With stories of packed trains and huge demand, the average person (subscription required) might be led to believe that the Rail Runner can now be called a success. But is it true? Is New Mexico’s commuter train really a success?
Not by a long shot.
First and foremost, like we saw when the train originally opened, there are plenty of joy-riders taking to the rails in droves right now to see what a free trip to Santa Fe on the train is like. Once commuters and other regular customers become the bulk of the train’s customers, we’ll have a better idea on ridership. But if high ridership continues, doesn’t that make the train a success? Not by a long shot.
Let’s put this in perspective. This train cost taxpayers $400 million to build. It will cost $20 million annually to operate, $19 million of which will be again financed by taxpayers. Only $1 million will come from fares. So, what we have is a massive subsidy. Imagine if the Waltons and other shareholders didn’t care about turning a profit and Wal Mart charged $50 for a new HD television and $25 for a Nintendo Wii. If they did that, there is no doubt that customers would flock to their stores. Of course, if they sold these items for such low prices, Wal Mart would likely go out of business (or at least stop making money) before long, so they instead charge market prices for their goods.
Transportation should be no different from Wal Mart. I as a New Mexico taxpayer should not be forced to subsidize your trip to Santa Fe or Belen any more than I should be paying for your HD TV. Unfortunately, this is not conventional wisdom in this, the age of bailouts.
Nonetheless, those who call the Rail Runner a success are ignorant of economics and simply aren’t weighing the projects’ full cost.

Merry Christmas. For a touching and informative story on the real meaning of Christmas, check out Jim Scarantino’s column in today’s Albuquerque Journal. Unfortunately, I have no link because I couldn’t find it on their site. Anyway, it is fantastic.
Also, be sure to tune in to AM 1550 from 9am until 10am in and around Albuquerque for a discussion of Christmas and whether or not capitalism and free markets are compatible with Christianity. It’s sure to be an interesting discussion.

In case this is your first time to our blog, the Rio Grande Foundation recently released its 2008 Piglet Book on wasteful government spending. Read more about it here. As you might imagine, there was a good deal of discussion on various New Mexico blogs relating to the report.
Mario Burgos did a nice write up over at his blog marioburgos.com.
Another space-focused blog wondered why we’d focus on “small potatoes” in our report in this age of bailouts.
The blog New Mexico Central also covered the story.
Lastly, I appeared on KOB’s show “Eye on New Mexico” last Sunday to discuss wasteful spending in New Mexico and around the country. You can watch the video here.

I was downtown the other day and received a ticket on my car. I wondered what I did wrong and when I took a look at the ticket, I saw this. How many of you, dear readers, knew that parking more than 18 inches from the curb was an infraction? It would seem that our City’s meter maids are being charged with closing at least part of Albuquerque’s budget gap.
It would seem that if Albuquerque’s meter maids are going to be so aggressive it kind of limits the usefulness of efforts to get people to come downtown, right?

Rarely do we at the Rio Grande Foundation see eye to eye with left-wing Sen. Jerry Ortiz y Pino, but he actually talked some sense in a recent column in the Alibi. His conclusion and ours: higher taxes are not the solution to improving education in New Mexico.
In a letter to the editor I expressed support for this realization and the Senator’s call for smaller schools, and suggested a system of education tax credits as a means of spurring reliance on smaller schools in the short term. Find out more about tax credits here.

If you follow the Foundation at all, you probably have heard about our 2008 Piglet Book. Our op-ed on the topic of “pork” and wasteful spending has been making the rounds throughout the state. Check that out here.

As I wrote on this site a few days ago, Albuquerque Mayor Marty Chavez is asking incoming President Barack Obama for a $1.6 billion bailout. Obama has already pledged to “invest” in infrastructure, so Mayor Marty is just getting his, right?
Unfortunately, as Kristina Rasmussen of the National Taxpayers Union points out in a recent article by columnist Cal Thomas: “Total cost of the wish list is $73,163,299,303. They claim this will create an estimated 847,641 jobs in 2009 and 2010. Divide that out, and you get a cost to taxpayers of $86,314 per job. Not exactly a great deal.” It seems like the plan simply shuffles the deck chairs on the Titanic rather than providing any “stimulus.”
As Mayor Marty has figured out, much of this spending represents nothing but pork and other projects, like the Albuquerque streetcar, that would not otherwise receive funding if the issue was left to local politicians and voters. Once Santa Clause (the feds) agree to pay, all restraint is abandoned.
As if to summarize the wrongheaded economic thinking associated with this money grab, Forbes recently named Albuquerque one of 5 “Obama Boomtowns” that are expected to benefit from the “stimulus.” Perhaps Forbes will raise a more important question next time “Which taxpayers and small businesses will lose out the most as massive amounts of their money is wasted on these boondoggles?” Unfortunately, I have a feeling this group includes all of us.

George W. Bush remains an enigma. Does he really believe in the free market? Does he completely misunderstand how markets work? Or, does he simply pay lip service to markets while continuing to undermine them? Regardless of his innermost feelings, there is no doubt that Bush abandoned free markets early and often in his presidency.
Unfortunately, as this recent story illustrates, Bush continues to imply that he was a free marketeer until he decided that a little (or a lot) of socialism was needed.
As Matt Welch points out over at Reason:

The real failure here is one of nerve, of imagination, of historical memory. You cannot save something by destroying it, or abandoning it, or even giving it a few stiff raps in the kneecaps. “Paternalism” is too mild a word for the mentality that produces such a sentiment, let alone the disastrous policies to back it up.

I would go even further and argue that the Medicare Prescription Drug Bill, No Child Left Behind, Sarbanes-Oxley, massive regulation, and massive spending increases under Bush should put lie to the President’s claims of adhering to free markets, but that is just a starter list. Unfortunately, he continues to besmirch and discredit free markets the more he opens his mouth.
Call me crazy, but how much worse can President Obama really be? At least he doesn’t paint himself as a free market believer.

“Tax Lightning” was first used to describe the shock a homeowner experiences upon receiving the initial property tax assessment from their respective county. It has since become more of an umbrella term to reference a larger problem: a severe property tax inequity among homeowners in New Mexico. When ownership of a property transfers, the property tax may be assessed by county assessors at current market value, pursuant to legislation passed in 2001 (HB 366). This has only become a hot topic in the past few years. People who purchased or developed properties at the height of the real estate bubble are paying inflated property taxes. Two property owners in the same district, perhaps even door-to-door, may be paying severely disproportionate property taxes. “Tax Lightning” remains an important issue; particularly with the 2009 state legislative session impending. This trend in property assessment at “current and correct” market value serves the budget concerns of county bureaucrats but chills our already weakened economy by penalizing home buyers.
While the weak housing market certainly makes it more difficult for potential home buyers to pull the trigger, the reality of “Tax Lightning” further hinders the market from returning to liquidity in New Mexico. A potential homeowner won’t enter the market because they face a significantly-increased property tax burden. While this is bad enough for those who are looking for bigger and better housing, the problem is even worse for current homeowner such as seniors, retirees, and those who simply need a lower house payment. Their incentive is not to downgrade to a smaller, more affordable house because they may wind up with a comparable monthly payment for a less valuable property, due to the new assessment and subsequent tax increase.
For some time now local newscasts, newspaper articles, and blogs have attempted to voice the concerns of those homeowners most directly affected by Tax Lightning. But the public outcry appears to have had little effect on this policy. Challenged assessments are continually shot down. The answer given to contesting parties has been the same, unaffected by public outcry: your property tax was assessed pursuant to the law. It follows then that new legislation is the only real means for change. Earlier this year, Senator Mark Boitano sponsored two bills addressing Tax Lightning which county assessors lobbied against. Bernalillo County Assessor Karen Montoya said that her office had considered the fiscal implications and determined that the State would lose too much revenue. The bills ultimately failed. In 2009, Senator Boitano and his colleagues will introduce new legislation that may be more amenable to the opposition. This new legislation may propose the following:
• Clarifying legal nuances regarding the formula to calculate property taxes and the definition of “current and
correct” and “valuation maintenance.” This may narrow the gap between those paying too much and those
paying too little.
• Applying yield control to debt service in addition to operating costs
• Maintaining a 3% cap regardless of a change in ownership
• Removing the 3% cap, reassessing all properties, and then imposing the cap again. Phase in the heavy
increase experience by some and the decrease experienced by others over a 4 year period.
It is clear that this issue is of great concern to those most directly affected. It should be of concern to everyone. It appears that legislation is the only way to interfere with the new trend in assessment. People are seeking shelter from the lightning storm. Concerns should be voiced to state legislators. The 2009 legislative session draws near, and with it a new opportunity to properly address this issue. The desperate state of our real estate market and the extreme dissatisfactions of property owners should be enough to influence legislation.

Once the holidays are over, Albuquerque’s City Council will again be discussing whether to pony up close to $400 million and raise taxes in order to finance an arena. We at the Rio Grande Foundation have long questioned the need for a taxpayer-financed arena or events center, particularly who would actually play there. Possibilities have included the WNBA and an arena football team.
Council better hurry up because the list of possible tenants has become even narrower with news that the Arena Football league has decided not to play the 2009 season. This comes on the heels of news that the Comets, the WNBA team in Houston, has folded. If the WNBA can’t survive in America’s 4th-largest season, how will it survive here?
The fact is that the case for the arena is built on nothing more than hope and taxpayer dollars. If they build it, who will come?

While the Founding Fathers would undoubtedly be rolling in their graves if they were aware of the federal government’s massive intervention in the American economy, we can still celebrate America’s Bill of Rights and its important legacy of limited government. It is also important to educate our fellow Americans that ours is a federal government with limited powers and that the Bill of Rights protect individual Americans and their state and local governments from federal overreach.
Happy Bill of Rights Day!

Sometimes I wonder if Albuquerque Mayor Martin Chavez is serious. Hopefully, Congress does not take him very seriously with regard to his latest scheme to expand government, this time at the expense of federal taxpayers rather than just local taxpayers. The key to this scheme is that he won’t have to build public support for his projects and no one will have to vote on the plan. I’m referring, of course, to his plan for Congress to “bail out” Albuquerque to the tune of $1.6 billion.
As outlined in the New Mexico Business Weekly, Chavez’s wish list includes:

A concentrating solar plant at Double Eagle airport for $532 million, a wind farm for $140 million, a small business energy audit and retrofit program for $5 million and a solar array on the Albuquerque International Sunport with a price tag of $34.5 million.

Of course, no list of Mayor Marty’s would be complete without money for his beloved streetcar down Central Avenue for which he’d like $90 million. Apparently, the voices of City Council and Albuquerque voters have no bearing on Mayor Marty’s dreams. He wants a streetcar and by golly he’s trying to get it even if taxpayers in Des Moines have to pay for it.
The fact is that Congress has at least temporarily rejected the bailout for the Big Three Automakers. Hopefully, this move will put a stop to the bailout bonanza once and for all and Mayor Marty will be unable to force his useless streetcar on us by begging for money from Washington.

Over at the left wing FBIHOP blog, we at the Rio Grande Foundation are accused of believing that voters are “dumb” for voting, albeit narrowly, to raise the gross receipts tax to fund the Rail Runner. Of course, I never said that voters in New Mexico or elsewhere are dumb, rather, I simply argued in a recent Albuquerque Journal column that government should not be able to use taxpayer money to fund campaigns in support of ballot measures. FBIHOP apparently interprets this as my saying that voters are dumb.
Nonetheless, lets not let the facts get in the way of a perfectly interesting discussion. Are voters really informed when it comes to voting on the issues? If anyone watched the JayWalking or other “man-on-the-street” segments about the presidential candidates it seems pretty obvious that voters are not always well informed.
While it is easy to criticize ignorance, as Reason Magazine writer Bryan Caplan wrote voters tend to make boneheaded decisions on basic economic issues when they go to the polls. This is not a sign that they are inherently “dumb,” rather it is a sign of rational ignorance in which people concern themselves with their jobs and succeeding in their daily lives rather than keeping track of politicians and policy issues.
While overcoming rational ignorance is difficult, it would seem that at the very least policymakers should stop government bureaucrats from using taxpayer money to sway voters to vote for bigger government.

If you caught KOB News last night, you saw a report on the release of our Piglet Book. Check out this article which includes some great footage of our pig frolicking in the Santa Fe plaza and handing out copies of our report. The report itself is available here.

In case you missed it on each of the major New Mexico news outlets, the Rio Grande Foundation released its 2008 Piglet Book along with the Washington, DC-based Citizens Against Government Waste. Detailed in the report is hundreds of millions of dollars of wasteful and unnecessary spending. Download the report here.
In case you did miss the stories, you can hear more about the Pig Book on Bob Clark’s show on 770 KKOB AM at 9am on Friday and on 1550 KJOY AM on Saturday from 9am til 10am.

Nick Gillespie over at the Reason blog points out that with the automakers’ bailout practically a done-deal, the states and cities are using infrastructure investment to get their own “bailout.”
Among the infrastructure items funding is hoped for:

* a proposed “O’Malley Road Reconstruction” in Anchorage, Alaska, that will cost $30 million but provide 300 (count ’em!) jobs;
* a Gadsen, Alabama “Hoke Street Sidewalk Construction to serve new Department of Human Resources facility” that’s a real steal at $150,000 but will take almost surviving members of the Allman Brothers Band off the public dole (at last!);
* Police Facility Solar Panels for Lake Havasu City, Arizona, for only $400,000 and 75 jobs;
* Stormwater Settlement Ponds for Beloit, Wisconsin for $1,428 million and five whole jobs, which will feed a family of four in the Badger State, especially if they only eat government cheese;

Bastiat disproved the idea that government can improve our economic situation by wasting money on worthless projects. Unfortunately, if Congress and the White House cave to the governors and mayors we’ll be pushing off any economic recovery and making us all poorer.

Advocates of limited government have been distressed to see one bailout after the other pass through Congress only to have little positive impact on our economy. While it looks likely that the automakers will get their bailout, taxpayer advocates led by the National Taxpayers Union are calling for federal policymakers including the Treasury Department and Congress to make the bailouts transparent at least. Read the recent coalition letter to which the Rio Grande Foundation is a signatory here. A total of 72 grassroots organizations, including many that are not considered to be fiscally-conservative, signed the letter.

On Sunday there was an interesting article in the Albuquerque Journal explaining that legislators have found $173 million worth of unspent funds that could be re-allocated for other uses. While the opportunity to re-allocate unspent funds that would have otherwise been wasted on a $22.3 million equestrian center would seem like a good thing, Ed Sandoval is skeptical. He is quoted in the article as saying “Capital outlay in essence drives the economy…we’ve got to be careful how we do this.”
Certainly, care is important whenever legislators are dealing with millions of taxpayer dollars, but the idea that the capital outlay process “drives” the economy is truly a joke. The private sector drives the economy and people like Sandoval (politicians) suck off of our productive activity and re-distribute it to others, often with highly unproductive results. Does anyone really believe that they couldn’t spent $22.3 million more effectively than the state has plans to do for this equestrian center?
In the best of times Sandoval’s economic ignorance should be of concern. In today’s economic situation, Sandoval’s ideas are truly dangerous.

Having been out of state for much of this week, it has been tougher to follow the action locally, here in New Mexico, but I did see this great article from the Wall Street Journal from Wednesday. The authors’ essential argument is that while we expect Congress and corporations to behave badly, we have seen an unfortunate abandonment of principle from many economists relating to the spate of bailouts and the role of government in having created the current economic malaise.
As the authors conclude:

Our desire for a principled approach to this crisis does not arise from an academic need for intellectual coherence. Without principles, policy makers inevitably make mistakes and succumb to lobbying pressure. This is what happened with the Bush administration. The Obama administration can do better.

Principle, especially relating to limited government, is more important than ever these days. Usually economists are among the most principled members of society, but supporters of bailouts and arbitrary, massive government spending have debased the field.

Governor Richardson has officially been named by Barack Obama to head the Department of Commerce. While I’m sure he would have preferred the State Department (and the Commerce Department has no constitutional function and should be eliminated) this country faces too many economic problems not to give Richardson our best wishes for helping the Obama Administration solve the current economic situation.
As I said in a recent article in the Santa Fe New Mexican, Richardson’s record on the New Mexico economy is mixed:

On one hand, he cut income and capital gains taxes to very positive effect.” “In that sense, he will undoubtedly be a voice of reason in the Obama administration. On the other hand, he has relied heavily on targeted tax breaks designed to benefit specific companies. His prized achievements are arguably the film industry and Eclipse Aviation.
The Governor’s Office has said that since he was elected, more than 100 major film and television projects have been shot in the state, adding more than $2 billion to the state’s economy.
But Eclipse, in which the state has a $19 million equity investment, has been hit with some major financial problems in the past months, including not being able to make payroll at one point last week.

Hopefully, Richardson will be an advocate for responsible tax policies in the Obama Administration. Only time will tell, but at this point we can only wish the Governor the best in Washington.

Now that Eclipse Aviation has filed for Chapter 11 bankruptcy protection, New Mexico taxpayers have officially lost their $20 million investment in the company. As Rio Grande Foundation investigative journalist Jim Scarantino points out in his newest piece, New Mexico taxpayers face mounting losses and well-below-market returns through the State Investment Council.

While all these bailouts are economically dubious from a policy standpoint, Charles Krauthammer points out that their real danger is in shifting the emphasis of business from economic success and innovation and to political lobbying. What he doesn’t state explicitly is that President Bush is largely responsible for the shift. He does point out that it will be up to Obama and the Democrats to further these changes or return to the market.

Despite tough economic times and plummeting oil and gas prices, Texas maintains an $11 billion surplus (without forcing its citizens to pay an income tax). As this article points out, despite the surplus, politicians in the Lone Star State are not calling a special session to spend the money, unlike the Governor of a neighbor of Texas. According to the article, in Texas “new spending by lawmakers will be capped at about 9.1 percent over the current two-year budget.” New Mexico grew spending by this much in one year during the recent oil and gas boom.
Perhaps that is why the average Texan makes more than $5,000 more than the average New Mexican annually???

There is a lot of talk at UNM about making the school more environmentally responsible. A new degree is even being offered in sustainability studies. In keeping with this trend, the University and the state government should also consider making UNM more fiscally responsible.
With President David Schmidly implementing a freeze on hiring and faculty raises, University students are becoming increasingly critical of fiscal policy on campus. They have reason to be concerned. After all, major facility renovations and upgrades, including a $60 million renovation of The Pit, are moving forward despite the freeze on faculty spending. Some students have suggested Schmidly take cuts out of his own salary – which is $387,000, according to UNM’s public records – and administerial operations to ensure that the educational function of the University isn’t jeopardized.
Although the state has allocated less money to the University this year, UNM’s operating budget has increased by 10.4 percent. State allocations to the school are likely to continue their decline due to tax revenues taking a hit from dropping oil prices. If the school’s budget keeps increasing and state allocations continue to dwindle, the University will find itself having to compromise the quality of education just to keep itself afloat.
Unfortunately, the University’s incentives aren’t necessarily aligned with its purported educational goals. That’s because a relatively minor percentage of the school’s operating budget is collected from tuition – only 6.4 percent. Far more, 38.6 percent, comes from local, state and federal taxpayers.
New Mexico policymakers should consider realigning those incentives by routing a greater percentage of government money through students in the form of a voucher rather than directing it to the bureaucracy. Colorado is one state that has enacted this reform to positive effect. If New Mexico’s universities are forced to compete for students, and therefore money, student needs will begin taking precedence over basketball and administration. A voucher program will give students the ability to allocate government funds to whichever school they choose. In a free-market system like this, schools will naturally focus more on the quality of their product – education – rather than sports facilities or outrageous administrator salaries.
(The above letter was published in UNM’s student newspaper, The Daily Lobo.)
UNM’s President David Schmidly is also worried about the likely cuts in government allocations to the school. Hopefully this recession can give the university an opportunity to learn to operate more efficiently.