Errors of Enchantment » kmbrown

Santa Fe Sore Thumb

kmbrown — Sat, 18 Feb 2006 19:18:45 +0000

The New Mexico state legislature wisely rejected the proposed increase in the statewide minimum wage. As a result, Santa Fe–with its own substantial increase–will stick out like a sore thumb.
Any business that wants to locate in New Mexico will surely avoid Santa Fe. Even those that need to be located right in Santa Fe will tend to avoid the city’s high wages. It’s said that 19 restaurants have already closed.
It’s said that a higher minimum wage will have no effect on firms that don’t hire low wage workers, but this is untrue. A $10 minimum will probably be felt in the form of wage increases higher up in the pay scale. Otherwise why were union lobbyists so thick around the capital during the minimum wage debate?

Clunk! Clunk! Clunk! Goes the Trolley

kmbrown — Sat, 11 Feb 2006 17:00:35 +0000

Albuquerque Mayor Chavez wants to install streetcars between Old Town and Knob Hill. I don’t know why. Here are a few reasons why not:
1. Construction costs would be high and streets would be torn up for months. Whatever the estimated cost, the actual cost would be far higher.
2. Low benefit-cost ratio. Dozens of cities (including Albuquerque) have abandoned their streetcar systems for one reason or another.
3. Unlike other forms of mass transit, streetcars actually add to congestion, as their tracks use one or more lanes of the street.
4. Streetcars endanger riders who have to get from the sidewalk to the streetcar, dodging auto traffic.
5. Eventually the system will prove to be a lemon, and taxpayers will have to foot the bill for tearing up the tracks and paving over the ruts.
Does anyone disagree?

Spaceport Fiasco in the Making?

kmbrown — Mon, 06 Feb 2006 17:25:50 +0000

The Governor is pushing a massive subsidy to establlish a spaceport in New Mexico. Like the train to nowhere, it is a venture with little likelihood of success and a certainty of draining the state’s taxpayers for its entire life.
Do we really believe that there is a huge demand for suborbital flights that cost $200,000 per? One crash and the market, whatever it turns out to be, will dry up permanently.

Can’t Someone Stop the Train to Nowhere?

kmbrown — Sat, 04 Feb 2006 18:53:43 +0000

By now it has become obvious that the planned “communter” train between Belen and Bernalillo makes no economic sense. Yet the legislature continues to debate this monstrocity. Can’t anyone step up and introduce a bill to put the train out of its misery?
It’s bad in so many ways:
–The cost will greatly exceed revenues.
–Ridership will be so small that no appreciable reduction in congestion will occur.
–The purchase of BNSF land and track holds many pitfalls, such as liability for damage claims and the loss of tax revenues on the land.
–What benefits there are (and these will be slim) will acrue to a very limited number of people, while taxpayers statewide pick up the tab. Better to use the money statewide for needed road improvements.
Now proponents of the rail line are asserting that even though the train will lose money, in twenty years it will begin to make sense. What a weak argument, unsupported by any evidence!
It’s time to pull the emergency cord and stop this monumental waste.

Is Business Doing the Right Thing?

kmbrown — Tue, 06 Sep 2005 14:13:39 +0000

The Albuquerque business community has mobilized to oppose the “living wage” measure that would impose a $7.50 an hour minimum wage. So far, their main argument against it is the bothersome clause that would give access to businesses to “inform employees of their rights.”
Clearly this is a bad feature of the ballot initiative, but is it the right one to stress in a campaign against the measure? I don’t believe it is.
The “access” clause is rightly opposed by business, but I doubt whether the the voting public cares much one way or the other.
Anti-minimum wage advocates should, in my opinion, stress the traditional economic arguments: It costs jobs, raises costs, and forces buwiness to move away.

Living Wage Bad in So Many Ways

kmbrown — Mon, 29 Aug 2005 14:59:54 +0000

You’ve probably noticed tha little yellow box on the home page of this website. It’s a quote from Henry Hazlitt that cites his “economics in one lesson” principle: The art of econmics is to look past the primary effect of some action to all of the good and bad effects that follow. This certainly applies to the “living wage” proposal that would set the miniumum wage in Albuquerque to $7.50 an hour, to be adjusted upward with the cosumer price index.
Here’s the chain of effects past the first one of raising the legal minimum: Those workers not worth $7.50 get fired. Cost of doing business in Albuquerque rises. Firms either raise prices or move out of town. Tax base declines. Taxe rates increase. Higher tax rates capitalized into the price of commercial and residential real estate, both of which decline.
So much more than (supposedly) just raising someone’s wages.

Subsidies for drunks?

kmbrown — Wed, 15 Jun 2005 12:50:05 +0000

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.

Tax Relief by Mistake

kmbrown — Mon, 13 Jun 2005 15:49:42 +0000

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.”

Women’s Work

kmbrown — Wed, 23 Jun 2004 22:44:34 +0000

A federal judge has ruled that a sex-discrimination suit against Wal-Mart Stores can proceed as a class action, which could lead to a huge loss for the megastore. Up to 1.6 million women could join the class action, and at a few thousand apiece it could cost Wal-Mart billions.
Baltimore trial lawyer Peter Angelos made enough from his asbestos lawsuit work to buy the Orioles. Lawyers’ fees in this case could buy the entire American League.
This is not the first big case involving women’s wages. Coke, Home Depot, and Texaco have paid more than $100 million each in such lawsuits.
Now I don’t want to quarrel with any of these decisions. Who knows what went on? How could American courts be wrong? But I call your attention to a larger version of this alleged discrimination, the oft heard claim that women earn, on average, 70 percent of men’s salaries. NBC News this evening cited this figure as a virtual national scandal. Should an Equal Rights Amendment pass, you can bet that lawsuits would follow gigantic enough to make Senator John Edwards dance with anticipation
Any economist worth his or her salt will immediately wonder where this 70 percent number came from and how it would be changed if it accounted for differences in experience, education, difficulty of jobs, and the other factors that affect the demand for a person’s labor. This requires rigorous analysis, not just quoting some data.
But where do you find such analysis? Well, you go to one of my favorite websites, www.iwf.org, the home page of the Independent Women’s Forum. This organization published a report called “Women’s Figures” that challenges the 70 percent shibboleth, and they keep up to date on other such issues, presenting a clear, market oriented analysis in a lively format. Yes, they are conservative women!
Maybe women economists should get a raise!

Reel Money: Should Taxpayers Finance Movies?

kmbrown — Wed, 28 Apr 2004 18:56:33 +0000

The State Investment Council has just agreed to lend $7.5 million at zero interest for three years to finance the production of a movie to be filmed in New Mexico. The film will tell the inspiring story of a man and his grandson who drift into Mexico and both fall in love with the same prostitute.
The opportunity cost of making such a loan is around $1 million, that being the returns that could be had by investing the money elsewhere. There is also an element of risk to be considered: presumably the loan is unsecured by property, and who knows how the production company figures its profits and hence its ability to repay the loan.
It’s said that 97 film jobs will be brought into the state, but only for the duration of shooting. That figures out to about $10,000 per job, some or perhaps most of which will go to movie makers brought in from Hollywood.
Is this a good deal for New Mexican taxpayers? Probably not. But as usual, we aren’t given enough information by the state to make a reliable calculation.
But one thing is for sure: No one will ever make a film in New Mexico without first paying a visit to Santa Fe to pick up some free money.