N.M. Needs Private Sector To Fill Federal Budget Gap

The recent announcement of job cuts at the Los Alamos labs generated some interesting reactions from New Mexico’s political leaders. By and large, Democrats – even those representing the Los Alamos area – were supportive or understanding, while Gov. Martinez ripped the Obama Administration, calling the cuts a “by-product of the dysfunction in Washington, D.C., and the inability to appropriately prioritize national defense and national security in federal spending decisions.”

I chalk up these reactions to politics. Democrats don’t want to be seen as bashing the Obama Administration while Gov. Martinez will take any chance she can to do so. But, neither side is really telling the full story.

The year-over-year cut to the Los Alamos Labs’ budget is $300 million out of a $2.2 billion budget. That is a cut of nearly 14 percent and is significant to the Labs. However, in the grand scheme of the federal budget which was $1.3 trillion in the red in FY 2012, it is a drop in the bucket.

The major components of the federal budget include military spending (20%), Social Security (20%), health care spending (Medicare, Medicaid, CHIP) 21%, and interest on the debt (6%). Any federal budget plan that fails to dramatically-reform and reduce the size of these so-called “big three” programs is not a serious plan. Falling into national defense as these cuts do, they could represent a move toward more substantive cuts.

Democrats, if they are really serious about cutting spending, need to push the Obama Administration to do a whole lot more cutting than he seems willing to do. It also means that Gov. Martinez and state and local politicians throughout New Mexico can and should get ready for more cuts in federal funds flowing to the state. After all, New Mexico receives approximately $3.35 from the feds for every $1 we pay in federal taxes. Some reduction in that ratio is inevitable.

With that austere outlook, why would I dare say that the prospect of a massive reduction in federal spending is an opportunity for New Mexico? Simply put, it is time for political leaders of all parties here in New Mexico to understand that economic development must be driven by the private sector. Government (and oil and gas) have been driving the New Mexico economy for the better part of our 100 years of statehood.

If the federal government could pump enough money into our state to make us wealthy, we would have been wealthy decades ago. Instead, we are among the poorest states in the nation. In part, this is because our political leadership has not had to make the tough decisions to make our state more competitive. It is also true that while the Labs (both Sandia and Los Alamos) have “spun-off” various technologies to the private sector, the smartest people in our state have been working behind a wall of secrecy for the federal government, not in their garages (a la Bill Gates and Steve Jobs) to develop the latest and greatest home-grown technologies.

It is the Microsofts, Googles, and Apples of this world that generate prosperity. These companies grow, creating the need for new suppliers and inevitably spinoffs that may become major businesses on their own. This is not to discount what the Labs mean to New Mexico, but it is to address the facts that the federal budget is broken and that private sector growth can and must fill the gap.

So, I’d like to have seen a press release from Gov. Martinez say something along these lines: “We in New Mexico have long been beneficiaries of federal largess. But, with the federal government in dire fiscal shape, we encourage Washington to get serious about cutting spending. We in New Mexico, at the same time, need to enact more free market policies in order to become more prosperous.”

The answer to funding cuts at the Labs and to other federal installations in the future is not to complain about the lack of seniority of our representatives. Rather, it is to remind ourselves that the laws of mathematics and economics cannot be repealed or altered for our benefit.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.