Errors of Enchantment

The Feed

Taxpayer Rip-off in New Orleans

10.26.2006

As much as one doesn’t want to pick on the citizens of the Gulf Coast region, one might think that taxpayers and residents of the area would agree that we don’t want something like Katrina to ever happen again. Unfortunately, it looks like that is what federal taxpayers are in the midst of paying for — rebuilding in flood-prone areas.
Unfortunately, Congress has proven once again to be an inadequate steward of our taxpayer dollars. So, instead of reforms or, better still, the elimination of the National Flood Insurance Program which ultimately creates these perverse incentives, we’ll have aother Katrina-like storm in the future.

Wishful Thinking on Minimum Wage

10.25.2006

Perhaps you may have heard about the recent letter that was signed by some 675 economists who endorse raising the minimum wage from $5.15 an hour to $7.25. It would be nice if Congress could raise the income levels of working Americans with the wave of a legislative wand, but as Steve Chapman points out, these economists — yes, it happens to them too — have fallen prey to a bout of “wishful thinking.”
While New Mexico, because of its relatively high poverty and low wages, will hurt its low-income workers more than most states, the best thing about Congress’s decision not to raise the wage this year is that some states are raising their wages while others are not. Given time, those states that raise their wages the most aggressively will see a negative economic effect while others will escape harm. Allowing states to go their own ways is far better than a one-size-fits-all policy from Washington.

Cato Institute Releases Report Card on Nation’s Governors

10.24.2006

Many of New Mexico’s leading fiscal conservatives were quite upset when, in the 2004 Report Card, the Cato Institute gave Bill Richardson a “B” and called him “an aggressive tax cutter, the best Democratic Governor in the nation bar none,” and “one of the best new governors in the nation.”
Recently, Cato released its 2006 study of governors and, while Richardson only receives a “C,” Cato still lists him as the 9th-best Governor in the nation. What gives? For starters, despite all his shortcomings, Richardson is a net tax cutter based on his income and capital gains tax reductions. With all of the other governors out there raising taxes, Richardson is going to be seen in a favorable light on tax policy.
Spending is something of a different story. According to Cato: “Richardson’s budget proposals have grown faster each year, and the general fund budgets he signed into law between fiscal 2004 and 2006 have grown in total by a whopping 23 percent—almost five percentage points faster than population and inflation.”
We at the Rio Grande Foundation have been saying very much the same thing about Richardson’s spending record. If nothing else, hopefully his desire to play the part of a fiscal conservative and the reduction in oil and gas tax revenues will force Richardson to exert some fiscal restraint rather than raising taxes and further tarnishing his credibility as a “fiscal conservative.”

International Competitiveness???

10.22.2006

Often, much is made of America’s “economic competitiveness” with the rest of the world. Thomas Friedman’s book, The World is Flat made a big deal over whether Americans can “compete” in the world economy. Unfortunately, politicians from both the left and the right of the political spectrum too often harp on our “competitiveness” without fully explaining themselves.
Fortunately, that is why we have people like Paul Jacob to explain in just a few hundred words that we are not really competing against the Chinese or the French, rather we are all cooperating through the wonderful capitalist system to raise living standards in all nations that embrace free trade and economic liberty. In other words, rather than worrying aboiut what the Chinese or Indians are doing and whether they’re “catching up” to us, we should celebrate their gains and work to improve our our own country.

Ballot Measures

10.20.2006

Just in time for the upcoming election, the Rio Grande Foundation has put together its own guide to the ballot measures that voters will have the final say on. It is safe to say that the so-called “quality of life” tax hike is not the only vote likely to have a significant impact on taxpayers’ pocket books.
Although it is nice that politicians allow citizens to have the final say over some of these issues, it would be even better if New Mexicans could actually put items like constitutional tax and spending limits on the ballot rather than even more spending as the politicians seem to prefer.
If our ballot guide is not enough for you or you are interested in what voters in other states are voting on — four states will be voting on tax and spending limits — then be sure to check out the ballot guide put together by the National Taxpayaers Union,

Self Esteem No Help for Math Scores

10.20.2006

Self esteem is a good thing, but it doesn’t help American students with their math problems.
Six percent of Korean eighth-graders in a recent survey expressed confidence in their math skills, compared with 39 percent of U.S. eighth-graders. Yet an international math assessment showed Koreans scoring far ahead of their peers in the United States, “raising questions about the importance of self-esteem,” notes writer Jay Mathews in “For Math Students, Self-Esteem May Not Equal High Scores.”
With New Mexico students trailing behind the rest of the country and the country as a whole trailing behind much of the world, it is clear that big changes are needed here and in the American education system as a whole.

Bias at UNM Law School?

10.19.2006

Recently, on the pages of the Albuquerque Journal, there has been a debate over whether or not the law school at the University of New Mexico is biased to the left of the political spectrum. Asserting that there is rampant bias at UNM was Christina Hoff-Summers of the American Enterprise Institute while the Dean of UNM’s law school weighed in to assert that there is no bias at the school.
Unfortunately, conservatives who complain about bias at NPR, on PBS, and in the universities should realize that bias is inevitable at institutions that depend on government largesse for their existence. These people are not going to bite the big-government hand that feeds them and when it comes down to it, unless they say or do soemthing truly outrageous as the University of Colorado’s Ward Churchill did a while back, these people are pretty secure in their rather cushy jobs.
Perhaps then, libertarians and conservatives should agree to work together not to change the party identifications of those who are hired and fired at these government-supported institutions, but to privatize them entirely. Michigan and Virginia law schools are de facto privatized and even Berkely is considering the idea. How about it UNM?

Richardson Agrees: Tax Cuts In Order for New Mexicans

10.18.2006

We at the Rio Grande Foundation have had our share of problems with some of Governor Richardson’s economic policies, but we wholeheartedly agree with his recent assertion that tax cuts are in order here in New Mexico. That said, however, if the purpose of cutting taxes is economic growth, his narrowly-targeted proposal will have a negligible impact.
Instead, we suggest, as we have in the past, that Governor Richardson continue reducing the state income tax to the point of complete elimination. Blanket rate reductions are always better than narrowly-targeted tax cuts and reducing the top rate further would have a significant, positive economic impact.

New Mexico Needs Tax and Spending Limits

10.17.2006

The Rio Grande Foundation of New Mexico today published a study that once-and-for-all shatters the myth that Bill Richardson is a fiscal conservative and makes the case for Colorado-style tax and spending limits.
Among other facts brought to light:
Governor Richardson is not just a bigger-spender than former-Governor Gary Johnson, but he is the biggest spender relative to the growth of inflation and population among the last four New Mexico governors (2 Republicans and 2 Democrats);
The average personal income of a New Mexican is approximately $10,000 less than that of the average Coloradoan;
New Mexico not only receives more taxpayer dollars from Washington relative to what its citizens pay in taxes than any other state (yes, we even beat out Alaska), but New Mexico also has more state and local employees per capita than any state but Alaska and Wyoming.
Only by giving taxpayers greater control over tax and spending decisions can New Mexico achieve its full potential.

Vouchers Encourage Integration

10.16.2006

A tip of the hat to Arwynn Mattix with the Goldwater Institute for this posting.
According to the National Education Association (NEA), “A pure voucher system would only encourage economic, racial, ethnic, and religious stratification in our society.” One wonders how the NEA could reach this conclusion when both the Milwaukee and Cleveland voucher experiences show otherwise.
Rather than encourage stratification, these voucher programs lead to even less segregation, according to two recent reports by the Friedman Foundation. Private schools participating in the programs were found to be 13 to 18 points less segregated than their public school counterparts.
Because students are assigned to public schools based on where they live, there is a significant risk that schools will reflect the racial and economic segregation of neighborhoods. But, “Private schools have more potential to break down geographic barriers, drawing students together across neighborhood boundaries,” explains Greg Forester, author of the reports. And, with the help of vouchers and tuition scholarships, private schools become affordable for more families, eliminating the financial obstacle to private school.
If “America’s success has been built on our ability to unify our diverse populations,” as the NEA claims, then doesn’t their anti-voucher position block the way to an even more successful America?

Gangster Politicians

10.13.2006

Check this video on eminent domain out. The sad thing is that gangsters’ views of our property rights are little different from those of our political leaders. Worse still for New Mexicans, while this video was made by a Nevada group supporting an initiative that will be on the ballot to protect property owners this fall, we don’t have the citizen initiative and must rely on Governor Richardson and others to pass necessary protections.

NM College Freshman not Ready

10.12.2006

Given New Mexico’s poor track record on K-12 education, it is no surprise that many of the students entering New Mexico colleges and universities are ill-prepared. But, as the Albuquerque Journal editorialized on Wednesday, it is shocking just how unprepared students are. According to the editorial, “High-performing states have 64 percent of students in upper-level math classes and 40 percent in upper-level science, New Mexico has 35 percent and 21 percent.” The study, which includes a table indicating that New Mexico students receive an “F” in preparation and “D” in completion of their college educations is available here.
The problem here is two-pronged, but in both cases it is caused by government: 1) The simplest way to address student unpreparedness is to reform the K-12 monopoly and put parents back in charge of their child’s education. Only this accountability will cause educational outputs to improve because nobody cares as much about kids as their parents. 2) Rather than using oil and gas revenues to subsidize college tuition for New Mexico students, our colleges and universities need the freedom to adopt real standards and be able to go after the best-qualified students. A merit-based system, not gussied up welfare, will make our higher-education system world class and will force New Mexico’s students that want to go to college to improve their achievement.

Taxpayers’ Asserting their Rights Nationwide

10.11.2006

After last year’s much-publicized battle over Referendum C and Colorado’s Taxpayers’ Bill of Rights, the conventional wisdom among the media was that the movement to create constitutional protections for taxpayers was dead.
Nothing could be further from the truth. In fact, voters in Maine, Montana, Nebraska, and Oregon, will decide this November whether to adopt their own versions of Colorado’s Taxpayers’ Bill of Rights. Although New Mexico does not have the initiative and referendum process available to its constituents as these other states, the Rio Grande Foundation is working to start the discussion on a similar measure for New Mexico in the upcoming legislative session. Check back soon for information on the need for such taxpayer protections.

The Parade of Wishful Thinkers Lengthens

10.09.2006

It’s not just the governor. Now Bernalillo County is considering a new minimum wage law:

The county proposal, calling for a minimum wage of $6.75 per hour on Jan. 1, will be formally introduced Tuesday at a County Commission meeting.
It will be sponsored by Alan Armijo, chairman of the commission. He said it makes sense to have the same minimum wage beyond the city limits.
“We’re part of this community and need to be consistent,” he said.
After starting at $6.75, the minimum-wage figure would increase to $7.15 the following year, and to $7.50 on Jan. 1, 2009— just like in Albuquerque.

In response to a similar proposal in Missouri, David Neumark (a leading scholar in the field of labor economics and professor of economics at Cal-Irvine) has recently discussed the minimum wage debate in terms non-economists can understand. Here is part of his summary:

The evidence from a large body of existing research suggests that minimum wage increases do more harm than good. Minimum wages reduce employment of young and less-skilled workers. Minimum wages deliver no net benefits to poor or low-income families, and if anything make them worse off, increasing poverty. Finally, there is some evidence that minimum wages have longer-run adverse effects, lowering the acquisition of skills and therefore lowering wages and earnings even beyond the age when individuals are most directly affected by a higher minimum.

It would be nice if our wishful thinkers would consider these economic realities.

The Gasoline Price Conspiracy

10.05.2006

Here is my LTE to ABQ Journal in response to yesterday’s LTE by Chuck MIttlestadt:
Chuck Mittlestadt’s letter to the editor of October 4 alerts us to the big oil—Bush administration “conspiracy” to drive down gasoline prices just before the election. After this “political ploy to influence your vote,” according to Mr. Mittlestadt, you should not be “upset when it zooms back well over $3 a gallon right after the votes are counted.”
As I reread Mr. Mittlestadt’s letter I wonder if it is meant to be satire. But assuming it is not, let me point out how Mr. Mittlestadt and others confident of the “conspiracy” theory of gasoline prices can profit at the expense of the conspirators and their fellow travelers. The December contract for unleaded gasoline futures is currently trading at roughly $1.50 per gallon on the New York Mercantile Exchange. All Mr. Mittlestadt needs to do is max out a long position in December unleaded gasoline futures. The exchange limit is 5000 contracts, and each contract represents 42,000 gallons. Do the math: Mr. Mittlestadt can go long for 210 million gallons of gasoline (all that is required is that he put aside little margin in case of an unexpected price drop). If the post election price zooms up by a mere 50 cents per gallon, he will be $105 million richer!
I eagerly await the arrival of December to hear Mr. Mittlestadt and other conspiracy theorists crow about their new riches and the lesson taught to those greedy conspirators.
HARRY MESSENHEIMER, Ph.D.
RIO GRANDE FOUNDATION
Update 10/6/06: Check out Coyote Blog for more insights. There is a nationwide letters-to-the-editor campaign being put on by the economic ignoramuses.

A Picture Is Worth…

10.02.2006

As Harry pointed out, New Mexico’s ranking for economic freedom among US states and Canadian provinces is quite dismal. New Mexico always seems to stand out on a map:

Not so pretty, is it?

Don’t Try Drowning Your Sorrows

10.02.2006

New Mexico was near the bottom of the recent rankings of states and Canadian provinces:

New Mexico
New Mexico’s climate for economic freedom has worsened steadily over the past
two decades, to the point that, by 2003, its overall all-government ranking was 50th,
while the subnational fell to 47th after five straight years at 44th. Size of government
helped sink the overall ratings, coming in at 56th all-government and 53rd state and
local. Takings and taxation provided no help, coming in at 48th all-government (in
free fall since finishing 13th just three years earlier) and ranked 48th subnational. In
the labor market freedom area, New Mexico was ranked 41st and 40th. At 10.1%, its
state and local tax burden is well above average, unlike the gasoline tax at 17¢, which
is below average. And don’t try drowning your sorrows; all three alcohol-related
taxes are among the highest in the nation.

Would you rather work for $5.15 an hour or be unemployed at $7.50?

10.01.2006

Today I was doing some research on economic freedom and uncovered this 1970 gem by Leo Rosten:

Fenwick and a friend of mine from Washington, a sociological Meistersinger named Rupert Shmidlapp, were talking about minimum wages, which Congress had just voted to raise from $1.25 an hour to $1.40—and ultimately to $1.60. Fenwick stunned Shmidlapp, whom I had forgotten to brief in advance, by mournfully remarking that the minimum-wage laws would of course create unemployment, and that these particular laws would wreak havoc precisely among those unskilled workers (Negroes, teenagers, Puerto Ricans) they were supposed to help.
“What?” gulped Shmidlapp.
“To begin with,” said Fenwick, “the American wage-earner today gets twice $1.40 an hour, so the bill is not going to affect him——-”
“The bill is designed to help the unskilled and the undereducated,” retorted Shmidlapp.
“An admirable intention,” beamed Fenwick, “because a tragic proportion of that group is unemployed. But if employers aren’t hiring them at $1.25 an hour, is there any reason on earth why they will hire them at $1.40?”
I poured a stiff drink for Shmidlapp.
Fenwick continued: “Surely the unemployed will have less chance of finding a job under the new, higher minimum-wage laws than they had under the old.”
“What?” cried Shmidlapp. “Can you prove that?”
“Yes,” said Fenwick. “Every time minimum wages have been raised, the ratio of unemployed teenagers has risen— and mostly among Negroes and Puerto Ricans, who are the teenagers it seems absolutely insane, if you look at the crime rate, to force onto the streets with nothing to do! … Don’t you agree that every time you raise the minimum, you must push more unskilled or inexperienced or poorly educated or discriminated-against workers onto the unemployment and relief rolls?”
Instead of repairing his fences, Shmidlapp attacked on the flanks. “What about the greedy employers,” he demanded, “who cruelly exploit their workers by not paying them enough to live on?!”
A twinge of pain crossed Fenwick’s boyish features. “Oh, very, very few employers can hold on to their workmen if they pay them less than the workers can get elsewhere.”
“It isn’t what they can ‘get,’ it’s what they’re worth!” Shmidlapp thundered.
“Only God can decide how much a man is ‘worth,’” sighed Fenwick. “Let us consider the best wage a man can get— for his labor, services or talent——”
“Some men just can’t live on that! Or feed and clothe their children! Or pay their medical bills!” This was Shmidlapp at his best.
“We certainly ought to remedy that,” said Fenwick. “No American who wants to work should go hungry because of the objective (and therefore efficient) forces of supply and demand. Let us by all means give and guarantee the poor a minimum income; that does far less economic and political damage than a minimum wage. A minimum income does not discriminate against the black, the illiterate, the inept——”
“Do you mean to stand there and tell me”—Shmidlapp was too agitated to notice that Fenwick was sitting, not standing— “that no workers are actually helped when Congress raises the minimum wage? !“
“Oh, some workers will have their wages raised from $1.25 to $1.40 an hour,” said Fenwick, “but far more will not get a job they might have gotten at $1.25! And fewer teenagers and Negroes will get on-the-job training, which they desperately need. It is just too costly to train them at $1.40, much less $1.60 an hour—especially for skills that take long training periods. This makes a raise in minimum wages absolutely heartless,” mourned Fenwick. “It prices decent, innocent, willing workingmen right out of the labor market!”
“Then why does Congress pass such laws?” shouted Shmidlapp.
Fenwick blinked. “Are you suggesting that Congress never passes foolish or short-sighted——”
“I am asking why, if minimum wages are so goddam stupid, far-sighted humanitarian leaders like Lyndon Johnson and Hubert Humphrey and Governor Rockefeller support them?!”
“Politics,” chuckled Fenwick. “Or innocence. Or ignorance. Or all three. Politicians and labor leaders get a lot of public credit for raising wages, and considerable private satisfaction in imagining all the good they have done.”
“I happen to know that many business leaders, Republicans and conservatives, favor minimum-wage legislation!” swooped Shmidlapp.
“Of course they do. They can be just as wrong, ignorant, or selfish as anyone else,” said Fenwick. “Many of them are manufacturing products in the North——”
“What does geography have to do with it?” demanded Shmidlapp.
“Well, northern manufacturers are delighted to force up their competitors’ costs in the South; in that way, businessmen in the North won’t have to face the desirable effects of that free-enterprise system conservatives and Republicans love to extol.”
“But opinion polls show that the public——”
“The public,” sighed Fenwick, “is not well-informed about economics, and will pay for its innocence. Increased minimum wages lead to increased costs, which lead to higher ……… Then many honest, low-wage earners in the South (where the cost of living is lower; which is one reason wages there stay lower) will become disemployed. And many more of the young and no-skilled, in Harlem no less than Dixie, will remain more hopelessly unemployed than they already are.” Fenwick regarded Rupert Shmidlapp innocently. “Tell me, honestly: Would you rather work for $1.25 an hour or be unemployed at $1.40?”

Can you guess who Fenwick might be in real life?

All Aboard Mayor Marty’s Crazy Train?

09.27.2006

Last night, I attended one of the City of Albuquerque’s meetings on Mayor Chavez’s so-called “Modern Streetcar Project.” It wasn’t so much a meeting involving give-and-take between community leaders and residents as it was a sales pitch from the City’s Transit Department and the HDR Company which will manage the project.
There was a 30-minute powerpoint presentation and a Q & A session, which did feature lively debate, but the only elected official who actually showed up, Councilman Heinrich, left immediately after making a short introduction. Most of the attendees appeared skeptical of the $224 million project and justifiably so. Although this meeting was designed to convey the sense that this project is a “done-deal,” information on expected ridership numbers, operating costs and subsidies, fares, and operating hours was in short supply.
A few things struck me as particularly troubling:
First and foremost, Heinrich and others constantly compared the $224 million streetcar to the Big I interchange reconstruction which cost $230 million to complete. There is no doubt that the Big I carries exponentially more people and goods than the streetcar will ever carry.
Secondly, while the Mayor’s trolley will be paid for by all taxpayers whether they ride or not, the Big I was largely paid for by motorists and truckers themselves through gas taxes and other fees. There simply is no comparison between the two projects as far as importance to the community is concerned.
Lastly, the people pushing this project say Portland is supposed to be our model. Unfortunately, that just doesn’t hold up to scrutiny. Albuquerque is only 60 percent as dense as Portland and Albuquerque’s metropolitan area has only 40 percent as many people (797,000 as compared to 2 million).
I’m really only scratching the surface of the arguments against this and other rail projects, but as was made clear last night, we won’t have a chance to vote on this. Pressuring City Council to oppose this boondoggle is the only way to stop it.

Politics of the Living Wage in Chicago

09.27.2006

Here is interesting commentary by Robert Novak on death of the living wage in Chicago. It looks far from over, however. Wal-Mart and Target still face enormous risk of political takings in Chicago.