Rail Disaster 2006
06.22.2005
Never content to derail a bad idea, New Mexico is poised to become the next rail disaster. Unless New Mexico learns to decouple from this kind of runaway spending, its economy will remain at half throttle.
Never content to derail a bad idea, New Mexico is poised to become the next rail disaster. Unless New Mexico learns to decouple from this kind of runaway spending, its economy will remain at half throttle.
Did you see this editorial in Friday’s Wall Steet Journal? Excerpts:
“It hasn’t yet hit the intensity level of Howard Jarvis’s Proposition 13, the famous ballot measure that slashed California property taxes by 30% and sparked a nationwide tax revolt in the late 1970s. But activists in at least 20 states — from Alaska to South Carolina — are working to enact Taxpayer Bill of Rights (Tabor) laws to cap runaway state spending and tax increases.”
“Last week in Richmond, Virginia, taxpayer groups from 30 states gathered under the banner of the State Policy Network to discuss how to insert these anti-tax restrictions into state constitutions.”
The Rio Grande Foundation is taking part in this revolt. Stay tuned this summer as we further our documentation of runaway state spending in New Mexico.
In today’s report from Chuck Muth:
YOUR FDA AT WORK
According to the latest “Give Me a Break” commentary by ABC’s John Stossel, the chemical Mexoryl effectively blocks UVA the rays from the sun which cause wrinkles. Dermatologists swear by it. And sun worshippers in Rio, Paris, Mexico, Canada and Australia have been lathering up with it for over a dozen years now.
But don’t look for it on the shelves of your local drug store here in the U.S. of A. It ain’t there. Why? Because it’s illegal here. You see, the federal Food & Drug Administration (FDA) still hasn’t “approved” Mexoryl as safe and effective.
How typically “governmental” to be told over and over and over that the sun is dangerous and not to forget to wear sunscreen…while the feds continue to ban the most effective sunscreen on the market today.
And this is the same group some want to turn the regulation of tobacco over to? Give me a break.
A bad idea filled with feel-good rhetoric has been exposed. So called “smart” growth policies are not working out after all. Unfortunately, Albuquerque has not yet caught on.
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.
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.”