Saturday, January 12, 2013

New Mexico - Getting Serious About Economy Growth

A "Big Picture" of Prosperity

It's usually a mistake to discard possible first steps because they are so much smaller than the big problem they are addressing.  By the time a proposal for real action has fought its way to the discussion table, all those gathered there have already been quite thoroughly impressed with the scope and gravity of the issue which prompted the meeting in the first place.

The idea here qualifies as one of those "first steps."  As we proceed, we can remember one of the criteria for effective "economic development" which we've mentioned before.

The basic premise is that any proposal which will increase discretionary wealth broadly -- all across the state and in all socio-economic classes -- will actually serve to prepare the field for all sorts of demand.  Of course that demand will offer a specific market for the products of any type of development, but even more interesting, when New Mexico's citizens have increased discretionary wealth broadly distributed, demand also begins to show up in manner of other areas.

For example, if the State of New Mexico were to lower taxes significantly for the majority population of state residents, discretionary wealth would increase and demand would also increase.  If the change which caused this were lower taxes, the resulting increase in demand would be largely in the areas where there had been demand before.

The market created by such a broad increase in discretionary wealth would not be directed exclusively at anything specific.  It would probably manifest itself pretty much as an increased demand for everything -- an increased demand for all the things that were in demand before.

If you're thinking about the old aphorism, most recently made famous by President Bill Clinton, that "a rising tide lifts all boats," we're on the same page!

Now, MeanMesa is not proposing a reduction in state taxes.  However, the rest of this scenario sounds rather appealing.  Immediately we confront the question.

"If New Mexicans are not going to have more discretionary wealth because the state lowered their taxes, what else could cause such a thing?"

If there were to be a satisfactory to answer to that question, we'd be in business.  Well, we're in business!

Here we go.

Demand Economy's "List" from Our Last Post
Just a paragraph to get things started.

Considerations for re-thinking "economic development:"

1. The scope of job creation

2. Keeping demand close to home

3. Government has a role

4. "Job Creation" vs. "Economic Development"

Let's begin with number 4.

If we wanted to change the picture painted by the "poorest state in the union" designation, we could think of everyone just having more money in their bank accounts, fewer unpaid bills, a better standard of living or so on.  That, however, would be a static sort of remedy.

Instead, let's think more along the lines of a steadily improving economic cycle.  In that case New Mexicans would have jobs, get pay checks and purchase products manufactured by New Mexicans in New Mexico.  Naturally, there would then be a demand for more products to be produced, more products being sold, more jobs to be done, more pay checks to be written -- you get the picture.

Once the cycle began to turn on its own steam, the "poorest state in the union" label might be able to go elsewhere.  Here in New Mexico, economic conditions might just be beginning a steady, long term ascent.  The faster and more powerful the economic cycle, the more innovation and invention might begin to surface. 

The better the state's economy became, the better the state's economy could become!  Still, we must remember that the gears of real economic development not only begin to turn slowly, but that in New Mexico's case, we'll have to start at the foundry.

How does MeanMesa propose to increase discretionary wealth for New Mexico citizens? 

By lowering their gas bills.

We can look at an outline of the MenaMesa proposal right here.  However, as usual, the "devil is in the details."  MeanMesa intends to handle the "details" in the next post on this subject after we tie up a few loose ends on economic, social-cultural and ideological matters with this one.

The MeanMesa Windows Modernization Proposal

The over all goal of the proposal is to replace the inefficient casement windows which saturate every corner of our State with very affordable, modern insulated windows.  The replacement windows would be manufactured inside New Mexico.  The financing necessary for the purchase the new windows would be provided by State of New Mexico programs.  The installation labor would be performed exclusively by New Mexicans, trained, bonded and certified to do this work.  Both home owners and renters -- everyone who pays a monthly heating bill -- would benefit from the program.

Wow!  There is no doubt that this quick summary of the idea poses more questions than answers.  As mentioned before, this post will focus on the "big picture" questions while the future post will focus on the mechanics of implementing the program.

Let's also add in a few facts about our State.  This data comes from the US census, and is current for 2011.  [Read the whole report ]

Data Category                                    New Mexico       USA

Housing units, 2011 908,132132,312,404
Homeownership rate, 2007-2011 69.6%66.1%
Housing units in multi-unit structures, percent, 2007-2011 15.0%25.9%
Median value of owner-occupied housing units, 2007-2011 $161,800$186,200
Households, 2007-2011 762,002114,761,359
Persons per household, 2007-2011 2.622.60
Per capita money income in the past 12 months (2011 dollars), 2007-2011 $23,537$27,915
Median household income, 2007-2011 $44,631$52,762
Persons below poverty level, percent, 2007-2011 19.0%14.3%

To round things out a bit, we should also include one more line from the analysis.

Data Category                             New Mexico          USA
Population, 2011 estimate                             2,082,224          311,591,917

We see in this data that New Mexico has 900,000 housing units.  About 70% of these are owned by the people who live in them, that is, around 630,000. [There is a bit of a mix between "multi-unit-housing units" and "rentals," but this won't particularly alter the proposal being presented.]

We are, however, interested in the following relationship.  Beginning with the 19.0% of New Mexicans below the poverty level in 2011, we can add a good number of New Mexicans who are above the poverty level but below the  economic echelon wealthy enough to have good, efficient, thermal windows in their homes.  Let's say that we can add another 50% of households, making the rough estimate of households which could benefit from having better windows around 50,000 to 55,000.

If the discretionary income of 50,000 households in the State could be increased with the increment which would result from reducing monthly gas bills, a steady, growing amount of additional "fluid" money [discretionary] would be introduced into the State's wealth cycle, and some of our ideas about creating a "demand economy" would suddenly be "getting legs."  Of course we don't know exactly what consumer products that increased demand would be targeting, but we do know that increased demand will be one of the key "ingredients" of real economic development.

MeanMesa's "fast and loose" interpretation of "discretionary" money only corresponds to the traditional definition loosely.  Here, the term means money which will not be immediately consumed by normal expenses of living while not necessarily money which will be directed toward the purchase of a Chinese flat screen television on credit.  However, the presence of additional money in the New Mexico economy is the real engine of economic growth -- almost without respect to how it is spent.

State Government Pulls Off the "Blindfold"

There have been a few State and Federal fund allocations dedicated to "weatherization."  Unhappily, the words which typically follow that program title are: "for home owners."

When we look at this through MeanMesa's, fairly frequently manifested, "wealth redistribution" eyes, we see, well, a classic case of classism.  This reactionary phenomenon has not been just one swift blow, either.  It has been relentless -- always with the spoken or unspoken goal of divisiveness.  The class selective  "weatherization" schemes are not only "not an exception," they have provided  glaring, brazen examples.

Anecdote Number One:

Here an anecdote might help.  MeanMesa's Albuquerque Galactic Head Quarters, regardless of what grand fantasies about it our visitors may have had, is a two story, two bedroom, 800 square foot apartment -- built in 1961.  The estimated part of the monthly gas and electric bills which can be attributed to heating the place ran around $80 last month [the total of both bills was $130].

From the INSIDE - a 50 year old casement window at Galactic Head Quarters.

The point here is simple.  The cost of heating a well constructed, well insulated house with 2,000 square feet of floor space would probably be about the same as the cost of trying to heat this 60 year old, 800 square foot apartment. You can look at the photo of the window and see that it never gets particularly warm in here between November and May regardless of how much the natural gas furnace is operated.

This high end comparison example would be a house with insulated windows.  The photo above was taken of the windows in this apartment.  This is the interior view.

Anecdote Number Two:

The high end windows in the well insulated house are expensive.  MeanMesa's attention was caught be a radio advertisement from a local window supply business.  The offer was for a discount.

A discount of $2,500.00.

If a home owner were to purchase a "complete set" of these windows, he would receive the $2,500.00 discount on the full price.  We can only imagine what the "full price" might be when the discount is $2,500.

To be fair, this is not a critique of expensive windows and it is also not a plebian complaint about the luxuries and indulgences of being in the monied class. Those high end windows are, no doubt, impressive marvels of technology and design.  For example, the thermal barrier of some high end insulated windows are filled with helium gas.

Still, the picture this paints is not a nice one.

The residents who own their "housing units" have, traditionally, qualified for government -- tax payer financed -- subsidies for weatherization.  The "other citizens" who live in rented "housing units," have consistently been left with what they've got -- in almost every case an apartment or mobile home with twenty to forty year old, uninsulated windows and the monthly heating bills which go with them.

There is plenty of incentive for a home owner to purchase effective insulating windows to make his house energy efficient, but throughout all these legislated weatherization subsidies, there has never been an incentive for a land lord or rental owner to modernize or insulate anything.

Driving the stake just a little deeper into the foot of the typical, shivering rental resident, his tax money has very possibly not only paid his sky high utility bill, it has also paid for the subsidy such "energy saving" legislation made available to weatherize that same house somewhere in the northeast suburbs with the high end windows.

We could get technical and attempt to define this as an Amendment 14 "suspect discrimination" issue or a few other things, but there's no need.  It's crooked, and it's wrong.  Perhaps the stinkiest part of it is that the ALEC parasites are always waiting in the wings to scoop up their cut before the money even gets out of Santa Fe.

To recap the weatherization and window discussion, a few points emerge right away.  They are not too dissimilar from the list of features of the demand economy.

1. If there is going to be a state financed program to manufacture and install efficient, affordable windows in the places which need them, the cost per window will have to be low.  Instead of a $2,500 discount, all the windows in a small home should be priced so they can be purchased and installed for less than that.

Cheap, easy to install, efficient windows will have to be designed -- at first, probably in just a couple of standard sizes.  MeanMesa read an interesting article about windows.  Maybe some of these folks -- from the factory floor -- could help us out with this. [Read an article here. There is plenty of coverage of this unfolding story.]

2. The State government of New Mexico will need to provide affordable financing for the purchase and installation of the windows.  Somewhere in the depths of the current annual $1.3 Bn "economic development" well, there will have to be a few million to allocate to something that might actually work.

3.  The State will also have to finance the design and construction of the first -- or first several -- factories where the windows will be manufactured.  The State of New Mexico will, at least temporarily, own the manufacturing facility.  When we refer to "manufacturing facility," we mean everything associated with the project.  The employees and managers will need to be trained, suppliers will need to be organized, necessary transportation must be considered and the financial structure established.

For some reason, MeanMesa sees a lot of released prisoners employed in the window factory.  Jobs for them pay an extra dividend!

Once windows are flowing out the factory, installation crews all over the state will be required for getting the efficient windows installed.  The number of these installation teams will be large and will comprise some real job creation -- not dozens, hundreds.  The installers will need to be managed, trained, transported, housed, hired and fired.

The team which can process and approve applications for credit to purchase the windows will also need their own training, management and facilities.  Management for the project will have to originate in the Round House.  This  includes the criteria for qualifying for the State loan guarantees.

Have we been electing people capable of running this?

MeanMesa will be posting the details of what we expect from Santa Fe.  

Just in case you may think this is an exaggeration, have a look at the following Channel 4, KOB, reporting on jobs.  [Read the article here. ]

New Mexico losing jobs 

while surrounding states gain

The latest numbers from the U.S. Department of Labor portray New Mexico as a desert island of lost jobs surrounded by neighboring states where employment is increasing and the economy is recovering.

They say misery loves company, but poor old New Mexico is all by itself among the western states. The misery map tells the story.

States all around us are growing jobs. Texas - up 274,000 jobs in the twelve months from November, 2011 to November, 2012. Oklahoma - an increase of 38,000 jobs in that same period. Colorado saw an increase of 51,000 jobs, Utah enjoyed growth of 38,000, and in Arizona they can brag about 60,000 new jobs. Meanwhile New Mexico lost 4,800 jobs.  The Albuquerque metro area lost 3,900 of those jobs, the worst record of any American metro area in the twelve month time frame.

That grim picture is in sharp focus these days at the University of New Mexico, where students are looking at the prospect of graduating into a shrunken economy with fewer jobs for the ones who want to stay here.

"I will be lost looking for a job," said UNM student Adriana Ortiz. "That's actually how I am right now. I'm in school but I'm looking for a job at the same time and I'm finding that to be a battle."

"You never know what's going to happen here," said student Steven Charles, who plans a nursing career through the Army Reserves. "It's kind of iffy depending on each year. You never know what job is going to be available and students might have to change their major just to find a job that could suit them."

"My plans are to actually go into criminal prosecution," said UNM law student Dorie LePaul. "In this state that's a pretty healthy standby. You always consider that criminals are going to be around."

Gov. Susana Martinez is proposing a package of tax breaks and incentives to attract employers to New Mexico, including a big cut in the corporate income tax. When state lawmakers convene for their sixty day session next week, that package will be on the table, along with the lawmakers' own proposals for the economy.

New Mexico can simply not continue to dither around on this problem.  The social impacts and the poverty elevate a solution for this to a grave importance.  The task before us is to find a way through the paralysis -- a way which won't hand over another truck load of State money to the parasites in ALEC, either.  While the "economic development" folks are still talking private jets and computer factories, MeanMesa will keep posting ideas.
There are plenty of them.

A note from MeanMesa

The next post on New Mexico Works -- NMW -- will be all about putting this plan in front of the people we have elected.  It will also include a discussion of incentives for land lords to install efficient windows in their rental units.

Please visit MeanMesa for the next post on this important subject.  This isn't a modern version of FDR's WPA, but he would probably approve.

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