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.

If you left your house, watched tv, listened to the radio, or read the newspaper in the months prior to the last election, you probably saw a political ad that you paid for. No, I’m not just referring to donors to the Obama or McCain campaigns, but involuntary campaign “donations” that were taken in the form of taxes. How can this happen?
As I explained recently in the pages of the Albuquerque Journal, taxpayers funded the “yes” campaigns on behalf of the RailRunner and other statewide bond measures that increased property taxes statewide in an extremely tough economic time. This represents an extremely unfair advantage over grassroots and community groups like the Rio Grande Foundation that are concerned with out-of-control taxes and spending.
While government agencies looking for more money will always have the advantage of having many employees that get their paychecks from said agency, cutting off advertising money would at least create a fair election in which taxpayers’ own money are not used against them.

Most economists worth their salt oppose government wage mandates for the simple fact that politicians have much less knowledge about what a “fair” wage is than do employers and workers making decisions in a free economy. Santa Fe’s “chickens” of government-mandated wage inflation are now coming home to roost. In fact, business owners in the City Different are organizing to make a last stand against the 30-cent increase in the wage which is set to take effect at the end of January.
Business owners say that raising the wage in a strong economy is one thing, but with economic growth slowing dramatically generating increased unemployment and mainstream economists concerned about deflation, a free market would see wages shrink, thus naturally sucking marginal workers into the employment market albeit at marginally lower wages. Unfortunately, mandated wage rates disproportionately harms teens and low-skilled workers.
Santa Fe made a mistake in mandating wage rates that are far above market levels. Unfortunately, business owners and marginal workers will be the ones feeling the pain.

Everyone wants a bailout these days. Once Congress and the Bush Administration made the misguided decision of bailout out AIG and the banking industry, every other industry — not to mention governments and individuals — decided that they deserved some money from the federal government.
In yesterday’s Albuquerque Journal, Christine Trujillo
President, American Federation of Teachers-N.M, made the case for a government “bailout” of education. While I couldn’t disagree more with her overall point, the truth is that she makes no factual argument for the “bailout.” Rather, she makes some pointless statements about societal changes that she argues make educating children next to impossible.
The biggest red-herring is that education suffers from inadequate spending. This is the argument some are making for a major gross receipts tax hike for additional education spending, even in these tough economic times. As Dr. Harry Messenheimer has pointed out, education spending per-capita has increased dramatically in recent years. Check page 6 of this study.
There is no need to bail out education with a tax hike of any kind. Instead, like the Big 3 automakers, education will be forced to improve and become more efficient with competition and by giving consumers greater freedom of choice.

At least that is what the folks over at the blog Urban ABQ believe. Apparently, we’re also intellectually lazy. But is it true?
Yes, we at the Rio Grande Foundation oppose the taxpayer-financed Albuquerque streetcar, the taxpayer-financed Rail Runner, and the taxpayer-financed Albuquerque arena. But does that mean we oppose “everything?” I believe the evidence points elsewhere.
For example, we support the Heritage Marketplace development which has been killed by the City of Albuquerque. Also, we’d support the parishioners at St. Francis Xavier Catholic Church who were outlined on the front page of today’s Albuquerque Journal. It turns out that the churchgoers would like to cook home-made food (tamales, menudo and homemade goodies like bread pudding and bizcochitosfor), but the City health regulators are forcing them to buy food instead.
The fact is that we at the Rio Grande Foundation support private sector efforts and realize that those who use and abuse government power by forcibly taking other people’s hard-earned money via taxation are pushing ideas that would otherwise not garner financial (as opposed to political) support from enough people to be viable.

Lobo football fans awoke this morning to find that their head football coach of the past 11 seasons, Rocky Long, had resigned. While the losing 2008 season was definitely tough on the coach, he made a point of stating that New Mexico football will never flourish until the fans decide to turn out in greater numbers to support the program. What does this have to do with public policy in New Mexico?
Well, Albuquerque’s political establishment is considering the construction of a brand new taxpayer-financed arena in downtown Albuquerque. Possible anchor tenants include an arena football team and a WNBA franchise. While studies are done with an eye towards justifying the expenditure, despite difficult economic times, the real question is “If you build it, will they come?” After all, Lobo Football is a Division I, “major league” product. If fans won’t support them, will they support women’s professional basketball?
The record is mixed. Fans turn out for the Isotopes and Lobo basketball, but not for the Thunderbirds minor league basketball, not for Lobo Football (at least not enough to make the team as successful as its <a href="<a href="http://themwc.cstv.com/"/”>Mountain West peers, and not for the Scorpions hockey team.
It is hard to say what makes the teams that succeed do so and why other teams lack fan support, but I don’t trust our City Council and Mayor to spend a bunch of our money to figure it out, do you?

Recently, I appeared on a special on Channel 4 called “The Climate Case” to discuss global warming and what, if anything, should be done about it. The show lasts 30 minutes and can be found below:
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Also, if the current fiscal crisis has any silver lining it is that Congress, according to New Mexico Sen. Jeff Bingaman, Chairman of the Energy Committee, says that Congress will not act until 2010 on global warming legislation. At least Congress recognizes that the American people view purported climate change as far less of a problem than the economy. Of course, whether government at any level has the right solutions is an even better question.

Regardless of how you feel about the results of the recent election, it would seem that taxpayers of all stripes should be concerned that government officials are able to tilt the balance of ballot elections by using tax money to advertise on behalf of those ballot measures. Opponents of higher taxes, like the Rio Grande Foundation, must rely on donated funds and are given no free resources or media platform to argue against these tax hikes and bond measures.
I wrote about this problem in this week’s edition of The Taos News.

According to KOAT TV:

The Albuquerque Downs are moving to Moriarty, and the city’s major hopes extra funding will come with it.
Mayor Adan Encinias is asking the state for $4.5 million to help cover infrastructure costs for the new racino. Plans for the track are complete, and this is the only issue standing in the way of breaking ground. The Downs president hopes to begin racing by the summer of 2010.

While I am completely agnostic as to whether or not the Downs should move, I find it hard to believe that Moriarty deserves $4.5 million of our tax dollars for the privilege of hosting the Downs. After all, isn’t state-sanctioned legalized gambling and horse racing supposed to be an economic boon for the area?
Rather than asking taxpayers in the rest of New Mexico to foot the bill for Moriarty’s infrastructure, perhaps they could leverage some of those future tax revenues in the form of bonds in order to pay for the needed roads etc. In the best of economic times, Moriarty’s case for $4.5 million of our tax dollars would be on shaky footing at best. In current, tough times when cutbacks are being made across the state, Moriarty should be asked to come up with something a bit more creative than fleecing the rest of us for their Racino.

It is no secret that cities all over the country including our own Albuquerque are facing mounting budgetary problems. Chicago just received $2.5 billion in exchange for leasing the airport to a private company. Once debt is paid off, Chicago is expected to receive $1 billion from the privatization.
Albuquerque’s Sunport is owned by the City of Albuquerque and receives taxpayer funding. There is no doubt, however, that a private, profit-making company could do a better job while also providing resources in the form of lease payments to the City. With impending belt-tightening including recent cuts of $15 million, Albuquerque’s elected leadership should consider painless ways to access needed funding.
The win-win for taxpayers is that they get a better-run airport and save money at the same time.

It is good to have fans. Check this letter out from yesterday’s Albuquerque Journal:

I FIND THAT the blatant bias of Leslie Linthicum’s (columns) is becoming more and more intolerable. Her editorial comments do not belong on the front page where a portrait of the (columnist) becomes more noticeable than the actual content. …
“Run on Guns,” was full of tongue-in-cheek gloating. She selected to scold the fringe of conservative thought such as religious bigotry and gun loving. She does not take into account the heart of conservatism that has been broken by people who “just don’t get it.”
Then she closed by preaching to us worried conservatives to stop wasting our time by being sore losers, closing with the admonition for us all to get along. Who selected her to be the conscious of the public?
I know she once said she could do as well as Sarah Palin, but I would like to see her credentials before I take her front-page grandstanding seriously.
I humbly recommend that you either put her on the editorial page where she belongs or you give equal front page time to Paul Gessing, who is one of the most thoughtful expositors of conservative thought that I have read in your newspaper.
SONJA BAUM Albuquerque

The Albuquerque Journal has apparently been receiving feedback to the effect that they have been carrying too much of our work. I’d like nothing more — and I think it would be great for the paper — if we did regular pro/con pieces with leftist organizations. Until then, keep those pro-RGF letters coming!

It looks like the endgame may finally be near for Albuquerque-based Eclipse Aviation. According to KOB TV, Eclipse employees found out that they won’t be receiving paychecks from their past two weeks of work. With no money to pay employees, it would seem doubtful that the company can go on much longer — how long would you keep showing up for work if you weren’t being paid?
As Jim Scarantino has pointed out, if/when Eclipse goes under, taxpayers will be out $20 million. Nonetheless, I sincerely hope that Governor Richardson and our “economic development” gurus don’t decide to double-down on this taxpayer loss by bailing out the failing company.
While it is sad that so many people will likely lose their jobs and New Mexico’s economy will take another body blow, the lesson learned must be that government’s role in economic development should be to create an economically-viable and equitable tax structure rather than attempting to pick and choose “winners” of government largesse. Those “winners,” like Eclipse, often are engaged in risky businesses that would otherwise not attract private investment and when times are tough, they are unable to survive.
Perhaps Eclipse will pull through on its own. It would be great if it does. Unfortunately, it is not looking good right now.

Now that he’s moving to Washington, DC, Barack Obama and his wife must choose where to send their girls to school. One might think based on his strong advocacy for government-run public schools and opposition to choice, Obama would put his children where his ideology is by sending his kids to DC public schools. Not surprisingly, that is not the case.
Rather, Obama is thought to be leaning towards sending his girls to a tony private school, perhaps the same one that the Clintons sent Chelsea to. It would be nice if all Americans had the same (or at least some) choice over educational opportunities.

Some of the figures below are truly shocking. According to the Institute for Truth in Accounting:
Since May 30, 2008, less than six months ago, the United States has added a stunning $1.2 trillion dollars to its already bloated public debt. Total debt now stands at $10.6 trillion while that portion held by the public and foreigners is up 20.6% in less than half a year.
“Since the time George Washington was president until Bill Clinton assumed the office, we had managed to accumulate $4.2 trillion in debt. President Clinton added $1.6 trillion and George Bush has increased the total by another $4.8 trillion” said Sheila Weinberg Founder of the independent Institute for Truth in Accounting.
“Beginning in the middle of the year, the federal government’s existing annual deficit has been increased by bank bail outs, insurance company rescues and by coming to the aid to automobile manufacturers and their unions.” Weinberg continued. “For the sixty million households that pay taxes, these government programs add more than $20,000 in future liabilities.”
Weinberg reminds us that the public debt is only a small part of the fiscal challenges that face Americans. “The real problems are the promises we have made to ourselves without a way to pay for them. These unfunded obligations are a consequence of Social Security and Medicare entitlements, primarily and they are nearly five times larger that the “official” debt. The total combination of debt and promises is a whopping $57 trillion or more than $188,000 for every man, woman and child. For taxpaying households, this is an obligation of nearly $900,000!”
For more information about the Institute please visit: www.truthinaccounting.org and www.truthin2008.org

Our elected officials have a way of taking advantage of Americans’ poor memories. As Robert Higgs points out, it seems like only yesterday that executives from the oil and gas industry were hauled before Congress and berated for supposedly “gouging” consumers. Fortunately for American motorists (and other energy users), prices continue to drop and, not surprisingly, Congress hasn’t thanked the industry.
Perhaps Exxon and BP will get a bailout too if prices continue their recent declines?

Over at Reason, there is a tally of the various federal bailouts — total damage about $2 trillion. Interestingly, the Washington Post recently ran an article quoting several economic experts who believe that the AIG bailout was ineffective. This latest news is not surprising considering that another major government intervention in the markets, the ban on short-selling, has been called ineffective by a range of experts as well.

We at the Rio Grande Foundation have been quite critical of the powers that be when it comes to economic development in Albuquerque. While some projects like the streetcar, Winrock Mall, and the downtown arena/convention center (to name just a few projects) receive special treatment in the form of tax breaks and taxpayer subsidies, other projects (like the Scientologists’ proposed building downtown) are given the runaround.
Now, SunCal, a company that has been involved in the fights over TIDD’s, has experienced the wrath of an Albuquerque government that seems to not care about jobs or economic growth at a time in which both are at a real premium. The New Mexico Business Weekly has an interesting article about SunCal’s Heritage Marketplace project, a 12-building, 20-acre, mixed-use development at Ladera and Unser NW.
According to the article:

SunCal and said two anchors were lined up for the project as designed by SunCal. To make the changes the city requires, it will add 15 percent to 20 percent to the project’s construction costs.
City planners had a different vision. They wanted the plan to conform to the city’s design guidelines, which call for open plazas with pedestrian and bicycle amenities in new shopping center developments. Strip center development is viewed unfavorably. The commission saw a more urban project with less parking and didn’t want the center to face heavily trafficked Unser Boulevard. SunCal argued it couldn’t attract retailers if their stores didn’t face Unser. Unser is a state road, Route 435, and new turn lanes are an issue.

So, we have a company, SunCal, that is looking to invest millions of dollars (without demanding subsidies) by building a new commercial development in Albuquerque and the City says “thanks, but no thanks” because the development doesn’t fit the hopes and dreams of a few bureaucrats….don’t you just love government?

Rep. Jeff Flake a Congressman from Arizona is one of the most intelligent and principled members in the United States Congress. He wrote an article in the Washington Post that appeared in the Albuquerque Journal today in which he laid out a plan for Republicans to re-take Congress by adopting principles of fiscal responsibility. Among Flake’s cures for what ills conservatives:

At the top of that list has to be a recommitment to limited government. After eight years of profligate spending and soaring deficits, voters can be forgiven for not knowing that limited government has long been the first article of faith for Republicans.
Of course, it’s not the level of spending that gets the most attention; it’s the manner in which the spending is allocated. The proliferation of earmarks is largely a product of the Gingrich-DeLay years, and it’s no surprise that some of the most ardent practitioners were earmarked by the voters for retirement yesterday. Few Americans will take seriously Republican speeches on limited government if we Republicans can’t wean ourselves from this insidious practice. But if we can go clean, it will offer a stark contrast to the Democrats, who, after two years in training, already have their own earmark favor factory running at full tilt.
Second, we need to recommit to our belief in economic freedom. Adam Smith’s “The Wealth of Nations” may be on the discount rack this year, but the free market is still the most efficient means to allocate capital and human resources in an economy, and Americans know it. Now that we’ve inserted government deeply into the private sector by bailing out banks and businesses, the temptation will be for government to overstay its welcome and force the distribution of resources to serve political ends. Substituting political for economic incentives is not the recipe for economic recovery.
Most House Republicans opposed the recent bailout and will be in a strong position to promote economic freedom over central planning as the Obama administration stumbles from industry to industry trying to determine which is small enough to be allowed to fail and which is not. Since timetables will be in vogue, perhaps Republicans could even insist on a timetable for getting the government out of the private sector.

Republicans here in New Mexico and nationally should heed Flake’s call for real change towards fiscal responsibility. Otherwise, they’ll be in the wilderness for a long time.