New Mexico 2000: A Study of Its Policies and Economic Health
Harry Messenheimer, Ph.D.
Executive Director and Senior Fellow, Rio Grande Foundation
New Mexico's state and local public policies and their consequences
for the state's economic health are assessed. That assessment is undertaken
from a free market perspective: incentives matter, and overwhelming evidence
indicates that economic freedom begets prosperity. The assessment provides
answers to the question: How does New Mexico stack up relative to other
states in the region and nation with respect to economic freedom and prosperity?
An assessment of state and local governments' output of goods services,
using primary and secondary education as an example, is provided. After
all, the reason people agree to give up some economic freedom is to obtain
government provided goods and services such as infrastructure, property
rights enforcement and education.
Comparisons in the region are made between New Mexico and its bordering
states: Arizona, Utah, Colorado, Oklahoma and Texas. Comparative measures
are used for the lower 48 states to assess how New Mexico fares relative
to the nation. This assessment uses longer term and improved measures
of income than have appeared in prior assessments by others.
The answers for prosperity are not good. While New Mexico ranks
fair to good with respect to domestic migration indicator of prosperity,
it is at the bottom of states in the region and at or near the bottom
of the lower 48 for measures of income and growth of income.
Not surprisingly also, the answers for economic freedom are not good.
With respect to taxes, New Mexico has legislated greater harm than
most states and the greatest harm of any state in the region. And that
conclusion is invariant as to whether the harm is assessed by averages
(taxes collected as a percent of income) or margins (tax rates on personal
income and sales/gross receipts).
With respect to restraints on economic freedom imposed by regulation
and litigation, New Mexico also fairs poorly. That assessment is
drawn from the recent Clemson University study Economic Freedom in
America's 50 States: a 1999 Analysis. In that study New Mexico is
ranked 36th out of the lower 48 for freedom from regulation and 37th out
of the lower 48 for freedom from litigation. In the region New Mexico
is next to last for freedom from regulation and last for freedom from
How about government output? Does New Mexico deliver differentially more
and better goods and services that other states in return for the differentially
greater economic freedom given up? The answer is an emphatic no.
Using primary and secondary education for comparison, New Mexico is last
in the region and near the bottom of the lower 48.
The study concludes with an interstate cross-section econometric assessment
of how economic freedom affects prosperity. It uses state and local government
gross state product (gsp) divided by the quantity private gsp plus state
and local government gsp as a measure of restraints on economic freedom
for each state. And it looks at the growth rate of these restraints over
20 years. The results overwhelmingly validate the anecdotal assessments
contained above: The findings can be summarized by what might have been
for New Mexico: If New Mexico now had state and local governments that
were only slightly more coercive than the lower 48 average, then the median
income for 4-person families is estimated to be $8,303 higher and per
capita income is estimated to be $5,476 higher than they are today.
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