With such a lethargic economy, you might suppose that New Mexico’s policy advocates and business leaders would demand tried and true growth policies. I mean lower tax rates, less governmental spending, enacting a right-to-work law, and a serious effort at deregulation.
If New Mexico could acquire a pro-business reputation, attempts to land large companies would be far more successful. For example, the tax goodies being offered to Tesla would look even better viewed against a backdrop of a sound economy.
The recent session of the State Legislature failed to take up any real growth initiatives, so we are left with ineffective little programs that do nothing but extract money from taxpayers and give it to “deserving” individuals, as chosen by bureaucrats and elected officials.
Out-of-state investors yawn and head for Texas.
Economic growth requires investors from outside of the state to expand their operations into New Mexico. If we rely on funds from the state budget to encourage investment, not much will be achieved. Just moving money around within the state won’t produce growth.
Gov. Susana Martinez understands this, but she has to deal with the anchor-like Legislature.
What actually happens to your taxes? Here are a few typical ideas from New Mexican think tanks and business groups.
For example, a local think tank recommends giving more scholarship money to foreign students. Why? Because some immigrants who came to the United states sometime in the past created new business, according to some study.
Then we need to assume that the subsidy draws in new students, not just the ones who would have come to this state without it. Then we assume that these students would be at least as productive as those of the past, and that the businesses they start would be worth something to New Mexican people.
This is the sort of convoluted reasoning that’s used to get money to favored programs.
There’s another “development” program, called Individual Development Accounts. I’ll bet you’ve never heard of it. It gives chosen poor people some money and some training in financial management. It costs taxpayers $1.5 million, which goes to fewer than 300 winners lucky enough to be selected and to however many people it takes to run the program.
Another program gives companies a small amount of money to hire a few workers in hopes that they will catch on after the money stops.
These are not the worst programs ever invented. It’s just that they are too small to do any good. If you’re going to take the subsidies route, then bundle all the little programs together to make companies take notice.
Pre-kindergarten for all is popular, especially among mothers, teachers and kids. Its support is based on an experiment held many years ago on a small number of students. But it is absurd to call it an economic development program. There are plenty of such programs available to those who are willing and able to pay for them, so I would consider free kindergarten to be a redistribution of income program.
Do companies really care whether there’s a free kindergarten for every tot? Do they care whether foreign students qualify for in-state tuition?
Many of these ideas smell like central planning. Under one such proposal, financial rewards would be doled out to companies only after they had done what the state had told them to do. In other words, “hire workers that you don’t need at the salary we say, and do as you’re told if you know what’s good for you.”
Hardly a welcome mat for investment.
To end on a brighter note, is it possible that the policy establishment has at least learned a lesson on the folly of big expensive programs that drain millions of dollars each year? Of course, I mean the Disastrous Three: Rail Runner, Spaceport America and the costly venture into movie making. Or is some future governor warming up in the bullpen, scheming to spring some new outrage on taxpayers in the name of economic growth?
Kenneth Brown is an economist who was a senior executive with the Department of Commerce and the National Science Foundation.