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.

President Bush celebrated the first anniversary of the Supreme Court’s Kelo decision with an Executive Order, basically restating the Fifth Amendment to the US Constitution. By the President’s order, private property is now protected by:

limiting the taking of private property by the Federal Government to situations in which the taking is for public use, with just compensation, and for the purpose of benefiting the general public and not merely for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken.

It’s absurd that the Fifth Amendment needs repeating, especially to certain Justices whose reading comprehension is diminished in the presence of our founding documents.
We’re still at the mercy of state and local government land grabs, but I guess we’re not supposed to worry about the Federal government, at least until January, 2009, when our next chief executive may have other orders in mind.
Our government was founded on the principle that individual rights are not subject to the whim of any one man or government body. They are not granted to us by government, but inherent in our very existence as sentient beings. We should demand a government that holds our Constitutional rights as inviolable, not feel grateful for whatever meager scraps of rights a government official is willing to indulge.
The President’s Order is an insult. His oath of office would be better served by leading a movement to impeach those Justices who rule in clear violation the US Constitution.

Speaking of the failure of New Mexico to protect the cornerstone of liberty, there is a new book out. In Cornerstone of Liberty: Property Rights in 21st-Century America, a new book published today by the Cato Institute, Timothy Sandefur, a staff attorney at the Pacific Legal Foundation, examines the state of property rights after Kelo.

Today marks the 1st anniversary of the Supreme Court’s Kelo decision. It was such a bad interpretation of the constitution that it makes you wonder what they were smoking.

Property rights are the cornerstone of the liberty that has made us so prosperous. Paul is leading an event today that calls attention to New Mexico’s subsequent failure to protect those property rights.
Thanks to Robin for the graphic.

Should New Mexico replace the state income tax with an immigrant tax?
No country can let in an infinite number of immigrants. And, if we allow immigrants to take advantage of public schools, welfare, social security and Medicaid, it will cost us a lot. Tech Central Station has come up with a strategy: tax the immigrants. According to the plan, each immigrant must put the dollar amount necessary to pay for his own deportation into an account; if he is ever unable to support himself, the money will be used to pay for his removal; in addition other taxes are levied on his wages that don’t apply to citizens. This way we could be sure that there is no drain on the economy of taxpayer funded programs and instead immigrants create more revenue.
Why not replace some current taxes with a tax on immigrants? Nobody can argue against a tax refund for all citizens. In any case, it is an interesting and innovative idea for an old and sometimes divisive problem.

I have signed on to the following open letter on immigration. The only thing I could add is that our inefficient and ineffective welfare system tends to reduce the benefits of immigration while enabling the “misguided commentary.” Look here to find the many distinguished scholars who signed the letter. Thanks to Alex Tabarrok for putting it together.

Dear President George W. Bush and All Members of Congress:
People from around the world are drawn to America for its promise of freedom and opportunity. That promise has been fulfilled for the tens of millions of immigrants who came here in the twentieth century.
Throughout our history as an immigrant nation, those who were already here have worried about the impact of newcomers. Yet, over time, immigrants have become part of a richer America, richer both economically and culturally. The current debate over immigration is a healthy part of a democratic society, but as economists and other social scientists we are concerned that some of the fundamental economics of immigration are too often obscured by misguided commentary.
Overall, immigration has been a net gain for American citizens, though a modest one in proportion to the size of our 13 trillion-dollar economy.
Immigrants do not take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.
In recent decades, immigration of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to have been small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent.
While a small percentage of native-born Americans may be harmed by immigration, vastly more Americans benefit from the contributions that immigrants make to our economy, including lower consumer prices. As with trade in goods and services, the gains from immigration outweigh the losses. The effect of all immigration on low-skilled workers is very likely positive as many immigrants bring skills, capital and entrepreneurship to the American economy.
Legitimate concerns about the impact of immigration on the poorest Americans should not be addressed by penalizing even poorer immigrants. Instead, we should promote policies, such as improving our education system, that enable Americans to be more productive with high-wage skills.
We must not forget that the gains to immigrants coming to the United States are immense. Immigration is the greatest anti-poverty program ever devised. The American dream is a reality for many immigrants who not only increase their own living standards but who also send billions of dollars of their money back to their families in their home countries—a form of truly effective foreign aid.
America is a generous and open country and these qualities make America a beacon to the world. We should not let exaggerated fears dim that beacon.

Today’s Albuquerque Journal reports on HB80, Equitable Sentencing Schedule, which among other things doubles the threshold at which shoplifting becomes a felony from $250 to $500. This bill was passed during the 2006 legislative session and is set to go into effect on July 1.
The bill’s sponsor, Hector H. Balderas (D), argues the change is necessary to keep up with inflation, one of the chief tools in the belts of those seeking higher minimum wages at the local, state, and federal levels. Professional shoplifters will now be able to steal just under $500 at a time to avoid a felony arrest, instead of the presumably inadequate bundles of grifted goods available today. I guess even Jane’s Addiction needs to make a decent living.
But it’s certainly not good for New Mexico retail businesses and their law abiding customers. According to the Online Lawyer Source:

The consequences of shoplifting cause one third of all new businesses to fail. Businesses lose sixteen billion dollars annually in lost revenue as a result of shoplifting. In addition to lost profits, the consequences of shoplifting also force businesses to raise prices and take other costly preventative measures to reduce their vulnerability to shoplifting… The average family in America spends $300 every year in order to subsidize the cost of what shoplifters steal.

So who does benefit, beside those employing the five-finger discount ? Following the nail-bitingly close presidential election in 2000, Richard Romero’s 2001 Restoration of Felony Voting Rights act allowed an estimated 50,000 convicted felons to return to the polls after completing their sentences, and passed after:

Every Democratic member of both the House and the Senate received copies of a study in progress which demonstrated that Democratic defeats in several close elections in various states could be attributed directly to felony disenfranchisement.

Apparently, removing some shoplifters from the voter rolls during the maximum 18 month sentence for a fourth degree felony conviction is too much a burden for the state’s politicians to bear, especially with mid-term elections coming up. Maybe this post should be titled “The Voting Rights Act for Shoplifters.”
Lawmakers should concentrate on protecting the property of the state’s businesses and providing a secure environment in which residents can engage in mutually-beneficial trade. Easing the lives of criminals, and their voter eligibility, in order to maintain entrenched political power is as perverted as special interest politics can get.

It looks like California may be the next state to succumb to “minimum wage madness,” only this time, the Governator, supposedly a big fan of Milton Friedman and his book “Free to Choose” looks to be in on the plan to not only raise the state’s minimum wage, but to index it to inflation. In “Free to Choose,” which was published in 1980 when the federal minimum wage was much higher relative to wages, Friedman wrote “The high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest. Yet it is largely a result of minimum wage laws.”
New Mexicans can’t do much about California’s misguided politicians, but perhaps we should all send our legislators copies of Friedman’s book?

The latest Weekly Alibi features the chilling tale of the Crematorium that nearly killed the Cultural Center.
Bryan Arndt, property owner, made the grave mistake of leasing a lot to Charlie Finegan, business owner–New Mexico Mortuary Service and Riverside Funeral Home, to be exact. Finegan sought to expand his business, creating jobs and new tax revenue for the city, by building a new crematorium.
But the Chinese Cultural Center across the street had a problem with this private business transaction. To its owners, explains the Alibi:

It’s about feng shui, the Asian art of placement that aims to create positive, flowing energy, promoting health and balance. Having the energy of death from the crematorium flowing into their space would wreak havoc on the positive energy they’ve spent years producing.

City Council President and Ethnoscientist Martin Heinrich explains: “Zoning was created to prevent conflicts like this.”
Mayor Martin “powerful tool” Chavez joined the fight, quickly forcing the city planning department to revoke their approval of Finegan’s plan.
“There’s nowhere to move,” complained one of the Cultural Center’s owners, while insisting the mortician do just that. Finegan did find a new location, which he’s as yet keeping secret to avoid threatening someone else’s chi.
So Albuquerque entrepreneurs are out tens of thousands of dollars, with private property rights one step closer to the ideological crematorium. But that’s okay because the Parkland Hills neighborhood is safe from “death energy,” an outcome which “feels wonderful.”
A note of caution to businesses looking to locate in Albuquerque: make sure your plans balance universal energy.

As we rapidly approach June 23rd, the one year anniversary of the Supreme Court’s Kelo decision, this story made me pause and think about just how out of touch most Hollywood elites are with the rest of Americans.
Where was Hannah when Susette Kelo and her neighbors when they were evicted by the city of New London recently? How about a little righteous outrage over the fact that any of us can now have our homes taken away from us for any reason, by some government bureacrat?
No, instead, we have actress Daryl Hannah sitting in a tree to stop the owner of the land on which an urban garden has been located. Worse, Hannah and her cadre of anti-property rights activists are only making it less likely that land owners will allow others to use their land on a temporary basis because when the time comes that they do need it back, the property owner is in for nothing but ingratitude and trouble.
Paul Gessing

Some additional context on the previous entry resurrected by Jason Kottke, hat tip to Marginal Revolution.
As the Economist showed back in 1997, consumption of Coke correlates strongly with both health, measured by the UN human development index, and freedom as reported by Freedom House:

Ah, now the American Medical Association’s attempt to reduce soft drink consumption by restricting economic freedom makes sense.
But won’t reducing our soda intake make us less healthy? I guess I’m still confused.

America’s doctors, fresh out of lollipops, are demanding that government do something about sweeteners in our sodas. Specifically, they want a ‘fat tax‘ imposed to reduce demand and fund “health education.”

Delegates at [the American Medical Association’s] Chicago conference are gunning in particular for high fructose corn syrup, the sweetener which is added to everything from ketchup to cola.

One American politician labeled it the ‘crack of sweeteners’ because it is so widespread.

Before begging for government intervention in the sweetener market, it may help to ask “how did we get here?”
The ‘crack of sweeteners’ epidemic broke out in 1984, when both Coca Cola and Pepsi switched from using sugar to high fructose corn syrup. Why switch? Protectionist sugar tariffs and import quotas, designed to keep domestic producers happy, had made sugar prohibitively expensive. America’s clever entrepreneurs found a more profitable alternative, corn syrup.
The domestic sugar market crashed, as soda manufacturers weren’t the only ones to respond in ways unpredicted by the politicians:

Entrepreneurs were importing high-sugar content products, such as iced-tea mix, and then sifting their sugar content from them and selling the sugar at the high domestic price.

Given this history, and the size of the soda market, legislative efforts to increase the cost of certain sweeteners will be met with the full force of American ingenuity. American consumer demand for cheap, sweet drinks will not go unsated.
As for the proposed “massive public health education campaign” funded by any corn syrup tax, this is also unlikely to make Joe Sixpack-of-Sodas less likely to obey his thirst. If people don’t listen to these concerned doctors face to face, in their offices, they’re not listen to them in a public service message.
Doctors are among America’s most educated and intelligent of citizens. Unlike politicians, they have a hard time succeeding in their profession without understanding that their charge, the human body, is complex, often responding in unpredictable ways to their interventions. Drug interactions are one example among many. Doctors would do well to apply this same understanding to an economic body before rushing to treat the patient.

Today’s Sunday Journal reports on the failure of one of the state government’s many ‘investments.’ TCI Medical, which was to build a nuclear medicine plant in Carlsbad, has ceased business after receiving $7 million from New Mexico’s taxpayers.
The immediate cause of TCI’s closure? Private investors realized the company simply wasn’t competitive with others in the industry, and pulled their financing. New Mexico’s taxpayers have all lost money on an investment they never chose to make.
If an endeavor is unable to generate private financing, this is likely because investors have decided the risk of losing their own money is greater than the potential returns. With personal wealth at stake, those with money to invest must be cautious, targeting their investments towards those enterprises most likely to succeed. Even an investment firm working on behalf third-party clients is held to this constraint, for any such firm that doesn’t find profitable returns will lose customers to those that do.
Politicians and bureaucrats, on the other hand, face little personal risk in investing other peoples’ money. Brian Birk, vice president of New Mexico Co-Investment Partners, which funnels tax-payer money to companies who haven’t earned it in the marketplace, laments the failure of “an opportunity that people thought could bring high-paying jobs to rural New Mexico.” Mr. Birk himself mustn’t be too sad at his failure, however, as he is unlikely to find his own job and salary at risk as a result.
Simply put, “thought” and “could” are not sound investment principles. With the risks of investments minimized, Mr. Birk and his colleagues are more susceptible to making decisions based on wishful thinking, how they think and hope things might turn out, rather than any underlying economic reality that actually does bear on the success of such investments.
Meanwhile, the economic harm from stripping this money from the state economy is hard to measure. That $7 million, which could have supported 140 salaries of $50,000 each if left in the hands of the businesses and residents of New Mexico, has simply fizzled away.
The Journal assures us, however, with a meaninglessly broad figure, that “from 20 percent to 90 percent of an investor’s equity portfolio will likely fail.” Often, a few big successes will make up for many individual losses. Given the incentives in play, it would be safe to assume that investments from personally uninvested bureaucrats and politicians lie closer to that 90 percent failure rate.
The verdict is still out on the other technology companies receiving these massive subsidies from tax payers. The state’s dabbling in the film business, however, has shown more rapid results. Of the 4 state funded productions as yet released, none have reported any profits from which New Mexico taxpayers can claim a share, and the state isn’t expecting profits from 9 other productions any time soon. 100 percent failure rate so far.
The use of forcibly confiscated tax dollars in such ‘investments’ is typically justified for ‘creating jobs’ or ‘economic development.’ Never mind the impact on jobs and economic growth of stripping money from productive earners in the first place. Politicians can’t take credit for jobs the private sector creates, and usually escape blame for the jobs they destroy. A politician can count as a victory the hidden destruction of two jobs in creating one high-profile job.
$7 million in state funds wasn’t enough to keep this unprofitable firm in business. You might ask, how many tax dollars would have been required to keep TCI operating in NM, producing pharmaceutical radioisotopes less efficiently than its competitors? In this case, we may never know, but with other investments, in tech companies, movie productions, etc., we’ve so far seen no limit to what Santa Fe is willing to throw into this risky business.
The surest way to see that New Mexicans’ money ends up investing in successful, profitable, job-creating businesses is to simply allow New Mexico’s residents and businesses to keep more of their own money, which they can spend and invest as they see fit.

As Harry mentioned, a majority of Senators sought today to permanently end the federal death tax, but could muster only 57 of the 60 votes needed to advance the measure.
New Mexico tax law links the state’s death tax to the federal one. By 2005, recent abatement of the federal estate tax effectively eliminated the state death tax. If nothing is done in Washington, however, New Mexico’s death tax will return, along with the federal tax, in 2011.
New Mexico’s Jeff Bingaman spoke out on the floor of the Senate against killing the death tax, before voting against the tax’s repeal. Given the strong tradition of family-owned businesses in New Mexico, one would think all of our representatives in Washington would know better.
Bingaman excuses the confiscation of the fruits of a lifetime of effort, effort that has already been subject to income and other taxes, because before the reductions, “there were only 200 people dying with any estate tax liability” in NM in 2001. That’s 200 of our favorite restaurants, our historic tourist-drawing ranches, our most productive family farms, even many of the funeral homes New Mexico families have relied on for generations.
And that’s only taxed deaths occuring in one year. The number of New Mexicans who will be subject to the death tax at the end of their lifetimes is much greater, unless the current federal law is changed.
It’s time the death tax itself took a trip to the funeral home.

This morning I was pleased to receive the following links from John Goodman, President and Ph.D. economist for National Center for Policy Analysis. If you would like to be enlightened on the “death tax,” international trade, the connection between social security and high tax rates on the elderly, the benefits of Roth IRA’s and/ or the harm done by minimum wage laws, then check out these links:
We All Pay for the Estate Tax –
Who would benefit from a Roth IRA?
Taxing the Elderly –
Trade & Economic Growth, Part I –
Trade & Econmic Growth, Part II –
The Negative Effects of The Minimum Wage –

The U.S. Senate will be debating permanent repeal of the so called “death” tax this week. I am seeing a lot of misinformed opinion about the effects of its repeal. For example, the SEATTLE POST-INTELLIGENCER thinks the true cost will be a trillion dollars in lost revenue over the next decade. WAPO has a similar view.
What these views miss is the dynamic effects of the tax. There is massive avoidance of the tax. That massive avoidance would vanish with repeal; and the net effect would more than replace the lost revenues via more tax collections on capital gains and increased incomes. Here is an economically literate debate on the merits of repeal.

Unfortunately, this is one bad idea that has already oozed out of California and into NM. According to my former professor Jennifer Roback Morse:

The proponents of universal preschool consistently overstate its benefits. Their favorite study is a Rand Corporation study that extrapolates the benefits obtained by a program in Chicago in the 1980’s. The results of that particular preschool study have nothing to do with the results the average family could expect, or with the results the entire state of California would be likely to achieve.
The Chicago preschool program was targeted at low-income, high-risk children, most of whom had unmarried parents. Finding that high quality preschool helped this group of people says absolutely nothing about the impact of preschool on the children of middle class, married-couple households. Most of those kids are already in preschool programs anyway;overall, 65% of California children are in some form of preschool. It is pointless to spend taxpayer dollars subsidizing kids who are already well-provided for by their own parents.
These same kinds of studies are used to browbeat stay at home mothers into placing their kids in preschools or daycare centers. “Am I harming my child by depriving him of the enriching preschool experience?” mothers ask me all the time. No, I always reply. Just pay attention to what your child needs, and trust your instincts. Ignore the studies, unless they apply to your situation very specifically. The studies touting universal preschool are based on non-universal samples and have nothing to do with the experiences of most families.
Furthermore, the Chicago program was more than an academic program. It also required parental involvement, and taught parenting skills. Some of the program’s benefits are surely attributable to the improved parenting the mothers used throughout the child’s formative years. Yet the supporters of universal preschool assign all the credit to the one year the child spent in their precious preschool program. After all, we wouldn’t want to give credit to parents. Everyone knows parents are the problem. The sooner we get kids away from their parents and into government run schools, the better off everyone will be.

She also points out the state politics and mandates that will insure that it is a total waste of your money. You should read the whole thing.

Today’s ABQ Journal attempts to clarify (sr) how our money is distributed to schools in NM. Excerpts:

Under a formula developed in response to a lawsuit by a tiny, rural school district, the state cannot simply allocate the money to the overcrowded districts. It doesn’t matter how much it’s needed or how much the governor or legislators want to do it. At best, a council set up to administer the formula could “loan” the district some of the money, which would be repaid in the form of offsets from future allocations.
District Judge Joseph Rich of Gallup ruled that New Mexico’s system for awarding capital outlay money to public schools was unfair and unconstitutional. He told the state to draft a more equitable system.
The state came up with a uniform system for distributing construction money. It is based on various factors, including need, how much local tax potential existed and how much of that potential was being tapped. The system was designed to equalize opportunity statewide when it came to building projects, rather than penalize or reward kids depending on where they lived.
New Mexico’s natural resources provide money to build and improve public schools. The state sells supplemental severance tax bonds and the proceeds go into the Public School Capital Outlay Fund. The bonds are paid off by revenue generated from taxes imposed on the extraction of natural gas, oil and other minerals.
The state Public School Capital Outlay Council, a nine-member board, is charged with identifying critical construction and renovation needs and decides which schools will receive awards from the capital outlay fund. Awards are based on districts’ applications and district visits. The council’s administrative arm, the Public School Facilities Authority, runs the day-to-day operations of the capital outlay program. The authority has construction managers around the state to help keep projects on track.
Every year, staffers visit a certain percentage of the state’s approximate 750 schools to assess construction and renovation needs. The facilities authority maintains a list in which every school is ranked according to construction need. Late in the school year, districts submit applications to the council, then make presentations before the council early in the summer. If a project the district is requesting money for ranks high on the priority list, then chances are fairly good it will be approved. In 2005, the council approved the top 98 projects on the list.
Once the council agrees to fund a project, a formula devised by the Public School Capital Outlay Task Force is used to determine how much money the district will receive and how much the district must pay.
State and district student population, the previous year’s taxable value for the entire state and the district, and the property tax mill levy in the district are all factors considered in the formula. The formula determines how much of their own money districts must contribute for a construction project in order to receive state funding. For example, Zuni is the only school district that receives 100 percent funding from the state under this formula. There are 15 districts that must pay for 90 percent of their construction projects. APS is required to pay 53 percent of its construction.
The Legislature recently approved a new funding program called the High Priority Project Grant Assistance Program. Districts that are experiencing high levels of growth are able to receive large awards to construct new schools. But while the program’s title implies a grant, districts have to pay back what is a loan.
APS officials said it hoped for the full $90 million available in the new program [for new schools on the West side]. What it got was $67 million, of which it must pay back $52 million.

That clarifies the school funding situation for you, right? Yeah, right. Here is how funding is determined according to the Department of Educations website. Enjoy.

From the Economist comes economic sense about gasoline prices. Excerpts:

…petrol prices in America depend, first and foremost, on the price
of crude oil. This is determined by global supply and demand, something over
which American politicians have only marginal influence. A gallon of petrol
at an American pump costs $2.85 on average, according to the American
Automobile Association (AAA), 75 cents more than it did a year ago.
Taxes account for a mere 18% of the price of filling an American car, compared with, say, 67% in Britain. So a surge in the price of oil leads toa proportionally bigger rise in the price of American petrol. Americans could reduce volatility by raising taxes, but not even Al Gore, who calls global warming “the most dangerous crisis we have ever faced”, is suggesting that Americans should pay just under $7 a gallon, as Brits do.
Although the global oil price is the main cause of American motorists’ woes, local factors also matter. Oil wells and refineries around the Gulf of Mexico have not yet fully recovered from last year’s hurricanes, and petrol stocks are low. Weathermen predict another busy hurricane season this year. And all this bad news comes at the start of the summer driving season, when holidaying families hit the road and prices traditionally rise to annual highs thanks to the increased demand.
However, prices were already at high levels in mid-May. In part that was due to the cost of crude oil. The hangover from last year’s hurricanes, which knocked out 10% of America’s refining capacity, also contributed, as facilities that had deferred maintenance work to compensate for (and profit from) the shortfall belatedly shut down. Furthermore, refiners around the world are struggling to adapt as crude supplies become more viscous and sulphurous, and so harder to turn into petrol.
Another crucial local problem arose from the removal of a chemical called methyl tertiary-butyl ether (MTBE) from petrol in Texas and several eastern states. The addition of MTBE helps to reduce smog from car engines. But researchers began to worry that it might be carcinogenic and was certainly seeping into groundwater, making it undrinkable. Retailers, fearing lawsuits, decided to switch to ethanol, which has similar properties. But petrol blended with ethanol, unlike MTBE, cannot be shipped by pipeline, since the two are prone to separate in transit. So distributors had to invest in new facilities to transport ethanol and mix it with petrol near the point of sale. Moreover, ethanol is in short supply, and therefore expensive.
At one point in late April, a handful of petrol stations actually ran out of fuel as a result of these accumulated woes. But by now, says John Felmy of the American Petroleum Institute (API), an industry group, distribution networks are up and running. The high price, meanwhile, has helped to attract imports of petrol, which have been running 36% above their normal level in recent months. Stocks are rising again, and prices have fallen on the futures markets as well as at the pump. The government now predicts that petrol will cost an average $2.71 a gallon over the summer-less than it does at the moment.
A similar story unfolded in the wake of last year’s hurricanes, when high prices attracted imports, which compensated for curtailed local supply. Members of the International Energy Agency, a club of oil-consuming countries, helped by releasing some petrol from their strategic reserves. Even if hurricanes wreak havoc in the Gulf of Mexico again this summer, Mr Felmy argues, America’s drivers should have no trouble refilling their tanks, as long as they can stomach the price.
Not all can, of course. According to most surveys, demand for petrol is atlast beginning to soften, as the poor or thrifty move about less or take the bus. The API reckons that America’s consumption fell by 0.7% in the first four months of the year. The Department of Energy calculates that it has risen, but at a fraction of the normal pace. Sales of the most gas-guzzling cars have also been falling for several years, which may have a more lasting effect.
In the long run, growth in America’s refining capacity (or the world’s) should also help to lower prices. But that will take time. Refining capacity in America rose by almost 300,000 barrels a day last year, a small fraction of 9m daily barrels of petrol consumed. It will take two or three years, according to Aaron Brady of Cambridge Energy Research Associates, a consultancy, to construct enough extra refining capacity for comfort.
For the most part, Americans are responding rationally to the high price of petrol. Suppliers supply more; consumers consume less. Politicians, however, take it as an opportunity to bluster. The House of Representatives has passed a bill barring “price-gouging”-that is, making it a criminal offence to charge more for petrol than some bureaucrat deems appropriate. This is popular; 69% of Americans even favour price controls. But in the long run, it would reduce the incentive for firms to invest in supplying petrol to Americans, and so would raise prices at the pump. With luck, the bill will die in the Senate.
Both parties tout their determination to free America of its dependence on jihad-fuelling foreign oil by some conveniently distant point in the future. Neither, however, proposes anything that might plausibly accomplish this. House Republicans passed a bill last week to allow oil drilling in Alaska’s Arctic National Wildlife Refuge, which would help a tiny amount at best, and in any case is highly unlikely to get through the Senate.
Both parties say they wish to promote ethanol, not just as an additive, but as a fuel in its own right. In practice, this means a futile attempt by government to pick promising new technologies, plus fat subsidies for midwestern corn farmers while cheaper Brazilian ethanol is kept out with tariffs. Lawmakers could free the ethanol market, but many would rather drive their SUVs to a petrol station a block away from their offices for a photo-op denouncing Mr Bush and Big Oil.

HT: Carroll Cagle

It’s in the Washington Post.
HT:Newmark’s Door

Paul’s New Mexico government “Spend-o-meter” is spinning away and will soon reach $11 billion dollars for the fiscal year ending June 30 (yes, that’s billion!). That is almost 23 thousand dollars per second or nearly 1.4 million per hour. How does this relate to us as individuals? The government spends your money at the rate of $115 per person per week.