Errors of Enchantment

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Teacher Pay in New Mexico

06.05.2007

Before I even get into this topic, it is important to clarify that there is no real evidence that spending more money improves educational performance. That said, I noticed a recent story noting that New Mexico now ranks 35th in education spending among the 50 states.
It may seem that we are not spending enough to educate our children although $7,580 per student is a healthy sum, even higher than rates charged by private schools, but like so many numbers, per-student spending is misleading. I submit to you the following ranking of teacher pay. While New Mexico’s teacher pay is 37th highest in the country in nominal terms, when those numbers are adjusted for cost of living, pensions, and experience, New Mexico’s teacher pay ranking actually rises to 20th.
Despite this focus on money and teacher pay, the fact is that results are the most imporant part of the equation. Choice, not money, is the key to improving results. That is why the adoption of a program of educational tax credits is one of the Foundation’s top priorities for 2008.

New Mexico: Investing Pensions in “Toxic Waste”

06.04.2007

Thanks to a reader of our blog, James McHenry, for this story from Bloomberg which explains that New Mexico’s State Investment Council, which funds education and government services for children, has $522.5 million tied up in investments so risky that they make “junk bonds” look safe. In fact, because of their risky nature, bankers call these investments “toxic waste.”
These collateralized debt obligations (CDOs) are packages of securities backed by bonds, mortgages and other loans that have been bought by the State Investment Council with hopes of generating returns as high as 20 percent. That is, of course, assuming that the Investment Council doesn’t lose its shirt on the deal.
The fact is that state employee pension funds across the nation are tremendously underfunded and there is a great deal of temptation, like any gambler in Vegas knows, to double down on losses in an effort to make their money back.
This is just another reason that, contrary to the pleas of organized labor, we are much better off investing our own money in our own retirement accounts than we are letting governments or even corporations do the investing for us.

Talking Sense About Mayor Marty’s Wi-Fi

06.03.2007

In a recent column, Gene Grant of the Tribune displays an excellent grasp of the reality and difficulty of putting together a municipal wi-fi/broadband system.
With all of the problems experienced by Rio Rancho and Sandoval County in their public wi-fi endeavors, one might think Mayor Marty would think better of getting involved in such a boondoggle, but apparently “Rio Rancho envy” is a reality when it comes to wasting money on arenas and internet systems.

No Single Solution to Health Care Woes

06.02.2007

Health care is going to be an extremely hot topic over the next 9 months or so (if not longer) here in New Mexico. A single payer bill is being pushed along with other “reforms.” I wrote an opinion piece in the Albuquerque Journal recently explaining why, although not as complicated as the experts make them out to be, the solutions to our health care mess will not be found in more government programs and regulations, but in peeling back some of the absurd rules and regulations that have perverted the health care marketplace.

Half of Every Tax Dollar Goes Towards Education

06.01.2007

The New Mexico Department of Taxation and Revenue opens it’s webpage with a question; who benefits when taxes are collected? It then goes on to proudly proclaim that 47% of your tax dollars go to public schools!
If someone’s benefitting from this program, I’m not seeing who it is. It’s certainly not benefitting the taxpayer. It’s not benefitting students either. As Justin pointed out, we already pay over $7000 per student, a huge increase over the past 30 years. Despite this, the education system still fails to deliver better results. The excess money has only succeeded in maintaining a system that lags behind the the demands for today’s world.
One way to finally begin putting a dent in the massive amount of money we funnel into our moribund education system is through education tax credits. Tax credits have saved other states such as Arizona and Pennsylvania millions of dollars. The Heartland Institute estimated in 2005 that tax credits could save our state $42 million over ten years.
New Mexicans should not be proud that we half our tax money for education. We need to see some change in the amount we fork over for mediocrity. Tax credits can begin this process.

The Double ‘Thank-You’ Moment

06.01.2007

John Stossel is one of my heroes and, especially considering his role as a commentator/reporter within the mainstream media, his strong grasp of economic and political issues from a pro-liberty perspective is astonishing. One of his most recent columns is all about that moment when you are speaking to a store clerk and both of you say “thank you.” This, Stossel points out is the essence of free market capitalism and is the greatest single difference between voluntary exchange and government force.
The essence of the “thank you” is that you are getting something you want, say a cup of coffee, and the company/employee is getting something they want, namely money. Both parties consider themselves to be “winners” in the transaction.
This is rather different from government interactions. How often do you enclose a “thank you” note with your income tax return? Not often I’d imagine. Ultimately, international trade is no different from the interaction between a Starbucks employee and a customer. Rather than getting in the way, the US government should abandon tariffs and subsidies, especially on agricultural products, and allow Americans to trade freely with citizens of other nations…even Cubans.

Dog Health Care vs. Human Care

05.31.2007

My six-month old Siberian Husky, Jack (click here for picture), recently had some health problems. Namely, He swallowed a hackeysack, one of those little bean-filled balls that kids kick around. After two trips to the vet and severy tests, the situation was resolved and the hackeysack removed.
But, the situation got me to thinking about health care and the ways in which human health care differs from veterinary care. First and foremost, Jack was “uninsured.” I’m not sure about the number of “uninsured pets,” in this country, but I am pretty sure that it is a national crisis of epic proportions and that some government solution is necessary.
Anyway, because Jack had no insurance, his bills were all paidout of pocket and upon completion of his treatment by me and my fiancee. To say the least, this is not common practice when it comes to human health care. In fact, a friend of mine was treated for a torn anterior cruciate ligament in Albuquerque and, after repeated requests for an itemized bill, the hospital simply refused to provide one.
It would seem obvious to me that if you don’t provide consumers any information about their health care costs and the tradeoffs they create, you will continue to have costs spiral out of control. Perhaps we can take a lesson from the vet…now if I could only get Jack a Health Savings Account!

Federal Funding for RailRunner?

05.29.2007

Right now, New Mexico is looking for $75 million in federal money for the RailRunner commuter train. The Albuquerque Tribune editorialized that the project was worthy of federal support and that Senator Domenici should use all of his political wiles to get the funding.
While it may seem simple to New Mexicans who think governments have an unlimited amount of money to throw around, even the federal government must (or at least should) prioritize. The problem is, as I point out in my subsequent letter to the editor, when government provides a particular service or several services, it becomes far more difficult to prioritize.
Although I don’t think we’ll see full-blown capitalism in transportation anytime soon, I do think that the first step is to return transportation policymaking to the states. That way, at least states will be able to try innovative solutions and compete with each other to find the transportation systems that work and that their citizens and businesses will use and can pay for.
If you want to see what an innovative, free market transportation system might look like, check out the work of Bob Poole and the Reason Foundation.

Wealth Will Help Us Survive Climate Change

05.28.2007

The Journal’s Business Outlook section had a nice story (subscription required) about a recent talk given here in Albuquerque by Robert L. Bradley Jr. of the Institute for Energy Research. Bradley’s main point (as disucussed in the article) was that our economy, because it is relatively free market and wealthy, can cope with what climate change occurs. Rather than panicking about a degree or two degree increase in global temperatures — whether it is human caused or not — we would be much better off devising ways to make sure our people can cope with the potential problems of global climate change.
Omitted from the Journal article was another important point made by Bradley, that is that ethanol and other so-called “alternative energy sources” are not really viable as replacements for the current suite of fossil fuels. Unfortunately, as Bradley made clear for the specific benefit of the Domenici and Bingaman staffers present, New Mexico’s Senators don’t seem to have gotten this message. In fact, legislation now being pushed by the Senators would again expand the alternative biofuels mandate.
Thanks to the New Mexico Prosperity Project for putting on an excellent event.

Education from the Top Down

05.25.2007

Yesterday, the US Census Bureau released its latest report on the public financing of elementary-secondary education. The data itself is also available.
On average, $8,701 of taxpayer money was spent on each student nationwide in 2005. New Mexico ranks at #35 in spending, $7,580 per K-12 student. Compared to its neighbors, New Mexico collects more revenue per student, but only Colorado spends more ($7,730 per student). Interestingly, Arizona and Utah are at the bottom of the list, spending just $6,261 and $5,257 per student. The problems with New Mexico’s public schools are not due to a lack of funding.
Where New Mexico really stands out is in the large imbalance in revenue for its public school system. Only two states (Arkansas and North Dakota) and the District of Columbia receive more federal funding per student, and we rank #10 in state funding. When it comes to local funding, however, New Mexico ranks #48, one of only 4 states where local sources provide less than $2,000 per student. Only 13.4% of public school funding in New Mexico comes from local sources, versus 43.9% average nation-wide.
What is the result of this displacement of local education funding by state and federal money? New Mexico ranks #42 in spending on classroom instruction, including teacher salaries and benefits, while landing much higher at #25 and #26 for spending on school and general administration respectively. Only 56.5% of public education spending in New Mexico goes to actual instruction, compared to 61% in the country as a whole.
When local communities, parents and property-owners, are directly funding their schools, they have a much stronger incentive to see their money spent where it counts. Clearly, this is a weakness in the financing of New Mexico’s public schools.

Single-Payer Cheaper than Current Health System?

05.24.2007

There has been a great deal of talk recently about health care reform in New Mexico, in part, because Governor Richardson is likely to dub the 2008 legislative session “the year of health care” and use the session to push for some kind of major health care reform.
The major proposals are known as the “Health Security Act” (single payer system), “New Mexico Health Choices” (taxpayer-subsidized vouchers), and the “Health Coverage Plan” (expansion of existing government programs like Medicaid). Specifics of all three are outlined on page 14 of this document.
With momentum building for some kind of reform, it was troubling to read that a firm known as Mathematica, which is studying each proposal, recently found that the single-payer plan would save taxpayers money. This drew a quick response.
I’m not going to judge the credibility of Mathematica before their final report is issued and I understand that the analyst made “heroic assumptions,” but Canada’s problems with single-payeer care are well-known and socialism has a rather poor track record in health care, not to mention the Soviet Union.
Rather than more government, what New Mexico needs is to peel back government involvement in health care. That may take more time than simply imposing a socialist model, but it is the only one that will work.

Income Inequality

05.23.2007

With all of the talk about increasing income inequality, particularly on the left, but also among politicians like President Bush, one might think that inequality simply follows the old race and geograpy pattern of wealth and poverty.
It turns out that the story doesn’t follow the old pattern and a new pattern is developing based on age. It turns out that far from the stereotype of old people living day-to-day on pensions and Social Security, older Americans are actually the wealthiest Americans (and they are getting richer every day).
Not surprisingly — as Mark Schmidt, my former colleague at the National Taxpayers Union pointed out a few years back — government policymaking plays a huge role here. Social Security, Medicare, and Medicaid are just a few of the most prominent of these massive programs that transfer wealth from young, productive workers to elderly retirees.
I’m not bashing grandma and grandpa here, but I am saying that Congress needs to do something to stem the tide of red ink. Unfortunately, politicians have been frightened for years by the spectre of angry old people rallying to vote them out of office.
The point is that the elderly are doing very well for themselves and policymakers need to reform and place strict eligibility limits on some of these programs (as I point out in this document) before it is too late.

Congressional Oil Impotence

05.22.2007

Gas prices are rising and the usual cry has arisen from Congress that something must be done. As Mr. Gessing pointed out, our own Rep. Wilson is sponsoring this very piece of legislation.
What, exactly, can Congress do about such apparent price gouging? One thing they can’t do is lower the price of oil per barrel; OPEC regulates that. Mandating a set profit margin or lower prices can only destroy profits and drive oil companies out of business. That certainly won’t drive prices down.
OPEC only supplies 40% of the world’s oil, yet they possess 75% of the world’s reserves. They show no signs of increasing their production in order to drive down prices. If they refuse to deal with this situation (since Congress can’t mandate them), then another solution must be found. Congress could consider the perennial topic of opening up our own massive untapped oil fields. From ANWR to the massive shale oil supplies in the West, Congress could do much to loosen what the President labels our addiction on foreign oil. In the interim, price gouging legislation is the first step towards eventually higher prices and increased dependence on the whims of OPEC.

Rep. Wilson Jumps on Price Gouging Bandwagon

05.22.2007

Congresswoman Heather Wilson has once again chosen to ignore basic economic principles in favor of trying to score cheap political points. The issue this time is “price gouging” legislation that she is sponsoring: HR 2335. While I can’t link to the bill text directly, you can read the bill for yourself by clicking here and entering “HR 2335.” Essentially, the bill sets up a series of regulations and fines, ostensibly for the purpose of preventing big, bad oil companies from taking advantage of us consumers.
Perhaps the ethanol mandate that Congress passed in the last energy bill is part of the problem? There’s also been a reduction in refining capacity which Congressional mandates have contributed to.
Instead of passing absurd “price gouging” legislation, Rep. Wilson and her friends in Washington need to look in the mirror for the real source of high gas prices. Wild goose chases after oil companies will only make matters worse.

Who Causes Inflation?

05.17.2007

An article in today’s ABQ Journal details the new John Adams Dollar Coin which goes into circulation today. Contrary to most people’s understanding of money, the U.S. Mint fervently hopes that people will start “collecting the coins.”
The article notes the flops of the Susan B. Anthony and Sacajawea coins while simultaneously explaining that “the U.S. Mint believes it has the right [marketing] strategy.” Critics have noted that the dollar bill works just fine when it comes to this issue, yet the U.S. Mint continues to try to promote unnecessary and expensive endeavours.
One cause of monetary inflation is an abundance of unnecessary money chasing fewer goods. When the government mints money for the sake of coin collectors, the value of the dollar drops as the amount of money flooding the market grows. Apparently this could total 900 million coins in the first year, yet no plans have been made to decrease minting the dollar bill. And we wonder why the Euro regularly outperforms the dollar. Turning money into a consumer product certainly won’t help things.

Ernst and Young: NM Business Taxes Among Highest in Nation

05.17.2007

Sure, the Rio Grande Foundation has been saying it for years: New Mexico’s tax burden makes the state a difficult place to do business. Now, the respected accounting firm Ernst & Young has reinforced those findings with a new study which shows New Mexico to have one of the heaviest business tax burdens in the nation.
The main culprit is the relatively heavy tax burden placed on business inputs by state and local government. Unfortunately, it is our gross receipts tax which is unique in the country for its high rates and broad base that cause this problem. I don’t know if the momentum is there on either side of the aisle for reform at this point, but changes are in order before the gross receipts tax gives New Mexico the heaviest business tax burden in the nation.

Helping the Poor

05.15.2007

E.J. Dionne had a recent column in which he outlined the findings from a new left-wing report outlining ways in which lawmakers can help the poor. As is so often the case, many of Dionne’s assumptions are way off base. First and foremost, he assumes that because inequality of incomes is greater that the poor are “falling behind,” when in reality we are actually much better off now than we were 20, 30, or 50 years ago.
Then, Dionne outlines several “reforms” like raising the minimum wage, increasing unionization, and helping 16-24 year olds get to work. Perhaps they would get to work if minimum wages didn’t prevent them from doing so, but the more likely culprit is our inadequate education system.
Anyway, the Rio Grande Foundation has its own ideas about how to reduce poverty; needless to say, they are quite different from Dionne’s.

No Reason for World Bank

05.14.2007

While the World Bank and opposition to its existence has long been a favored cause of the whacky left, ironically, this is one issue on which right and left can work together if not agree. As George Will points out, the Paul Wolfowitz scandal has drawn attention to the Bank, but what really needs to be brought to light is the colossal waste of money that the Bank really is.
The fact that both the World Bank and the International Monetary Fund are blatantly socialist organizations that hurt the very third world countries they are supposedly trying to help should give left and right enough ammunition to kill these institutions.

NM’s Education Pyramid Scheme?

05.12.2007

Mark Perry blogs about out-of-control retiree costs in Michigan public schools. My guess is that New Mexico faces a similar situation. Can anyone enlighten us on public school retirement formulae in NM?

Scorpions Having Trouble Attracting Fans to New Arena

05.12.2007

It seems that Albuquerque Mayor Marty Chavez has put plans for an arena on hold at least temporarily. As I pointed out previously, this is most certainly a good thing as the metro area already has more arena space than it needs.
That said, it is interesting to note that the New Mexico Scorpions minor league hockey team, despite having a succesful year on the ice, are deeply concerned about attendance numbers at their new digs in Rio Rancho. As long as the drive is out to the new arena, it seems a bit unlikely that the location is a real problem as plenty of other acts have, and continue to, sell out there. Regardless of the reason for the Scorpions attendance woes, it is hard to believe that any team Albuquerque could draw to a proposed 14,000 seat arena would have any better luck. If private investors spending their own money feel differently, then they have every right to move forward, but Albuquerque taxpayers should not foot the bill.

Why Prosperity Stops at New Mexico’s Border and How to Fix it

05.10.2007

Although the focus of this great new book is about the relative absence of prosperity in West Virginia, it could just as well be about New Mexico. The book is receiving lots of attention in WV. Maybe we could get the authors to write about New Mexico too, since it ranks right down there with WV and gets lots of attention in the book.
The first four chapters explain why economic freedom (rather than government) promotes prosperity. Chapters 5 thru 14 lay out specific policy measures that promote prosperity. Notice, however, that New Mexico has been doing just the opposite of what these scholars recommend — NM emphasizes playing favorites (chapter 8), does not emphasize tax competitiveness (chapter 5), does not reduce labor restrictions (chapter 10), does not quit punishing the working poor (chapter 11) and so forth.
This is a good read for those of you who want a better understanding of the relative weakness of NM’s economy. Hat tip: Professor Lawson at Division of Labour.

FCC Head Wants to Make Cable More Expensive

05.10.2007

The Chairman of the Federal Communications Commission, Kevin Martin, has waded into the debate over so called “a la carte” programming on cable television. What is “a la carte?” Essentially, the FCC wants to mandate that cable companies offer consumers the choice over what programming they do and don’t want to receive when they pay for cable (or satellite).
Of course, most consumers understand the concept of “bundling” of services and how costs can be driven down under such pricing schemes, but that is not good enough for the bureaucrats who regulate what we see and hear in the media. Worse, the FCC itself admits that an “a la carte” regulation would cost consumers even more money than they are already paying for these services.
If politicians want to cut costs, they might want to consider reforming video franchising at either the federal or state levels. Creating more competition, not government regulation, is the only surefire way to cut costs.

Global Warming

05.08.2007

As recently as earlier this year, I was willing to give the global warming crowd the benefit of the doubt and at least consider that reducing one’s “carbon footprint” might be a good thing. But alot has happened since then and I’ve been educating myself on the issue. Sometimes, given the “debate” going on in the mainstream media, it seems like this is what passes for debate.
This quiz is one creative way to dig deeper beyond the surface and figure out what you know about the issue.
Needless to say, while I recycle and drive a small car for my own reasons (recycling is REALLY easy and I’m cheap, so I like smaller cars) the hypocrisy of folks like Al Gore makes me wonder what his real agenda is….don’t give me any garbage about “carbon offsets,” you either live this stuff or you don’t. You can’t buy a clean conscience.
The thing that really makes me wonder is the longer perspective. We’ve had climate scares for generations (hot and cold), not to mention the malthusians who constantly harp on population and the supposed fact that earth simply cannot support more people, regardless of the fact that it continues to do so.

Dropping Out is Expensive, duh!

05.07.2007

A new national study analyzes the economic loss high school dropouts place on the economies of the 50 states. Not surprisingly, given its size, New Mexico suffers from a relatively heavy burden. In fact, the class of 2006 dropouts are expected to cost taxpayers $3.3 billion.
For some reason, although the study was released in January, the Santa Fe New Mexican failed to report the results until May and when they did, they gave $111 million as the economic loss of graduation. Strange…
More troubling is the fact that many of our elected officials actually believe that simply raising the dropout age will stop high school students from dropping out.
If New Mexico is serious about improving education results and cutting the dropout rate, perhaps we need to offer students and parents more choices when it comes to education? After all, only by forcing schools to teach and even compete to attract students can we break out of the current socialist education model.