I am a big fan of Tyler Cowen. He always makes me question my own views. But on this one I think he is wrong.
Constitutional limits on taxing and spending are put in place because voters cannot “simply cut spending by voting for anti-spending politiicians.” The reason is that the political process itself leads to outcomes which are biased in favor of bigger government. On that score he could take a lesson from his student.
Tyler may be justifiably “surprised” about whether or not Tax-Expenditure limitation will survive as a long run political equilibrium. The reason for that is clear; and it is the reason mentioned above.
Experience has shown, though, that Colorado’s limits on taxing and spending could have been better designed. New initiatives in other states will anticipate these problems.
Look here to see that NM is in the top half of states ranked by business expenses (even though New Mexico has competitive wages and below average energy costs).
A few thoughts: There is no attempt to capture regulatory burden. There is no measure of gross receipts tax pyramiding. The weighting scheme for each of the 5 elements making up the index is not clear.
Thanks to Ralph Frasca at Division of Labour for the heads up.
The Albuquerque Journal is up to their usual hyperbole about gasoline prices. There is no question that gasoline prices have been going up; and that hurts. We never like it when the price of something goes up; but we enjoy it when the price of something goes down.
The problem with the Journal article is that it provides no context as to your tradeoffs today versus those in the past. Albuquerque’s reported price per gallon of $2.44 is still 85 percent of the inflation adjusted price in 1981. The 1981 price still holds the record in inflation adjusted terms.
More importantly, on average you “empty your wallet” a lot less today than you did in 1981. In 1981 if you “emptied your wallet” of 10 percent of New Mexico’s average annual disposable income of $8,255, you could buy you 611.5 gallons. Today if you “emptied your wallet” of 10 percent of New Mexico’s average annual disposable income of $25,100, you could buy 1,028.7 gallons. In other words, New Mexico’s average annual disposable income can buy 68 percent more gasoline today than it could in 1981!
That’s not all. Vehicles get some 30 percent more miles per gallon than they did in 1981. The result: New Mexico’s average annual disposable income today can buy 117 percent more vehicle miles than it could in 1981!
I have pointed out that the so-called “living wage” ordinance will actually hurt the poor. That raises a question: who will actually benefit from this wage floor? The answer: labor unions. They enjoy the spoils of reduced competition.
Here is a great summary of the logic by John Stossel in context of Davis-Bacon. And New Mexico exacerbates the situation with its “little Davis-Bacon.”
And now Albuquerque may increase the spoils of these selfish scoundrels with its “living wage” proposal. The voters have the opportunity to say “NO” on this October 4. And they will have future opportunity to say “NO” to the state’s union-legislature monopoly.
Most people do not understand inflation. They notice the price of gasoline increasing; and they think that is inflation. They may also notice that housing and health care prices are rising; then they are really convinced that inflation is on the rise.
They are wrong. And Craig Newmark briefly explains why here, while correcting the errors of some thoughtful commenters. I recommend you check it out.
Robert J. Samuelson’s recent article in the Washington Post got the discussion going. Newmark provides a link to Samuelson’s article.
Speaking of inflation, we can now obtain all kinds of insights from scholars like Craig Newmark for practically nothing (all you need is access to the Internet). Insights at a price of almost zero — and they are not included in measuring inflation!
From RGF President John Dendahl:
The Rio Grande Foundation is a new, and small, part of the network of think tanks giving so much heartburn to the wealthy bunch of Leftists discussed today in the Washington Post. Excerpt:
“At least 80 wealthy liberals have pledged to
contribute $1 million or more apiece to fund
a network of think tanks and advocacy groups
to compete with the potent conservative
infrastructure built up over the past three
The Heritage Foundation is probably the largest and best known, but our movement may include one hundred or more.
The Left has just one problem, but it’s a fatal problem: its answer is always some version of socialism. In the memorable words of Lady Margaret Thatcher: “President Reagan and I knew … what didn’t work –
namely socialism in every shape or form. And how many forms there are! Socialism is like one of those horrible viruses. You no sooner discover a remedy for one version, when it spontaneously evolves into another … Nowadays socialism is more often dressed up as environmentalism, feminism, in international concern for human rights … New slogans; old errors.”
Matt’s recent posts on pork barrel spending and lack of fiscal discipline made me curious about voting records on the “transportation” and “energy” bills. I decided to create an honor roll of representatives and senators who voted against both bills. Here are the few, the proud, the defiant.
No to Corporate Welfare Honor Roll:
Flake, Jones (NC), Royce
Gregg (R-NH), Kyl (R-AZ), McCain (R-AZ)
BTW, if you would like to see how members voted during the last session of congress look here for the senate and here for the house.
The Albuquerque Journal reported yesterday (subscription required) that some of the spending is coming our way.
Here is how I described the incentives of pork-barrel spending in the public choice class I taught earlier this summer (those familiar with public choice may recognize this as a modified version of “Tullock’s roads example”):
Imagine you and two friends are out to dinner at Sadies (a fantastic Albuquerque restaurant for you non-New Mexicans). After a delicious meal, the waiter asks if anyone would be interested in dessert. You look at the menu and think, “I like mousse. I might be willing to spend $5 on one. They cost $6, though, so I think I’ll pass.” Let us assume that your two companions think the same thing. No one orders mousse because no one feels that it is worth it.
But, now something happens to change the incentives. The waiter informs you that he is sorry, but he forgot to split the check and it is impossible for them to itemize the bill. Did I mention that your two friends happen to be from the Democracy for New Mexico group? Well they are. Being a “social progressive,” one of your friends suggests that you just split the tab into equal thirds—everyone paying the same amount, even if some eat more than others. And being enamored with democracy, the other suggests that you take another look at the dessert menu and take a vote on whether or not you will have any dessert. The decision to have dessert has just been collectivized.
One of your friends has enjoyed many margaritas and when he gets up to go to the bathroom, you and your other friend make a deal. You will form a coalition: each voting for mousse for the other guy. When you do this, there will be two mousses (misse?) ordered at a cost of $6 a piece. Total cost will be $12, split three ways. The two of you in the majority coalition will each pay $4 for mousse which you value at $5. Pretty good deal for the majority. The (minority) third dinner-companion will also pay $4, but he gets no mousse! Pretty bad deal for the minority.
But notice what happened. The table collectively ordered $12 worth of mousse which it valued at only $10! That is insane!
Now, imagine if you made all of your dining choices this way. We could imagine shifting coalitions among the three parties: a carne adovada coalition, a tamale coalition, a chile relleno coalition. When you add up all the costs, you can expect to lose in the long-run. The table will order way more food than it really wants.
Where you went wrong was in collectivizing the decision in the first place. By doing so, you were able to concentrate benefits on the few, but diffuse the costs over the many. You should have kept dessert a private, individual decision.
Hopefully by now you see the purpose of our little parable. Every time legislators get together to vote pork for their district they are doing the same thing as our dinner companions. They are concentrating benefits on their constituents and diffusing the costs over the rest of us. For a particular project, the constituents may be better off, but in the long-run, we all lose!
We don’t even have to assume greedy, avaricious or immoral legislators. Even good people trying to help out their constituents face an incentive to spend on pork. The problem is not with the people, but with the democratic system.
The founders, of course, knew this. Franklin argued that, “Democracy is two wolves and a lamb voting on what to have for lunch.” Washington warned that “Government is not reason; it is not eloquent; it is force.” Armed with this knowledge, the founders did not create a democracy, but a constitutionally-limited republic. Under such a system, a Constitution limits government to only those powers which are specifically enumerated. In the words of Madison, “The powers delegated…to the Federal Government are few and defined.”
Unfortunately, too few people respect the Constitution these days and too many have fallen in love with unchecked democracy.