The following letter ran in the Albuquerque Business Journal on May 23, 2016.
Resources like oil and natural gas are boons for smart policymakers. On their own, they have enormous potential to create jobs, profits, and positive effects on economies near oil drilling sites. These benefits are balanced by inevitable swings in oil prices which can result in well shutdowns and worker layoffs. Jerry Pacheco notes that these negative effects can extend outside of the petroleum industry, and affect state budgets.
The issue is not that resources are a “curse.” Rather, it’s all about how you manage them and diversify your economy. Texas and New Mexico, while neighbors, are very different. New Mexico lags behind Texas in ratings of poverty, GDP per capita, and income. In other words, New Mexico is poorer than Texas by several measures.
In large part, this contrast is driven by vast differences in public policy and business culture. Texas is a “right to work” state that taxes neither business nor personal incomes. It also has a very pro-business culture and has numerous major companies headquartered within its borders.
New Mexico, on the other hand, places high tax and regulatory burdens on businesses and has a culture that is suspicious of outsiders and for-profit enterprise. Outside of oil and gas, New Mexico tends to rely on government. Government efforts are often unresponsive to market demands, and based more on what sounds good to politicians than what actually makes financial sense. Spaceport America, a government project, now sits empty as taxpayers continue to provide for its upkeep.
Rio Grande Foundation