Who is protected by a tariff such as SB19?
Intentions are always good when legislators introduce bills that attempt to create jobs in their state.
Senate Bill 19 was a such a bill. Introduced by Sen. Tim Keller, D-Albuquerque and Rep. Larry Larranaga, R-Albuquerque, SB19 would have required a business to be established in New Mexico and paying state taxes for a few years before it could qualify for a preference law that gives local contractors a 5 percent advantage when bidding on public projects.
Evidently, SB19 has broad support – from the business community, legislators, and Gov. Susana Martinez. Yet Martinez vetoed the measure last week, because of a five-word phrase in the bill that became a concern.
The phrase that garnered her veto was the definition of a public body, which included the words “any entity on state-owned land.” She felt that the phrase leaves concerns that private businesses might be included under the definition.
SB19 is a protectionist tariff
Gov. Martinez has indicated she intends to look at the legislation again during the special session to be held later this year. My unsolicited advice to the governor between now and then is to read (or reread) Adam Smith’s “Wealth of Nations.”
In general, Smith rested his case for free markets on one fundamental proposition: “In every country it always is in the interest of the great body of the people to buy whatever they want from those who sell it cheapest.”
I ask, is giving “preferential treatment” to local construction businesses in the best interest of the great body of New Mexico? According to Rio Grande Foundation President Paul Gessing and Fox Business News reporter John Stossel, the answer is no.
Giving “preferential treatment” to local construction businesses is anti-free trade and does not necessarily serve the return-on-investment for the New Mexican taxpayer. According to Mr. Gessing’s position, in construction, there is a web of preferences (or, as Adam Smith would say, “barriers to free trade”) that has been erected in order to improve the prospects of supposedly New Mexico-based construction companies in receiving public construction projects in the state.
“In-state favoritism is bad policy,” Mr. Gessing says. I agree, and I think Adam Smith would have agreed as well.
After all, ultimately, it is taxpayers who lose out because of protectionist policies. If an out-of-state company can do the job better and/or cheaper (thus winning the firm the project), we’d be foolish not to hire it to do the job.
Senator Keller responded to Gov. Martinez’s veto of his bill with the following statement: “With an estimated 3,000 annual jobs at stake this bill is of urgent importance to the business community and job creation in our state.”
Of course job creation is of the utmost importance to our state, but are in-state protectionist policies good for the state overall?
The ‘seen’ and the ‘unseen’
It has been said that the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
The “3,000 jobs” Sen. Keller cites are the “seen.” (Although heavens knows promised jobs legislation has disappointed many times in the past.) The unseen is the placing into law what amounts to a protectionist tariff on the free trade of out-0f-state bids that may be in the best interest of the New Mexican taxpayer in the long run.
I think Gov. Martinez ought not ruminate too strenuously over those five words – “any entity on state-owned land” – over this summer and instead look at the bigger, unseen picture. SB19 is a tariff on out-of-state construction companies. Does this tariff benefit the great body of interest in New Mexico in the long run?
Molitor is a regular columnist for this site. You can reach him at tgmolitor@comcast.net.
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Reading these comments on “free market” and pguessing’s misinterpretation of my comments reminded me of economic theory as expressed in the movie “A Beautiful Mind.” Competition isn’t always the best system. John Forbes Nash shared the Nobel Prize in Economics in 1994 for his ideas on the subject, summarized here:
“Nash began his Ph.D. at Princeton in 1948 — when he was just 20. While he was still only 21, he wrote a 27-page doctoral dissertation on game theory — the mathematics of competition. The great John von Neuman, then at Princeton, had treated win-lose competitions. Now Nash showed how to construct mathematical scenarios in which both sides won. He found stable scenarios where no person continues to profit from competition.
Nash put a whole new face on competition, and he drew the attention of theoretical economists. They turned game theory into a tool. This young genius brought the field to fruition.”
More at http://www.uh.edu/engines/epi983.htm
The movie version of his life, with the scene in the bar, is well done.
Mr. Molitor really does fascinate me – particularly since, as the months go by, his responses have become so much less measured. His response to Ms. Wedum at the beginning of this conversation, for example, claiming that her comments – which specifically addressed his column’s primary thesis – were somehow “off point” is typical of his response to disagreement. Go through the commentary sections of both his and Mr. Gessings columns, and you will see a pattern of Mr. Molitor claiming that dissenting commenters didn’t understand the point of the column; he will then quote a passage of the column and never once address anything they actually wrote, because, quite simply, it never even occurs to him that any intelligent human being could possibly disagree with him.
And now, he’s apparently decided to single me out because I’ve dared to disagree with him repeatedly, and frequently by pointing out massive holes in both his understanding of economics and his strange mathematics. This is a man who spouts bizarre and long-debunked chain e-mail claims about healthcare reform, proposed doing away with several state regulatory boards that protect the safety and well-being of citizens, and specifically stated that people with medical conditions should be allowed to die if they couldn’t afford to pay their own way because insurance companies spending even a fraction of their profits to do what they’re actually being paid to do is bad for business.
Just out of curiosity (and boredeom), I examined the commentary sections of his own columns just now. Since September, there have been (at a very quick count) fifty-seven comments to Mr. Molitor’s columns that disagree with him in whole or in part; of those, twenty-nine included evidence and/or some sort of explanation why they disagreed. Mr Molitor directly replied to a grand total of twenty of the fifty-seven – which is actually a very good response rate.
However, of those twenty replies, only eight contained any further explanation or evidence from Mr. Molitor – and at least two of those actually provided evidence that proved him factually incorrect. At least five included the “did you read my column” tactic, and twelve (over half) included a veiled or direct insult to the commenter for daring to disagree with him in the first place. It should also be noted that most of the comments I find in which he provided explanation or further evidence are older. His more recent comments are usually the ones that contain an insult, and implication of unintelligence by the dissenter, or a complete redirection of the conversation. I suppose I should be honored that of all the people who have disagreed with his complete fabrication of reality, I’m the one he’s decided to single out. Apparently, he sees me as a threat; I, on the other hand, see him as a roadblock to progress… or maybe just a speedbump… or one of those orange cones that driver’s ed students frequently squash.
Thomas Molitor
I think it is a good thing to call out a liar in the blogs. The law doesn’t involve individual s making purchasing choices and being free to buy a consumer item. It is regulating that public tax money should work on behalf of the same public.
Interesting; I once asked Heath the exact same question about your contributions, Mr. Molitor. Indeed, I pointed out (with data to back myself up) that your economic policy positions had about as much credibility as those of Don Schrader.
You a) need to look up the definition of “ad hominem”; b) frequently accuse others of personal attacks if they have specifically addressed policy questions, simply because they dared to disagree with you; and c) constantly make policy proposals based upon a demonstrated ignorance of history, mathematics, the law… and economics, your chosen field.
This is the first time I have ever actually called someone a “liar” on this blog (a term I habitually tend to avoid due to its loaded connotations and, believe it or not, my natural aversion to negative campaigning), and the only reason I used the term this time is because I am going on the rather generous assumption that your good friend Mr. Gessing is not unintelligent and therefore would have no issues understanding what Ms. Wedum very clearly wrote; therefore, his representation must have been either intentional or careless. Since he (and you) have demonstrated histories of rampant misrepresentation, the idea that it is mere carelessness – particularly when numerous contributors have corrected you multiple times – is looking increasingly remote. I am willing to accept, however, that the person he is primarily lying to is himself, and the rest of us merely have to expend precious time and resources combating the dangerous results of his (and your) self-delusion.
@ IP “You have misrepresented our clear position to such a point that you leave me with no choice but to call you out as a liar.”
This is the last time I will address you personally or your distorted points of views. If wedum59 agrees with your hallucinations then my same feelings apply to her. You seem totally devoid of any basic understanding of economics. To call out Mr. Gessing in such a manner, shows your ignorance in discussing economic policy. I don’t think you are capable – nor have you read enough ( or any) economic books – to discuss policy issues rationally. You appear to thrive on ad hominem attacks rather than cite your disagreements backed by rational logic. Seriously, is something wrong with you? I would gladly debate you on a policy level or an economic theory level but your comments don’t seem to demonstrate a capability of engaging in logical debate.
(Part of this comment has been removed by site moderator.)
Mr. Gessing:
You have misrepresented our clear position to such a point that you leave me with no choice but to call you out as a liar. Entirely aside from the fact that this conversation is about labor rather than material goods, no one here said that free trade was bad; what we have said was that trade that goes unregulated by the people is bad. You are so obsessed with your mathematically unsound and historically distopian feudal system that in your desperate attempts to justify your intellectually unsustainable absolutism, you are willing to invent other people’s positions to a degree that is quite frankly unconscionable, to say nothing of laughably immature.
Yep, you geniuses convinced me, free trade is bad. Allowing people the freedom to buy and sell with whoever they want, wherever they are is a terrible idea. We’d all be better off if the government forced us to only buy things made in our own home towns. Wedum et al, will you be the first to give up your automobile (and bus!) and anything else you buy from out of state? Sorry folks, it is an interdependent world and it raises living standards for EVERYONE.
Thank you, IP and gofdisks. I think I may have spent as much time doing the background research and writing that comment as Molitor spent writing his column.
Empirical evidence shows time and again that “In every country it always is in the interest of the great body of the people to buy whatever they want from those who sell it cheapest.” is wrong. This has shown to be a race to the bottom. Why stop at the state border when Mexicans can work the cheapest? Where does it end? We need to provide jobs for New Mexicans so we can pay taxes here and spend money here. Public projects are paid for by the public and should benefit the public by utility, beauty and jobs for our hijos.
Mr. Molitor:
Ms. Wedum not only addressed your arguments, but she provided a more extensive background on the politics behind the very bill you were discussing. As usual, your reaction to arguments from people you disagree with is a complete lack of comprehension.
@wedum59
Please reread my column. Your comments are completely off point. I discuss protectionist policies within the context of a particular senate bill. I am not discussing partisan politics “or who’s out to get whom.” If you do not have the ability to discuss the merits of an economic argument, fine. But I would appreciate it if you would refrain from hijacking my column and sending it in a direction that has nothing to do with the economic principle under discussion.
Molitor writes, “I ask, is giving “preferential treatment” to local construction businesses in the best interest of the great body of New Mexico?”
Hmmm, I consider those local people to be part of my community, and, yes, I want to see them given preferential treatment. Neighbors should look out for neighbors. It is not all about “me and my best interests” (though this does seem to be the attitude of many Republicans, and Democrats too).
Furthermore, Martinez seems to have it in for Democrat Tim Keller, who consistently sought out Republicans, like Larrañaga and Bandy, to cosponsor his legislation. Of the 8 bills sponsored by Keller et al that passed both Houses, Martinez personally vetoed 5 of them (SB 017, SB 019, SB 025, SB 047 and SB 187), and pocket vetoed 2 more (SB 063, SB 237). Of the ones she personally vetoed, 3 passed both Houses unanimously (SB 025, SB 047 and SB 187) and one (SB 019, the subject of this essay) passed both houses with only one dissenting vote– and that was from Democrat Tim Jennings.
The only one she personally vetoed that seems to have generated any controversy was SB 17, the one removing the governor from the State investment Council–that one was opposed by 20 legislators, all Democrats! You would think that Martinez would be hugging this kid. Keller should be nominated for that bipartisanship award I have heard mentioned.
The two that were pocket vetoed were SB 063 and SB 237. SB 63 generated controversy, but SB 237 was opposed by only 3 senators. Wow, one of them was even a Republican.
The only one of Keller’s 8 bills that Martinez did NOT veto was SB 044, “FILM PRODUCTION TAX CREDIT TRACKING & REVIEW.”
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