New Mexico now has a law requiring ignition interlocks on the cars of convicted drunk drivers. (An interlock is a device that uses a breathalizer to estimate the driver’s blood alcohol content and then shuts down the ignition if the driver flunks the test.)
These devices cost more than $500–not cheap. So here’s my prediction: Within the next 18 months a bill will be introduced in the state legislature to pay for interlocks for drunks who “can’t afford them.”
Does this sound absurd? Yes, but not unlikely.

Two weeks ago Winthrop Quigley (subscription) gave us a pessimistic report on the status of Health Savings Accounts in New Mexico. An excerpt:
“Tax-advantaged savings accounts designed to restrain health-care spending have been slow to take off and haven’t made much of a dent in the number of uninsured workers, according to insurance industry research.”
But a report today from Michael Barone is much more promising. Health care costs may actually be slowing their rate of growth. According to Barone “…the evidence is that health care costs are being held down, by the workings of the marketplace, partly in response to health care legislation passed in the last four years.”
New Mexico is not likely to benefit, however. Our tax treatment discourages these accounts. And our vast array of Medicaid recipients do not need the accounts, since someone else pays for their health care.

So called “school reform” New Mexico style is not going to work because the incentives are all wrong. Look here for one assessment of the results so far. Last again.

Does ignorance of basic economics ever do any good? Maybe so.
When New Mexico repealed its gross receipts tax on groceries, it raised the tax on nearly every other good and service. It attempted to calculate this rate increase to exactly offset the revenue loss from grocery tax relief.
However, the state’s “economists” failed to allow for consumers’ negative responses to higher taxes. Supply side economics in reverse, as it were. With a nearly one percent increase in the cost of most goods, people bought less, or increasingly shopped out of state. The result was that net revenue losses were ten pecent more than expected.
Of course, any tax cut—even if by accident—is a good idea. Sadly, this was merely a reduction in a tax hike, but it was better than nothing. Truly, an “error of enchantment.”

Fooled you! Brown is Black.

Too bad we don’t have more doubting Thomases on the Supreme Court. Here is a portion of Justice Clarence Thomas’s dissent:
“Respondents Diane Monson and Angel Raich use marijuana that has never been bought or sold, that has never crossed state lines, and that has had no demonstrable effect on the national market for marijuana. If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything and the Federal Government is no longer one of limited and enumerated powers.”
The Commerce Clause has enabled activist judges to make up the rules as we go along. So much for the Constitution.
See more thoughtful discussion here.

From NCPA:
Ethanol’s advocates have long argued that increasing the amount used in
gasoline would be a boon to the economy, reduce our dependence on
foreign oil and improve air quality.
Yet, more than two decades and tens of billions of dollars in subsidies,
tax credits and fuel mandates have done little other than enrich the
agribusinesses that produce ethanol, says H. Sterling Burnett, a senior
fellow with the National Center for Policy Analysis.
Indeed, the economic impact of ethanol subsidies is negative. One report
by the U.S. Agriculture department determined that every $1 spent
subsidizing ethanol costs consumers more than $4.
There are several reasons for this, says Burnett:
o Every bushel of corn devoted to ethanol production leaves less
for human consumption and animal feed — thus people pay more for
corn, beef, poultry and pork than they would absent the
subsidies.
o And prices for other goods are also higher since farmers, in
pursuit of lucrative subsidies, devote more acreage to corn
rather than other, unsubsidized, produce.
o Additionally, the costs of growing, distilling and blending
ethanol into gasoline makes it cost 51 cents more per gallon to
produce than regular gasoline.
The clamor for increased use of ethanol also raises the specter of the
current problems surrounding the use of MTBE, the fuel additive that oil
producers began blending with gasoline in the mid-1990s to meet stricter
clean-air standards. Although not carcinogenic in humans, MTBE has
caused huge problems recently because it leaks from storage tanks and
contaminates local water supplies.
Absent federal subsidies and mandates, ethanol would likely disappear
from the marketplace. Like so much of the pork Congress bestows upon
special interests, ethanol is bad for the economy, consumers and the
environment, says Burnett.
Source: H. Sterling Burnett, “Ethanol benefits makers, legislators who
support their cause,” Billings Gazette, June 5, 2005.

Chuck Muth expresses my sentiments better than I ever could:
“For all its purported virtues, the Bush/Kennedy ‘No Child Left Behind’ law is perhaps the biggest threat to state sovereignty this side of the Rio Bravo today. The federal NCLB law tells states how they MUST run their re-education camps…er, public schools…or else.
Up ’til now that “or else” has been a threatened cut-off of federal funds to states who refuse to ‘get with the program.’ But now that Utah has gone on record as telling Uncle Sam to take his money and shove it, the feds are getting significantly more cranky. In fact, Nina Rees from the Education Department announced at a Cato Institute forum on Tuesday that, ‘We’re going to take a hard line against states that blatantly violate the law.’
So when the carrot doesn’t work, the feds are more than happy to whip out the ol’ stick to compel state compliance with the diktats of the omnipotent federal government. 10th Amendment supporters should be outraged. More states should follow Utah’s lead. Congress should repeal NCLB. And the federal Department of Education ought to be eliminated, just as Republicans proposed back in 1994…BEFORE they actually became the party of power.”

Proud to say that I was one of the graduate students who decided to cast my lot with GMU.

Councilor Martin Heinrich carefully follows the first lesson of politics:
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
— Thomas Sowell

Bad news about use of your tax money: Nearly 800 convicted s*e*x offenders in 14 states got Medicaid-funded prescriptions for V*iagr*a and other impot*ence drug*s. But also a little good news: Maybe the perver*ts won’t be able to find their prey.

Walter Williams explains why you should not worry about the trade deficit.
I wish politicians were as economically literate as Professor Williams. But they are not:
“Some politicians gripe about all the U.S. debt held by foreigners. Only a politician can have that kind of audacity. Guess who’s creating the debt instruments that foreigners hold? If you said it’s our profligate Congress, go to the head of the class. If foreigners didn’t purchase so much of our debt, we’d be worse off in terms of higher inflation and interest rates.”

Can you believe this? What’s next: blunt instruments or plastic bags?
I wonder why they don’t just get it over with and recommend banning criminals.
(Thanks to NCPA for the link.)

Wishful thinkers advocating the minimum wage refuse to acknowledge that the empirical evidence does not support their claims. Here is the follow-up statement I sent to Albuquerque City Council today:
“Living Wage” Hurts the Poor
Subsequent to my statement of May 20, 2005 I have seen several more empirical claims that the living wage will not hurt the poor. These claims constitute voodoo economics in the extreme.
Many factors (such as tax climate, regulatory climate, education, local entrepreneurial opportunities, what is happening in other states and localities, what is happening in other countries, business cycles and so forth) in addition to the “living wage” determine whether a local economy expands or contracts. In order to tease out an economically sound estimate of the effect of the “living wage,” the empirical economist must account for all the factors. Empirical studies that purport to show that the “living wage” does not hurt the poor and perhaps even expands employment and helps the poor do not account for all factors.
Studies that do account for all factors show overwhelmingly that wage floors hurt the poor. And those hurt are the least effective interest group in society (minorities, low skilled, relatively uneducated). They have no voice in the matter. All many of them know is that there is no job available when they go looking. For them the legal living wage becomes ZERO.
An excellent summary of the history and all the empirical evidence of wage floors may be found in: David Neumark in his research summary “Raising Incomes by Mandating Wages.” It may be found online here.
There are lots of things we can do to help the poor. The “living wage” idea is not only ineffective; it is counterproductive.

Corporate welfare does not create jobs. It makes us all worse off. Look here for a great explanation with lots of links.
Check here for my 2003 estimate of the costs of the economic development lies in New Mexico.

Did you happen to see this response to John’s living wage column in today’s ABQ Journal? If you really want understanding check this eloquent critique of progressives/socialists like Ann Kass.
Excerpt (you should read the whole thing):
· Employment and Wages: If I was going to sell my old TV set on eBay, most people would not think to have the government tell me how much I should be willing to accept for the TV. For me, even $20 might be enough, if the TV was not being used and just taking up space in my house. Can you imagine government agents descending on me and saying – “I’m sorry, but people much smarter than you have decided that $20 is too little for you to accept for that TV. We would rather you get nothing than get too little.”
Well, that is exactly what happens with labor. The government that does not tell me how much to sell my TV for does tell me that I can’t sell my labor below a certain price. They would rather me not work at all than work for $4.50 an hour. The arrogance of this is startlingly clear in lesser developed countries.
Progressives do not like American factories appearing in third world countries, paying locals wages progressives feel are too low, and disrupting agrarian economies with which progressives were more comfortable. But these changes are all the sum of actions by individuals, so it is illustrative to think about what is going on in these countries at the individual level.
One morning, a rice farmer in southeast Asia might face a choice. He can continue a life of brutal, back-breaking labor from dawn to dusk for what is essentially subsistence earnings. He can continue to see a large number of his children die young from malnutrition and disease. He can continue a lifestyle so static, so devoid of opportunity for advancement, that it is nearly identical to the life led by his ancestors in the same spot a thousand years ago.
Or, he can go to the local Nike factory, work long hours (but certainly no longer than he worked in the field) for low pay (but certainly more than he was making subsistence farming) and take a shot at changing his life. And you know what, many men (and women) in his position choose the Nike factory. And progressives hate this. They distrust this choice. They distrust the change. And, at its heart, that is what opposition to globalization is all about – a deep seated conservatism that distrusts the decision-making of individuals and fears change, change that ironically might finally pull people out of untold generations of utter poverty.

I am not making this up: Potty Parity may soon be coming to NYC. Hard to believe that Santa Fe is not setting the potty parity precedent.

Mason is on the front page of the Post today. GMU’s youngest (18) and oldest (77) graduates in history graduated today. Amir Azad is the youngest. According to the article, “Azad admires the work of Friedrich Hayek and others who, he says, place the individual above groups, systems and political ideology. He is translating several articles into Persian, so that they may be more widely read in the Middle East.”
Humbling and inspiring.

From Nobel Laureate James M. Buchanan in the Wall Street Journal:
“no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.”

Bryan Caplan has a nice blog today which touches on a topic of particular interest for New Mexicans.

Thanks to Micha Gisser for sending the following comments:
Some Comments on Minimum Wage laws
Micha Gisser
Minimum wage laws at the federal level have a long history. In 1938 Congress legislated a statutory minimum wage rate as part of the Fair Labor Standards Act. Initially, the federal minimum wage rate was established at $0.25 an hour. Since then, to adjust for the inflation erosion, it was raised many times. For example, the minimum wage was $3.35 in 1981 and $4.25 in 1991, and it has been $5.15 since 1997. The U.S. Labor Department estimated that this increase in the minimum wage rate between 1981 and 1991 led to a loss of 100,000 jobs, mostly women and teenagers in two-or three-earner families. Since most skilled workers earn wages above the minimum wage, they are not directly affected by it. Thus, most of the effects of the minimum wage fall upon unskilled workers. Early on, Jacob Mincer (1) demonstrated that the imposition of a minimum wage rate reduced the employment of all teenagers, of males 20 to 24 years of age, of females in general and the employment of males 65 years and over. He also demonstrated that the minimum wage law discouraged many workers from remaining in the labor force.
Most of the economic empirical research supports the theory that clearly shows that imposing statutory minimum wage rates results in unemployment among women, minorities and teenagers. However, more recent studies by David Card and Alan Krueger (2), claimed that New Jersey data did not support reduction in employment after the 1990 and 1991 federal minimum-wage increases. In New Jersey the increase was minimal, from $3.35 to $4.25 an hour, in contrast to the increase in Santa Fe. More importantly, studies by Donald Deere, Kevin M. Murphy, and Finis Welch (3), David Neumark and William Wascher (4), and other researchers demonstrated that the research methods used by Card and Krueger are flawed.
The major negative impact of minimum wage laws is unemployment among unskilled workers—mainly teenagers, women, and minorities—leading to heavy welfare losses to these groups. But there are other economic disruptions that are less visible. An example is the reduction of fringe benefits to mitigate the higher wages that must be paid to unskilled labor. Also, minimum wage laws suffer from poor targeting, e.g. tipped employees and employees from one-or two-family earners. On that, a detailed analysis is provided by Finis Welch. (5).
The ceteris paribus issue is relevant for statistical studies. For example, employment in Santa Fe may have increased recently because employment in New Mexico probably increased recently, and Santa Fe is an integral part of New Mexico’s economy.
Raising the federal minimum wage may cause cost-push inflation, followed by a demand push inflation if the Fed attempts to ease the money supply.
References
(1) Jacob Mincer, “Unemployment Effects of Minimum Wages,” Journal of Political Economy, vol. 84, August 1976. Pp. S87-s104.
(2) David Card and Alan Krueger, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review, September, 1994.
(3) Donald Deere, Kevin M. Murphy and Finis Welch, “Employment and the 1990-1991 Minimum Wage Hike,” American Economic Review, Papers and Proceedings, May 1995.
(4) David Neumark and William Wascher, “The Effect of New Jersey’s Minimum Wage increase on Fast-Food Employment: A Reevaluation Using Payroll Records,” American Economic Review, Papers and Proceedings, May 1995.
(5) Finis Welch, “Minimum Wage Issues and Evidence.” American Enterprise Institute for Public Policy Research, Washington, D.C., 1978.

If there is a principle which unifies the last three hundred years of economic research it is this: When two adults voluntarily consent to trade, each gain. To take a concrete example, if you hire me to cut your lawn for $5 an hour and I agree to that wage, we are both better off for having made the agreement. I must value the $5 more than I dislike the work, otherwise I wouldn’t have agreed to it. Conversely, you must value a trimmed lawn more than the $5 otherwise you wouldn’t have parted with your money. I may prefer that I make $15 an hour and you may prefer to pay me zero. But since neither of us is permitted by law to coerce the other, each of us will have to compromise. And when we do, we both stand to gain. Sometimes I think that this principle might be so simple it evades people. That seems to be the only explanation for perennial attempts to raise the minimum wage.
A minimum wage law–sometimes called a “living wage” or a “fair wage”–tells mutually consenting adults that though they have found a price which is agreeable to both, they cannot trade at that price. For those of us concerned about civil liberty, this is quite distressing. It is a blatant violation of our most basic (and ancient) right of voluntarily association with our fellows.
To the economist interested in social justice, a minimum wage law is more than distressing. It is a travesty. This is because minimum wage laws end up hurting the very people they were designed to help.
To understand how, we must begin with an important corollary to the “gains from trade” axiom. This corollary is the principle that market prices and wages have a tendency to naturally settle at those values which maximize the number of mutually beneficial trades. That is, the market wage rate will tend to maximize employment given the willingness of people to hire employees and the willingness of employees to work.
To be sure, this “equilibration” process does not work perfectly. It works best, however, when left alone. When minimum wage laws interfere in the process by raising wages above the equilibrium rate, employers and employees who would otherwise come to an agreement fail to do so. That means people who would otherwise be employed cannot find work.
Think of how employers make decisions. Even the most benevolent employer on the planet needs to make a profit. That means she can’t spend more money on her employees than they make for her business. There are low skilled workers (usually young workers with little experience or training) who are willing to work for low wages to get a start in life. If a law forces a potential employer to pay her employees more than they can make her, the employer will not take a loss for the sake of humanity. Instead, she will hire fewer workers. She may be able to automate some of her work (substitute capital for labor in the parlance of the economist). She can also move her business somewhere else where minimum wage laws are not so far above equilibrium. If none of those options are available, she may even go out of business. (It is worth noting that large employers tend to have greater resources and can do without the employees more easily than smaller businesses.)
Just as employers and employees stand to gain from trade, both stand to lose when minimum wage laws obstruct it. The sad thing is that employees are the worst hit because they lose everything.
It would be nice if we could wave a wand and raise everybody’s wages without decreasing employment. But the fact is that ours is still a free society (thankfully) and employers aren’t obliged to hire any number of workers at any price. Mutual gains would be possible for all of us if more well-intentioned politicians knew this.

I wonder why so many politicians and voters actually think that a social security “trust fund” actually exists. Are they that dumb? Or, are they deliberately misleading? It has to be one or the other.
Here is the best piece of writing — clear and short — I have seen explaining how social security affects overall spending and taxing.

It is distressing to see that Bruce Bartlett is waving the white flag on taxes and spending. That is his rationale favoring a value added tax.