Thanks to Walter Williams:
“After the first three years — that is to say, beginning in 1940 — you will pay, and your employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year. … Beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. … And finally, beginning in 1949, 12 years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. … That is the most you will ever pay.”
– 1936 government pamphlet on Social Security
Did you notice from this story (subscription) in yesterday’s Albuquerque Journal that Department of Economic Development Staffers are prohibited from visiting the Roundhouse during the session? “Secretary Rick Homans said the intent of the directive was to ‘make sure we don’t start getting our wires crossed. We don’t think legislators like it when they see a lot of state employees hanging around the Roundhouse.’ He also said the governor’s office ‘has been very clear about us being very disciplined in how we communicate with the Legislature.'”
This is good political strategy for an administration that seems bent on dishing out political favors in the form of corporate welfare. Matt clarified some of the losses from the game of political favor seeking yesterday. You can expect more commentary on corporate welfare and seeking of political favors in the near future.
I just saw The Aviator. It is every bit as good as you have heard–maybe a little better. The film is being lauded for its historical accuracy. (Though, as is often the case with Hollywood, they left out some of the more interesting aspects of reality. For instance, Hughes’ obsession with germs probably stemmed from his bout with syphilis which was entirely ignored in the movie.)
What I particularly liked about the film was how it portrayed the distressingly all-too accurate relationship that often exists between industry and government. Throughout the film, Hughes competes with Pan American’s Juan Tripp over airline market share. This, of course, would be great for the consumer if the contestants played fair. Instead, Tripp, and to a lesser extent Hughes, compete for unfair assistance from government.
To gain market-share in a free market, firms have to please the consumer–get him to voluntarily choose their product over their rivals’ product. But gaining market share is much easier when you have government on your side. Using government’s legal powers of coercion, firms can force their competitors’ prices up (for instance, with a tariff), or lower their own costs (say, with a subsidy from the taxpayers). In many cases, firms have been able to use government to simply outlaw their competitors by obtaining a legal monopoly. This is more than unfair, it is hugely costly. Intelligent, hard-working people like lawyers, accountants and lobbyists spend their time and money vying for an unfair advantage rather than thinking of new ways to please the consumer.
People often blame the firms and their executives for this unseemly behavior. What The Aviator does so well is to show that this is a government problem not a firm problem. At one point in the film, Howard Hughes is under intense interrogation from Maine’s Senator Owen Brewster. Brewster, known in real life as “the Senator from Pan Am,” had an interest in destroying Hughes’ TWA. Under oral examination, Hughes admits to dolling out gifts to government officials in hopes of gaining their assistance. But as Hughes points out, this is simply the way the government-entwined airline industry works. If you don’t take advantage of government’s unfair help, your competitors will.
The problem is not that business asks for hand-outs. After all, we can’t very well outlaw the desire for wealth. The real problem is that government obliges! This we can outlaw! So, see the movie and learn some economics.
Yesterday’s report is that Utah may be about to opt out of the No Child Left Behind abomination (thanks to Chuck Muth for the pointer). If they do opt out they are saying “thanks, but no thanks to $116 million in federal aid.” “state policy-makers are fed up with federal control of education and dictates.” The Utah legislature appears to be unanimous in wanting to opt out. According to the report, “eight other state legislatures — in Colorado, Connecticut, Idaho, Minnesota, Nebraska, North Dakota, Vermont and Virginia — are considering challenges to No Child Left Behind.”
One can only hope that this is the beginning of the end for the fraudulently titled “no child left behind” act.
The Washington Times further reports today that state legislators are demanding more flexibility.
Unfortunately, in response the Department of Education seems to have abandoned all principles of federalism: “The Bush administration warned that the national conference’s action ‘could be interpreted as wanting to reverse the progress we’ve made.’ ‘We will not reverse course,’ said Ray Simon, U.S. assistant secretary for elementary and secondary education. ‘Children must be challenged to reach their full potential, not told to settle for someone else’s lowered expectations.'” The administration is going to regret its top-down, one-size-fits-all centralized control.
When is New Mexico going to opt out of NCLB?
Chuck Muth reports yesterday:
“School administrators at Austin High School in Austin, Texas, latched onto this new obesity fad/crisis and decided to remove all the candy vending machines on campus. In light of the decision, some enterprising students have stepped into the breach and filled the need.
‘The candy removal plan, according to students at Austin High, was thwarted by classmates who created an underground candy market, turning the hallways of the high school into Willy-Wonka-meets-Casablanca,’ reports the Austin American-Statesman. ‘Soon after candy was removed from vending machines, enterprising students armed with gym bags full of M&M’s, Skittles, Snickers and Twix became roving vendors, serving classmates in need of an in-school sugar fix. Regular-size candy bars like the ones sold in vending machines routinely sold in the halls for $1.50.’
The paper notes that some kids are said to be making $200 a week selling black-market candy in the school’s halls and bathrooms.”
Questions about when this happens in New Mexico:
Will it be exempt from the food tax? After all, candy is a prepared food. Looks like Tax and Rev may have to begin hallway patrols.
How about the entrepreneurs? Aren’t they contributing to the obesity of minors? Looks like APD will have to step up their hallway patrols.
Are these entrepreneurs licensed? Looks like the PRC may have to begin hallway patrols.
New Mexico cannot get over its anti-market mind set. Now big Bill wants to impose price controls in the form of caps on payday loans (subscription):
“Gov. Bill Richardson says he’ll introduce a measure to the Legislature this week that will cap interest rates on payday and car title loans.
‘I’m going to enter the fray and propose a bill of my own that sets a reasonable cap,’ Richardson said Sunday in a telephone interview.”
I have seen only a little skepticism on this bad proposal. Why is it bad? Let’s answer the question by asking some questions.
1. Since there are so many payday lenders, how can it possibly be that they are charging too much for their loans? Wouldn’t an exorbitant rate of profit lead to even more lenders, driving down the charges for payday loans?
2. Similarly, why don’t those who say that payday lenders charge too much enter the market themselves and charge something more “reasonable.”
3. Undoubtedly there are a few borrowers who are misled by these loans. But with all the overbearing regulations now existing, why isn’t our government catching those who commit fraud? Isn’t detecting and prosecuting fraud one of the main reasons we have a government? Why do we want to drive this market underground where fraud will be even more difficult to detect and prosecute?
4. What is so hard to understand about the terms of these short-term payday loans? Example: Lender lends $200 for two weeks with a charge to borrower of $30. Even a borrower educated in NM should be able to understand that.
5. Why do we want to penalize borrowers who act responsibly and will get shut out of the market as a result of this bad proposal? They will suffer more when financial emergencies occur than they would with a payday loan – otherwise they wouldn’t be seeking the loan.
6. Proponents of this bad law are making a big deal out of converting the payday loan charges to an annual rate of interest. But they don’t include the value to the borrower of being able to obtain the loan hassle-free. Why not?
One thing we economists know is that price controls always make matters worse. This bad law will too.