If you caught Paul’s appearance on The Line last night, the discussion on government incentives to attract businesses to the state was especially useful. When a business is looking to locate in the Southwest, New Mexico is in competition with its neighbors. Two chief strategies come into play in this competition. States can either 1) create a business-friendly environment through low taxes, unobtrusive regulations, and protection of private property, or 2) use high taxes and an active government to bribe favored companies.
According to an index developed by the Pacific Research Institute, New Mexico ranks 37th in the nation for economic freedom, based on a number of indicators in the fiscal, regulatory, and judicial policy sectors as well as government size and state welfare spending. A color map is available, but New Mexico’s situation stands out most clearly in black and white:

That big dark blip in the middle of the Southwest, that’s us. Here’s how New Mexico compares to its immediate neighbors.

While its neighbors have generally proceeded with the first strategy, fostering economic development through economic freedom, New Mexico has stood out in its zeal for the tax-and-bribe approach.
Has this been a successful strategy for New Mexico? As Harry pointed out last week, New Mexico lags behind its neighbors in private sector generated income. Indeed, most economic comparisons with neighboring states are unfavorable.
With taxes from the oil and gas industry filling the state coffers, New Mexico is in a good position to create a climate more friendly to all business in the state, not just to a handful of bureaucratic favorites. Give home-grown businesses a better chance, and the entire state will be more attractive to outside investors and entrepreneurs.
In case you missed it, KNME will rebroadcast The Line Sunday at 6:30 am.

Once again political opportunism and economic ignorance are likely to hurt low-wage workers. Two leading economists are now scrambling to reduce the unhealthy part of the ultimate outcome.
Update: Check out this economically literate commentary by Don Boudreaux.
BTW, I wonder how NM’s reps will come out on this? Stay tuned.

Want to be enlightened on a wide range of issues? Check out this interview with Milton Friedman.

Did you know that the striking of one match emits sulfer dioxide, a poisonous gas more dangerous than one single cow flatulation? And at my age it requires a lot more than one match to light all the candles. Now we can make a difference! Find out how here.
HT: Division of Labour

The latest round of Congressional ratings on fiscal issues have been published and New Mexico’s representatives in Washington again receive low marks. In the 2005 ratings published by the Club for Growth, Representative Stevan Pearce scored the highest in the House with a ranking of 172 out of 435, while Senator Domenici was our highest-ranking Senator at 41st.

When the Bureau of Economic Analysis released its per capita income data for 2005 it looked at first like there might be some good news. The release emphasizes changes in per capita income from 2004 to 2005. And, while New Mexico continues to be near the bottom of the income rankings, its growth was in the top 25 percent (12th out of 50). That seems like a good reason for celebration, right? Wrong!
The reason we should not celebrate is income growth was disproportionately for state and local government and welfare payments. In fact, New Mexico had the highest yearly growth of income for state and local government in the nation! Here is how NM government growth compares to states in the region:

For yearly growth rate of welfare NM was 7th in the nation, and it would have been higher had we not been muscled out by the hurricane ravaged states. Here is how NM compares to states in the region:

Netting our the disproportionate effect of government and welfare growth on per capita personal income from 2004 to 2005, we see that New Mexico is lagging behind other states in the growth of private sector generated income:

So there you have it. Prosperity is generated by private sector growth and not by reliance on government — just the opposite of what the trend is in NM compared to other states.

My view is that stem cell research has the potential to improve our lives significantly. Yet I hope the president follows through on his veto threat. My reason:

By its very nature, government politicizes everything it touches. Science is no exception. Stem cell research needs neither government money nor politics. It is better is to get the government out and let the private sector continue its good work. Those people calling for increased funding could take out their checkbooks and support it. Those who oppose embryonic stem cell research would not be forced to pay for it.
Michael Tanner

Of course the same thing could be said for just about everything the government forces you (the taxpayer) to fund. By the way, if popular support of stem cell research is mirrors congressional support for it then we should see a lot of voluntary contributions to it. My guess is that most stem cell research already qualifies for some government sponsorship because of tax deductibility to those private organizations conducting it.

It’s always nice to discover a new, well-written defense of liberty. Check out this blog by economist Jeffery Alan Miron.
HT: Newmark’s Door

Governor Matt Blunt (R) in Missouri has signed legislation restricting use of eminent domain. His bill is particularly good in that it bars the taking of private property solely to increase taxes or create jobs; It explicitly rejects the Supreme Court decision Kelo v. New London; and it increases the compensation for seized homes from market value to a premium level (since clearly the owners did not want to sell and value their homes above the market clearing level). It also provides additional tools for homeowners to fight with in court and a “Property Owner’s Bill of Rights” to educate those faced with a possible eminent domain seizure.
Good for Missouri. Now lets demand the same in New Mexico!

Economic growth depends on division of labor. Division of labor depends on freedom of trade. Freedom of trade depends on, in the words of Adam Smith, “the obvious and simple system of natural liberty.”
So writes P.J. O’Rourke in a column for the Weekly Standard about Adam Smith’s lesser known book, The Theory of Moral Sentiments. If the economic system in America depends on liberty, should we not imagine that it is moral? But we don’t. And very few even understand why it works.
How could tax cuts actually lead to higher tax revenues? Taxes discourage productive work and move investment from the private to the public sector – reducing taxes leads to higher private sector growth, higher wages and higher profits – which, taxed at the lower rate, still bring in more tax revenue. It is so simple, but it means thinking about the economy over time, as a dynamic system, not as a static state. This is something that many economists forgot after Smith.
So, as some politicians preach morality in anti-market economics, saying that “we need to do right by hard-working Americans and raise the minimum wage,” rational thinking men should re-open their Adam Smith texts and remember the morality of markets. As other states push through higher minimum wages, New Mexico should steadfastly refuse to make the same mistake. The simplistic thinking of minimum wage advocates reveals itself in absurd hypocrisies – such as advocates of minimum wage hikes asking to be exempt because it would cause the same layoffs that they claim the minimum wage doesn’t cause!
Instead, New Mexico should lower taxes, encourage business and wage growth, and take pride in our moral and free market system.

NCPA has just rolled out its new Medicaid Reform Service Center. New Mexico needs to take notice.

Not only is ethanol inefficient, it also adds to polution. Find out how here.

A recent Albuquerque Journal story discusses a study by the national Foundation for Child Development in which full-day pre-kindergarten is recommended for all 3 and 4 year olds. New Mexico’s new and controversial half-day pre-K program was deemed “inadequate” by the Foundation.
I’m not sure if this foundation is funded by the teacher unions or not, but I can’t think of a more effective way to create jobs for public school teachers than allowing the state to get its hands on your kids even earlier. Of course, other studies have found that starting kids even earlier in school to be costly and ineffective boondoggles.

Clearly, the so-called experts are moving quickly towards mandatory in-the-womb schooling at some point. This will clearly create a conundrum for the National Education Association which is adamantly pro-choice.

While New Mexico’s state government gears up to build a spaceport, Space.com reports on a similar endeavor underway next door in Texas.
Both projects were initiated by brazen billionaires, Virgin’s Sir Richard Branson seeking to launch his Virgin Galactic in Southern NM, and Amazon.com’s Jeff Bezos and his Blue Origin setting up in West Texas. Both are supposedly private endeavors, with private companies and investors seeking to make a profit through space development.
The difference? Blue Origin is building its launch site with private funds, on private land, while billionaire Sir Richard Branson is taking advantage of the relatively poor New Mexico taxpayer, conning Bill Richardson and the New Mexico Legislature out of $100 million in public funds, plus a sizeable chunk of public land.
We’re told that a billionaire needs our hard-eared tax dollars for “economic development,” while at the same time we’re asked to forget about the negative impact on economic growth of high taxes and reckless spending by the state government. Given the Texas economy outperforms NM in almost every measure, it’s clear which approach works better.
Low taxes and limited government lead to real economic development, not welfare for billionaires.

This Fourth of July, let us respect all of the rights enshrined by the founding fathers. Just as important – but often respected much less – as the right of freedom of speech, freedom of worship, and suffrage, is the right of property.
In fact, it is an even more basic right than many that we hold to higher esteem. The fundamental, inalienable rights of man are: life, liberty and property.
This Fourth of July when we remember our country and our freedom and our constitutionally protected rights, let us reflect on why this right of property is so important. In the words of our founding fathers:
“Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own.” – James Madison
“To take from one because it is thought that his own industry and that of his father’s has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association–‘the guarantee to every one of a free exercise of his industry and the fruits acquired by it.’” –Thomas Jefferson
Let us also remember that this recognition – that only the protection of property rights can allow for the protection of freedom – was confirmed by the end of slavery in our country and by the new enslavement of the people in countries which abolished property rights.
As declared by the Great Emancipator himself:
“One of the reasons why I am opposed to Slavery is just here. What is the true condition of the laborer? I take it that it is best for all to leave each man free to acquire property as fast as he can. Some will get wealthy. I don’t believe in a law to prevent a man from getting rich; it would do more harm than good. So while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else.
When one starts poor, as most do in the race of life, free society is such that he knows he can better his condition; he knows that there is no fixed condition of labor, for his whole life. I am not ashamed to confess that twenty five years ago I was a hired laborer, mauling rails, at work on a flat-boat—just what might happen to any poor man’s son! I want every man to have the chance—and I believe a black man is entitled to it—in which he can better his condition—when he may look forward and hope to be a hired laborer this year and the next, work for himself afterward, and finally to hire men to work for him! That is the true system….” – Abraham Lincoln, 1860
Let us remember who we are not. We are not a collectivist society – where property is not a right but a crime and where poverty replaces prosperity and bondage replaces freedom. As the Virginia Institute explains here, it is this loss of private property which destroys the free society.
So, this Fourth of July, let’s rejoice in our right to property and our freedom. And let us not forget to protect them when they come under attack.

As those who regularly visit the Rio Grande Foundation’s main website may be aware, New Mexico’s fiscal year ended on June 30. The end of the fiscal year means that the Foundation’s spend-o-meter cycles back to zero. By this time next year, the state will have spent $12.6 billion.
A recent story in a new, New Mexico-oriented online publication known as The Citizen explored the issues surrounding government spending in New Mexico and how the spend-o-meter helps New Mexicans keep track of how their money is spent.

We are so fortunate to be blessed by such a heritage: “And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.”

This report should be of particular interest to New Mexico. You may be surprised to learn of the history of property rights among Native Americans. If you are a regular reader of this blog and Rio Grande Foundation reports, you will not be surprised to learn that the existence of well-defined property rights and economic freedom have at times led to prosperity for Native Americans.

The Rio Grande Foundation doesn’t take a position on smoking, but we do have a few things to say about government officials twisting the truth. I just knew this was the case when the U.S. Surgeon General came out and stated “The debate is over! Secondhand Smoke Kills!”
Of course, no new evidence was given to buttress the argument and the lapdogs in the media didn’t bother to ask, so it was all dutifully taken as truth with few questions asked. That’s why we have people like Michael Fumento to take a look behind the smokescreen.

As usual, the best solution to smoking is to let the free market decide. Let entreprenuers decide whether to allow smoking or not and let individuals decide whether to patronize them.

I notice that the law of demand reflects reality. When the price of something goes up people buy less of it; and when the price goes down people buy more of it. Why do “progressives” want to suspend this reality in the case of wages? Read Don Boudreaux’s excellent description of reality, including why he is not an “ideologue” when it comes to minimum wage laws.

New Mexico gets $2 back for every $1 in federal taxes paid, according to the Tax Foundation. It’s not because the state demands more from the federal government that other states like New Jersey which receives about 55 cents back for every $1, it is because of the progressive income tax. New Mexicans are poor and the federal tax structure provides the Earned Income Tax Credit and other negative income taxes to help the poor.
New Mexico, as of 2002-2004, had a rate of poverty as defined by the US Census of about 17%, among the highest in the country.
But is the progressive income tax the best way to help out poor New Mexicans? According to a new study reported by the Heritage Foundation the cost to the private sector of providing the government an additional $1 in tax revenue is about $2.50 not $1 as many people assume. So, the redistribution of tax money from the rich – who may live outside New Mexico or within – to the poor, costs jobs, growth, wages, opportunity and innovation of 2.5x the amount actually taxed and redistributed.
Although the progressive tax structure is supposed to help the poor, a low flat tax and smaller government would mean much greater economic growth, the only proven way to lift the poor out of poverty. Aid to developing countries has done little to nothing to alleviate poverty, while policies of growth have lifted millions each year out of poverty – why not help the remaining impoverished within the US in the same way?

If you are in need a thin smear of rhetorical mush today, then look here.

There is a debate going on within the Republican Party that makes me want to hold my nose. Unfortunately, I may soon have to hold my tongue.
Kudos to George Allen for standing up for free speech.

In case you missed it, the Rio Grande Foundation got some nice ink in the Albuquerque Journal relating to our rally marking the one-year anniversary of the Kelo decision.
Whether Governor Richardson’s commission succeeds in finding a solution that secures our individual property rights or whether John Dendahl pulls an upset and pushes legislation through the legislature next year, we hope that this will be the last time New Mexicans are forced to mark this dreadful Supreme Court decision.