–obtain multiple bids for furniture acquisitions;
$1,000,000–standardize the purchase of computers through a Dell contract;
$280,000–shift printing from desktop printers (which require printer cartridges) to copier fleet;
$1,000,000–centrally purchase all Microsoft software licenses;
$500,000–identify incorrectly enrolled participants in the employer insurance plans;
$360,000–have part-time employees contribute to the ERB only when they are at least .25FTE;
$1,000,000–divert budgeted salaries for vacant positions back to the university (“Historical practice has been that some units have balanced their budgets using vacancy dollars. This will need to be addressed.” p. 15);
$20,000–reduce Academic Program Review operating budget;
$70,000–reorganize Provost’s Office;
$40,000–reduce Freshman Family Day budget;
$300,000–reduce Extended University’s Instruction & General allocation;
$269,532–reduce frequency of office cleaning;
$200,000–reduce UNM Foundation’s Instruction & General allocation.

What is interesting about this list is that it doesn’t appear to include any re-thinking of the academic programs at UNM. There appears to be no consideration of the possibility that the university could better serve New Mexicans by altering the degrees offered. Contrast this with University of Maine’s recent changes:

From a UMaine press release on May 4th:

• Elimination of the Dept. of Public Administration
• Suspension of the German and Latin language majors
• Suspension of the theatre major
• Suspension of the women’s studies major and graduate concentration in that discipline
• Reduction of music master’s degree concentrations from five to two, retaining music education and music performance while eliminating instrumental conducting, choral conducting and collaborative piano
• Downsizing of the Master of Arts in Teaching program
• Downsizing of the Center for Research and Evaluation in the College of Education and Human Development
• Consolidations in the College of Engineering, including the assignment of certain Dept. of Mechanical Engineering teaching responsibilities to faculty members in the School of Engineering Technology
• Elimination of bachelor’s degrees in aquaculture, wood science, forest operations and forest ecosystem science, folding those fields of study into other majors in more cost-effective way.

More about UMaine’s strategic plan can be found here.

The difference between strategic cutting and just “trimming the hedges” is that strategic cutting is done with an eye towards better opportunities whereas a little trimming is about doing basically whatever has been previously decided, just a little more efficiently. If the program is generally sound, these trimmings might be the appropriate course. But, with the state’s budget crisis, a more radical re-envisioning may be in order.

In the coming days I’ll explore UNM’s budget cuts to see if they actually are substantial and realizable.

With oil still spilling into the Gulf, the issue of BP’s (and Transocean’s) culpability is being discussed by policymakers in Washington and the states. I wrote about the lessons we should take from the oil spill awhile back over at the Independent Forum. Among other points, I argued that Congress should not retroactively increase BP’s liability for the spill (as the Obama Administration is proposing).

That said, I don’t think BP’s liability should have been curtailed by Congress in the first place. As libertarian writer Sheldon Richman points out, weak and poorly administered government regulations and liability protections are part of the corporatist model that America is increasingly pursuing. This is not free market capitalism!

As Richman points out:

Those who see “tougher” government regulation as the answer are evading some formidable objections. First is the knowledge problem. Empowering regulators to prevent the next disaster tells us nothing about how they would know what to do without imposing costs that would dwarf any benefits.

Second is “regulatory capture.” Regulators and the industries they oversee develop mutually beneficial relationships that would appall those who idealize regulators as watchdogs. The rules that emerge from those relationships tend to foster more monopolistic industries.

Accidents happen, but they’ll happen less often and be less severe if the responsible parties are truly held responsible. Read Richman’s full article on BP and Transocean here.

Thousands of petitions (including mine) were submitted to Attorney General Gary King. But, despite the fact that 21 other states have filed suit against the recently-passed health care bill and 63% of Americans favor its repeal, King has not lifted so much as a finger to take action to stop the health care bill from being implemented.

As Sylvia Bokor of the Albuquerque Tea Party writes, the bill “violates individual rights. It forces Americans to buy a product. It violates the First, Fourth and Tenth amendments. It is replete with “mandates” that increase near-total control of American lives. It interferes in the relationship between doctor and patient. It will cause a decrease in medical practitioners, research, innovation and quality of medical service.

The health care bill is among the most impactful pieces of legislation ever passed. It is of highly questionable constitutionality, but King will do nothing to question or challenge it.

According to this excellent video from PJTV, the new Iron Man movie is quite pro-capitalist. The video not only analyzes the messages of the movie but shows Dr. Milton Friedman at his very best by explaining capitalism to Phil Donahue.

Check the video out here.

Hat tip to Steve McAllister.

Did you know that Albuquerque taxpayers are subsidizing golfers? Taxpayers of Albuquerque, the major city with the highest property tax burden (check pages 3 and 4) in New Mexico, are paying for General Obligation bonds to install a new, $1.5 million irrigation system at Ladera Golf Course Taxpayers are paying an additional $500,000 for other city golf courses (according to an article on page 9 of this publication). This, despite the fact that city golf courses are supposed to be operated as an “enterprise” within the city budget.

The problem is that greens crews at Ladera and the other municipal golf courses in Albuquerque (Arroyo del Oso, Los Altos, and Puerto del Sol) all hire highly-paid, unionized city workers (read the article at the top of page 21 of this publication). Worse, at least at Ladera, the unionized grounds keepers (making $18 to $20 to cut grass) have repeatedly damaged the golf course, making it less playable and, perhaps even resulting in costly repairs.

I just wrote about the need for government efficiency and specifically mentioned golf courses as an area of improvement through privatization. Perhaps Albuquerque could take a lesson (just this one time) from Detroit, where the city has privatized golf course management and actually earned $250,000 annually on its golf courses rather than asking overburdened taxpayers for ever-more. With workers paid at private rates and more flexible work rules, I’ll bet Albuquerque’s golf courses, located in a far better climate than Detroit’s, could turn a profit and become truly first-class courses as well.

If you’ve been paying attention to the various debates taking place in Congress over the past year from health care to climate change to financial services, you may be aware that our delegation has found itself on the side of bigger government and against taxpayers time and time again.

For a more specific snapshot of this situation, I point you to the recently released report from the National Taxpayers Union: “NTU Rates Congress”. Unlike some other Congressional scorecards, EVERY vote of importance to taxpayers is included. Members are given a letter grade and a percentage indicating how often they voted for/against taxpayers.

So, how did our Congresspeople do? The answer is, not well at all.
Harry Teague led the pack with a “D.” He voted with the taxpayers 25% of the time.
Martin Heinrich received an “F” and voted with taxpayers 7% of the time.
Ben Ray Lujan received an “F” and only managed to vote with taxpayers 4% of the time.

Our senators were even worse.

Supposedly “moderate” Jeff Bingaman received an “F” and voted with taxpayers only 4% of the time. Udall also received an “F” and edged Bingaman out by voting with taxpayers 5% of the time. Notably, Jeff Bingaman’s voting with taxpayers only 4% of the time is tied for worst in the Senate. Only a handful of the most left-wing members of the Senate like John Kerry (D) Mass. and Tom Harkin (D) Iowa voted for bigger government and against taxpayers as often.

None of our Senators are up for election in 2010, but all three of our House members are.