Posts tagged ‘AZ’

Cronyism, State by State

I get sent a lot of infographics and I generally just delete them but I thought this one was pretty good.  The largest recipients of corporate welfare from state governments.  Perhaps appropriately given the tilt of our economy here, our largest recipient in AZ is a real estate developer.

click to enlarge

The Dangers of Bipartisanship

The media loves to talk about the joys of bipartisanship, but libertarians run for the hills whenever we hear that word.  Because it means that true legislative suckage is probably on the way.   The horrendous war on drugs is just one example.

Here is another -- freedom to buy alcohol where it is most convenient.  Living in AZ, I have come to expect that I can buy some tequila at my grocery store, but apparently this is a very limited freedom in the US:

AlcoholGroceryStores_Liquor4

There are two reasons.  First, this is where you get one of those left-right coalitions, with Republican social conservatives wanting to limit liquor availability and Democratic big government types wanting to keep sales to a small group that can be tightly regulated (and strip-mined for campaign donations), or even better, to state-run liquor stores.  The second reason is that once any regulation is in place that restricts sales, the beneficiaries of those restrictions (e.g. liquor stores or unionized employees at state-run stores) fight any liberalization tooth and nail to protect their crony rents.

The Government's One Cost Advantage: It Can Exempt Itself from Regulation

Greg Patterson brings us this example from the AZ legislature, but this sort of thing is ubiquitous:

Just before I got to the Legislature, there was a big move to regulate day care facilities.  Naturally, the government has a role in establishing basic health and safety standards for facilities that take care of young children, so I thought it was a good move.

Then a funny thing happened.  The Legislature established one set of standards for private day care facilities and a different (lower) set of standards for public or non-profit day care facilities.  Some Legislators dared to ask why the health and safety rules would be different depending on what type of entity owned the facility.  After all, if a rule is really in place to keep a child healthy and safe, why should a publicly owned facility be exempt or have a lower standard?

The answer, of course, is that there's no reason for publicly owned facilities to have a different regulatory regime than private facilities and that these bills were really just disguised attempts to ensure that private day cares couldn't compete with public ones

We are facing something similar in my world.  As you may know, my company operates government parks and campgrounds on a concession basis (which means we get no government money, we are paid by the user fees of visitors).  This makes sense because we can do it less expensively and usually better than the government agency.

Recently, the Obama Administration has imposed an executive order that we concessionaires on Federal lands have to pay a $10.10 minimum wage.  Since most of our costs are labor, this is causing us to have a to raise fees to customers substantially to offset the higher costs.

In response to these fee increases, the US Forest Service in California is in the process of taking back traditionally concession-run campgrounds to run themselves, in-house.  Their justification is that they can do it cheaper.   Part of this is just poor government accounting -- because many costs (risk management/insurance, capital assets, interest on investments) don't hit their budgets but show up on other parts of the government's books, what appears to be lower costs is actually just costs that are hidden.  But their main cost savings is that since the Federal government is exempt from labor law and this new executive order, the Forest Service can staff the park with volunteers.  They are allowed to pay a minimum wage of ... zero!

This is just incredibly hypocritical, to say with one statement that private companies need to pay campground workers more and with the very next action take over the campground and staff it with people making nothing.

When Media Cheers for Corporate Welfare -- Local Film Subsidies

I am always amazed that the media will credulously run stories against "corporate welfare" for oil companies (which usually mostly includes things like LIFO accounting and investment tax credits that are not oil industry specific) but then beg and plead for us taxpayers to subsidize movie producers.

I wish I understood the reason for the proliferation of government subsidies for film production.  Is it as simple as politicians wanting to hobnob with Hollywood types?  Our local papers often go into full sales mode for sports team subsidies, but that is understandable from a bottom-line perspective -- sports are about the only thing that sells dead-tree papers any more, and so more local sports has a direct benefit on local newspapers.  Is it the same reasoning for proposed subsidies for Hollywood moguls?

Whatever the reason, our local paper made yet another pitch for throwing tax dollars at movie producers

Notwithstanding a recent flurry of Super Bowl-related documentaries and commercials that got 2015 off to a good start, Arizona appears to be falling behind in a competitive and lucrative business. The entertainment industry pays well, supports considerable indirect employment and offers the chance for cities and states to shine on a global stage.

Seriously?  I am sure setting up the craft table pays better than catering a party at my home, but it is a job that lasts 2 months and is then gone.  Ditto everything else on the production.   And I am sick of the "shines on the world stage thing."  Who cares?  And is this really even true?  The movie Chicago was filmed in Toronto -- did everyone who watched Chicago suddenly want to go to Toronto?  The TV animated series Archer gets a big subsidy from the state of Georgia.  Have they even mentioned Georgia in the series?  Given the tone of the show, would they even want to be mentioned?

When government subsidizes an industry, it is explicitly saying that resources are better and more productively invested in the subsidized industry than in other industries in which the money would have been spent in a free market.  Does the author really have evidence that the money I would have spent to improve the campgrounds we operate in Arizona is better taken from me and spent to get a Hollywood movie shot here instead?  Which investment will still be here 6 months from now?

Arizona is one of 11 states that don't offer tax incentives, primarily in the form of income-tax credits, and that's the core of the problem. There's also no state film office to help out-of-state crews obtain filming permits, locate vendors, hire temporary staff and so on.

Arizona's tax incentives expired after 2010 and the film office closed in the wake of a recession that hit the state especially hard and necessitated tough spending choices. Although bills to revive those programs have been introduced, they're not given high odds of success in the current session as the governor and lawmakers struggle to close $1.5 billion in deficits over this year and next.

"Right now, there's nobody to call, the phone isn't being answered and nobody responds to e-mails," said Mike Kucharo, a local producer and director who serves as the state-government liaison for the Arizona Production Association, an entertainment trade and networking group. "We need a film office."

Yeah for us!  While all the lemmings in other states bid up the price of a few politicians being able to get their picture with Hollywood types on a production set, we have chosen not to play.  Good for us.  Only an industry insider clown with a straight face could say that we need a taxpayer-funded film office.  Really?  Do we need a taxpayer-funded florist office to attract flower sales?

Years ago I wrote an article calling sports team subsidies a prisoners dilemma game, where the only winning move was not to play.  The NFL has 32 teams, mostly in the largest cities.  Without subsidies the NFL would have ... 32 teams, mostly in the largest cities, and taxpayers would have saved billions of dollars.  The same is true for film:

Indeed, the number and size of incentives escalated from just two states offering $2 million in combined incentives in 2003 to 40 states offering $1.2 billion just six years later, according to the Tax Foundation.

So subsidies have gone up by over a billion dollars a year, and yet roughly the same films are being made.  This is one of the best examples I can think of where politicians are using taxpayer money to increase their personal prestige.  The AZ Republic should be embarrassed they are out front actively encouraging this behavior.

Postscript:  For all of its flaws in teaching real-world relevant business topics, the Harvard Business School was very good, at least when I was attending it, at teaching business strategy.  My memory may be fuzzy here, but I am pretty sure that "40 other groups have all jumped into this activity and have ramped up their spending by a factor of 50 in just six years and all 40 competitors are really focused on winning almost irregardless of the price they pay" is not a very good pitch for investing money in a new field.

Postscript #2:  All of this is a wonton violation of the AZ state Constitution, though of course big government advocates are really good at totally ignoring Constitutional limits on government power.  Here is what our Constitution says:

Section 7. Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law or as authorized by law solely for investment of the monies in the various funds of the state.

Update:  From the Manhattan Institute, film tax breaks return 30 cents for every dollar spent

Similar to most targeted tax breaks, movie production incentives routinely fail to deliver on the economic promises made by their proponents. Supporters frequently claim movie incentives create jobs and lead to net gains in tax revenue. However, data from several states find movie production incentives generate less than 30 cents for every lost dollar in tax revenue.

Providing tax breaks specifically to the film industry is an example of government working to choose winners and losers in the marketplace. States could attract almost any industry if they paid for a quarter to a third of its expenditures, but such a policy would be fiscally unsustainable. A better system would be to lower state tax rates for everyone, encouraging economic growth.

Film is a particularly poor industry to subsidize because it does not create long-term employment and other lasting economic benefits for states. Even though a well-made film might boost tourism, productions only offer short-term employment and the workers are highly specialized. Production and workers can easily move from one location to wherever better deals are offered.

Update #2:  The AZ Free Enterprise Club was on this last month

Infrastructure Bait and Switch

President Obama wants to spend something like a half trillion incremental dollars on "infrastructure".  I have found that these initiatives to sell infrastructure tend to be great bait and switch programs.  Infrastructure is generally the one type of government spending that polls well across all parties and demographics.  So it is used by government officials to pass big spending increases, but in fact what really happens is that the government takes a wish-list of stuff that most of the public would not be OK with increasing spending on, then they put a few infrastructure projects on top like a cherry to sell the thing.  They call it an "infrastructure" program when in fact it is no such thing.

Obama would never do that, right?  Hope and change?  In fact, he already has.  The first time around he sold the stimulus bill as mainly an infrastructure spending bill -- remember all that talk of shovel-ready projects?   Only a trivial percentage of that bill was infrastructure.  At most 6% was infrastructure, and in practice a lot less since Obama admitted later there were no shovel-ready projects.   (also here).  The rest of it was mainly stuff like salary support for state government officials.  Do you think he would have as easily sold the "wage support for state government officials" bill in the depth of a recession?  No way, so he called it, falsely, an infrastructure bill.

The other bait and switch that occurs is within the infrastructure category.  We have seen this at the state level in AZ several times.  Politicians love light rail, for some reason I do not understand, perhaps because it increases their personal power in a way that individual driving does not.  Anyway, they always want money for light rail projects, but bills to fund light rail almost always fail.  So they tack on a few highway projects, that people really want, call it a highway bill and pass it that way.  But it turns out most of the money is for non-highway stuff.  That is the other bait and switch that occurs.

Expect to see both of these with the new infrastructure proposal.

By the way, Randal O'Toole has a nice summary of the drawbacks of light rail and trolley spending

For the past two decades or so, however, much of our transportation spending has focused on infrastructure that is slower, more expensive, less convenient, and often more dangerous than before. Too many cities have given up on trying to relieve congestion. Instead, they have allowed it to grow while they spend transportation dollars (nearly all paid by auto users) on other forms of travel such as rail transit. Such transportation is:

  • Slower: Where highway speeds even in congested cities average 35 miles per hour or more, the rail transit lines built with federal dollars mostly average 15 to 20 mph.
  • More expensive: In 2013, Americans auto users spent less than 45 cents per vehicle mile (which means, at average occupanies of 1.67 people per car, about 26 cents per passenger mile), and subsidies to roads average under a penny per passenger mile. By comparison, transit fares are also about 26 cents per passenger mile, but subsidies are 75 cents per passenger mile.
  • Less convenient: Autos can go door to door, while transit requires people to walk or use other forms of travel, often at both ends of the transit trip.
  • Less safe: For every billion passenger miles carried, urban auto accidents kill about 5 people, while light rail kills about 12 people and commuter trains kill 9. Only subways and elevateds are marginally safer than auto travel, at 4.5, but we haven’t built many of those lately.

Republican Hypocrisy: On-Again, Off-Again Federalism

Both political parties have issues on which they are systematically rank hypocrites.  Republicans are particularly so on Federalism, or on the power of states vs. the Federal government.

In the last week, an AZ Republican has proposed to defend Federal law against state pre-emption:

A Flagstaff lawmaker is hoping to throw a new roadblock in the path of those who want to legalize marijuana in Arizona.

Only thing is, his plan may be too little – and too late.

The measure by Republican Rep. Bob Thorpe would spell out that any voter-sponsored initiative that proposed anything that conflicts with federal law could take effect only if approved by 75 percent of those who cast ballots. Right now, a simple majority is all that is needed.

Thorpe told Capitol Media Services he has one particular measure in mind: a proposal by the Marijuana Policy Project to get voters here to adopt a Colorado-style law legalizing the recreational use of marijuana.

He pointed out that marijuana use remains illegal under federal law. Yet Arizona voters decided in 2010, by a margin of just 4,340 votes, to allow the use of the drug for medical purposes.

Wow, principled stand for the rule of law, right?  Well, just year or so ago the same AZ state Republicans put on the ballot, and got passed, a Constitutional amendment essentially pre-empting large parts of the PPACA, a different Federal law:

Section 2.

A. To preserve the freedom of Arizonans to provide for their health care:

1. A law or rule shall not compel, directly or indirectly, any person, employer or health care provider to participate in any health care system.
2. A person or employer may pay directly for lawful health care services and shall not be required to pay penalties or fines for paying directly for lawful health care services. A health care provider may accept direct payment for lawful health care services and shall not be required to pay penalties or fines for accepting direct payment from a person or employer for lawful health care services.

B. Subject to reasonable and necessary rules that do not substantially limit a person's options, the purchase or sale of health insurance in private health care systems shall not be prohibited by law or rule.

And just so it is understood that this is not some populist end-around Republican legislators, these same Republicans passed a bill last year, vetoed by the Governor, to essentially ban enforcement of Federal health care law

Arizona - S 1088, passed House and Senate; vetoed by governor, May 28, 2011. Would oppose any state role in compulsory participation in a health care system or purchase of health insurance; would prohibit any government official from enforcing prohibitions on purchase or sale of health insurance in private health care systems otherwise authorized by the laws of the state; would affirm a right to direct payment or purchase of lawful health care services; would prohibit threats of penalties, fines, taxes, salaries, wage withholding, surcharges or fees to punish or discourage the exercise of such right. Also would establish an Interstate Health Freedom Compact, to unify states opposing the ACA.

In the last several years, I can count at least four "principled" positions taken by AZ Republicans on Federalism:

  1. State law should not pre-empt Federal law (marijuana criminalization)
  2. State law should pre-empt Federal law (Obamacare)
  3. States should enforce Federal laws that we think the Feds refuse to enforce sufficiently aggressively (immigration)
  4. States should prevent the Feds from enforcing Federal law when we think they are being too aggressive in enforcing (Grand Canyon National Park closure during shutdown)

So there you have it.  Pick a position, stick to it.

If You Like Your Health Plan...

We received a letter from Blue Cross / Blue Shield of AZ saying we could keep our plan, but the cost goes from about $579 a month to $739 a month in January of 2015 (a 27.6% increase).  Note that this is for a pretty high deductible health plan, something like $5000.  We wrote to our broker to explore options.  We got this response:

Crazy as this latest BC [Blue Cross] rate increase is it is a lot better than Obamacare.  I ran the same plan under the Affordable Care Act with BC and the rate for 1/1/15 would be $963.70 a month and if you went to the $6300 deductible plan the rate would still be $914 a month.  So I guess we are all lucky to be out of ACA until we are forced into it.  Now there is one variable that could lower your cost and that is if your household income in 2015 will be under $92k you could go into the Marketplace for premium assistance from our wonderful Federal government. If it is going to be higher than that be grateful you are where you are!

As predicted in advance, Obamacare and the exchange are not about saving money.  The only people who are saving money are those getting taxpayer subsidies in the exchange.

Orwellian Government Language Update

In all the states we operate in, sales tax registrations are open-ended.  This means that once you register for a sales tax license, you keep it without having to do any sort of renewal.  However, there are penalties for not reporting every month on an active license, so there are pretty strong incentives to report a closed license as soon as one is not using it.  In effect, your monthly report is your renewal.

For some reason, Arizona has decided that it needs to put businesses through an annual renewal process for sales** tax licenses.  I have no idea why.  Even California does not make folks jump through this hoop.  Anyway, I chuckled at the name they assigned to this change: "TPT Simplification Program."  Because everyone knows that adding an extra paperwork step each year is a simplification.  I guess it simplifies the process of keeping their employment numbers up at the Department of Revenue.

 

** AZ actually call its sales tax a "transaction privilege tax."  Since I do not consider voluntary business transactions between two individuals to be a "privilege" that can only be granted by the state, I refuse to use the term.

With the Advent of Mandatory Paid Sick Leave in California, Here are a Few Sick Leave Excuses

The AZ Republic rounds up some actual sick leave excuses people have tried:

"I accidentally got on a plane" was on the list of most dubious excuses for calling in sick to work, according to a recent survey by careerbuilders.com.

"I just put a casserole in the oven," "I need to tweak my botched plastic surgery," and "I broke my ankle after my leg fell asleep while I was sitting on the toilet," were among other hilarious, yet real, excuses that employers reported.

The survey found that 28 percent of employees called in sick when they were feeling well, down from 32 percent last year, and that one in four employers have caught an employee faking sick through social media.

There are more at the link.

We get very, very little of this, so we are lucky to have great employees.  Since many of my employees are in the 70s, 80s, and even 90s (really), employee absences are generally real, quite serious health concerns.  Besides, since most of my employees live on the work site, it is a little harder to fake this kind of thing.

It will be interesting what having the incentive of getting paid, in addition to just skipping out of work, will do to this.

Gay Marriage in AZ

Good:  A judge has ruled that Arizona's same-sex marriage ban is unconstitutional.  I suppose I am a little torn over judicial overreach here, but enough freedom-robbing stuff happens through judicial overreach that I will accept it here in my favor.

Republicans should rejoice this, at least in private.  From my interactions with young people, there is nothing killing the R's more than the gay marriage issue.  Young people don't understand squat about economics, but they are pretty sure that people fighting gay marriage are misguided (they would probably use harsher language).  Given that R's hold a position they are sure is evil (anti-gay-marriage) they assume that Progressive attacks that R's are evil on economics must be right too, without actually understanding the issue.  In short, young people reject the free market because its proponents hold what they believe to be demonstratively bad opinions on social issues.

I learned a real lesson about politics from my brief involvement in this issue -- which is, don't ever become involved again.  I am still frankly reeling from the refusal of gay rights activists to work with our group because I and others involved did not hold other Left-wing opinions.  Until this time I had a fantasy that libertarians could make common cause with the Left on social issues and the Right on fiscal and commerce issues, but I saw how this was a pipe dream.

Forget Halbig. Obama May Have Lost the Senate By Giving Subsidies to the Federal Exchange

In Halbig, the DC Circuit argued that the plain language of the PPACA should rule, and that subsidies should only apply to customers in state-run exchanges.  I am going to leave the legal stuff out of this post, and say that I think from a political point of view, Obamacare proponents made a mistake not sticking with the actual language in the bill.  The IRS was initially ready to deny subsidies to the Federal exchanges until Administration officials had them reverse themselves.  When the Obama Administration via the IRS changed the incipient IRS rule to allow subsidies to customers in Federal exchanges, I believe it panicked.  It saw states opting out and worried about the subsidies not applying to a large number of Americans on day 1, and that lowered participation rates would be used to mark the program as a failure.

But I think this was playing the short game.  In the long game, the Obama Administration would have gone along with just allowing subsidies to state-run exchanges.  Arizona, you don't want to build an exchange?  Fine, tell your people why they are not getting the fat subsidies others in California and New York are getting.  Living in Arizona, I have watched this redder than red state initially put its foot down and refuse to participate in the Medicaid expansion, and then slowly see that resolve weaken under political pressure. "Governor Brewer, why exactly did you turn down Federal Medicaid payments for AZ citizens?  Why are Arizonans paying taxes for Medicaid patients in New Jersey but not getting the benefit here?"

Don't get me wrong, I would like to see Obamacare go away, but I think Obama would be standing in much better shape right now had he limited subsidies to state exchanges because

  1. The disastrous Federal exchange roll-out would not have been nearly so disastrous without the pressure of subsidies and the data integration subsidy checks require.  Also, less people would have likely enrolled, reducing loads on the system
  2. Instead of the main story being about general dissatisfaction with Obamacare, there would at least be a competing story of rising political pressure in certain states that initially opted out to join the program and build an exchange.  It would certainly give Democrats in red and purple states a positive message to run on in 2014.

AZ Corporation Commission's Completely Inadequate Response to My Critique on their Site Security

A while back I wrote about my concerns about the total absence of any security at all in the Arizona corporate annual reporting system

I started the annual reporting process by just typing in the name of my company and getting started.  There was no password protection, no identity check.  They had no way of knowing I had anything to do with this corporation and yet I was answering questions like "have you been convicted for fraud."  The potential for mischief is enormous.  One would have to get the timing right (an annual report must be due before one can get in) but one could easily open the site on January 1 and start entering false information in the registrations for such corporations as Exxon and Wal-Mart.

See for yourself.  Here is their web site.

I showed how one could open and file the report for a company like Wal-Mart, changing all their officers names, and confessing to all sorts of imagined corporate crimes

Again, note what I am saying.  This is not the result of hacking.  This is not lax security I figured out how to evade.  This is the result of no security whatsoever.  I simply went to the link above, clicked on the Wal-Mart Associates link, and then clicked on the annual report link.  I know from doing my own registration that there is a signature page at the end, but all you do is type in the name of an officer and a title -- data that is right there on the site.  It's like asking you for a password after the site just listed all the valid passwords.

The head of the Arizona Corporation Commission wrote me back. Here is here email in its entirety:

Dear Mr. Meyer:

Thank you for your email regarding the Corporations Division.  The Arizona Corporation Commission is the repository for all business formation documents for corporations and limited liability corporations.  We are in full compliance with state statutes.

Submitting false documents to alter another’s corporate structure or status is a crime and carries a Class 4 or Class 5 penalty.  The Commission or the aggrieved business entity may refer the false filing to the Attorney General’s office for prosecution.  Additionally, the individual business entity may pursue a civil cause of action.  The Commission only accepts on-line charges for a few services such as name reservation or to order a certificate of good standing, and the online payment process is completely secure.

Even though the Commission’s existing security measures comply with the state law and are similar to most other states and other Arizona governmental entities like the County Treasurer’s Office, the Commission is looking at implementing new technology to allow for the online submission of additional services – such as the filing of original Articles of Organization and Articles of Incorporation.  We do intend to provide password protected security features when that new technology is offered to the public.

J. Jerich

Executive Director

Arizona Corporation Commission

I had no doubt that submitting a false annual report for Wal-Mart would be illegal.  Duh.  However, it is just incredibly naive that this is the sole extent of the Commission's security, to prosecute people once the damage is done.  Can you imagine if Amazon had the same security policy - "we are getting rid of passwords because it would be illegal for you to buy something from someone else's account."  I wonder if the commissioners leave their doors unlocked at night, trusting in the threat of future prosecution to deter burglary and mayhem in their homes?

Arizona Corporation Commission Web Site is Criminally Insecure

Today I had to do my annual renewal of my corporate registration in Arizona.  As in most states, this involves a bit of information foreplay followed by the purpose of the exercise -- sending in a check to the corporation commission.

But here is the extraordinarily scary part -- I started the annual reporting process by just typing in the name of my company and getting started.  There was no password protection, no identity check.  They had no way of knowing I had anything to do with this corporation and yet I was answering questions like "have you been convicted for fraud."  The potential for mischief is enormous.  One would have to get the timing right (an annual report must be due before one can get in) but one could easily open the site on January 1 and start entering false information in the registrations for such corporations as Exxon and Wal-Mart.

See for yourself.  Here is their web site.  Below is a screen shot of the site letting me in to edit one of Wal-Mart's corporate registrations in Arizona:

click to enlarge

 

Again, note what I am saying.  This is not the result of hacking.  This is not lax security I figured out how to evade.  This is the result of no security whatsoever.  I simply went to the link above, clicked on the Wal-Mart Associates link, and then clicked on the annual report link.  I know from doing my own registration that there is a signature page at the end, but all you do is type in the name of an officer and a title -- data that is right there on the site.  It's like asking you for a password after the site just listed all the valid passwords.

If I disliked Wal-Mart, I could put all kinds of crazy garbage in here.  I did not go further, because I would have had to answer these questions to proceed and I had no desire to mess with another company's critical data, but if I had gone further I could have changed their mailing address, the names of their officers, etc. -- all I had to do was just pay the $60-ish registration fee for them and they would have a big mess on their hands to sort out.   If I had access to a fake or stolen credit card and a public computer, I could have done it all without any hope of being traced.

By the way, from my experience, this is not unique to Arizona.  This criminally lax behavior seems to be the norm in most states.

I have submitted this all as a complaint to the state, so far with no response.  If anyone in AZ knows how I can get someone's attention with this, let me know.

Is Occupational Licensing Meant to Block Competition from Ethnic Minorities?

Looking at this map of state licensing regimes (darker is more onerous, with AZ being the worst), it is hard to correlate with states being Republican or Democrat.  That doesn't surprise me, because I have always thought the urge to restrict competition and protect incumbents has always been a bipartisan enterprise.

click to enlarge

 

So I sat and thought for a minute about my home state of AZ.  Why is it the worst?  We have a pretty good libertarian history here, from Goldwater onwards.  We have at least one fairly libertarian Senator (Jeff Flake).  So what is the deal?

My hypothesis is that it is related to immigration.  The same majority Republican legislators who are generally open to free markets simultaneously have an incredible fear and loathing of immigration.  Perhaps our onerous business licensing regime is driven by nativists wanting to protect themselves from competition by new immigrants, immigrants who would struggle to compete onerous licensing requirements?

So what does this map look like vs. immigrant population density?  Via Wikipedia, here are the states on density of Hispanics

click to enlarge

 

Hmm, we might be getting somewhere, but its not a perfect fit.  So instead, let's hypothesize that business licensing is aimed at non-white, non-hispanic groups in general (similar to early justifications for the minimum wage as a way to keep black workers migrating from the south out of traditionally "white" jobs).  I cannot get it by state, but the map below by county looks pretty dang similar to the licensing map.  Areas in blue have above average percent of non-whites, red is below average.

Not a perfect fit certainly (one would expect Texas to be more onerous), but perhaps close enough to treat the hypothesis seriously.  I had always thought that I would be the last one to play the race card in a policy analysis, but business licensing tends to have an inherently base motive (protect one group from competition from another group) that is pretty easy to square with racial and ethnic fear.

 

Is This Trend Really A Trend?

From the AZ Republic

Cancer is skyrocketing worldwide and urgent steps are needed to curtail a catastrophic rise in incidents of the disease, the World Health Organization said in a report this week.

New cancer cases are expected to soar globally from an estimated 14 million in 2012 to 22 million new cases a year within the next 20 years.

Cancer deaths are expected to jump from about 8.2 million to 13 million a year.

I guess my question is, is there really an epidemic of new cancers, or can this be explained by:

  • Better and earlier identification of cancers that always existed but went undiagnosed.
  • A reduction in early death and disease that allows more people to grow old into the years where cancers are common

In both these explanations, increases in cancer diagnoses could easily be, counter-intuitively, caused by improving local medical care rather than any environmental or genetic factor.

The article seems to imply that the explosion is due to environmental and nutrition issues.  I am certainly willing to believe that rising incomes allow more people to smoke, causing cancer issues.  But my guess is that most of this increase is from my two explanations.  Far be it for me to suggest that folks who depend on fear-driven funding of cancer care might exaggerate the scope of the "epidemic".

Last Justification for Closing Private US Forest Service Concessionaires is in Tatters

The last remaining justification that anyone has given me for the need to close privately-funded concession-run parks in the US Forest Service is that the Forest Service must close to all uses on its lands.  But this justification is now in total tatters, making it all the more clear that closure of private concessionaires was an arbitrary and unjustified action.  Here is why:

  • As reported earlier, the US Forest Service is still allowing many recreation uses on its lands.  Individuals can still camp and hike in non-developed areas.  Many US Forest Service campgrounds till seem to be open (example Oak Flats near Globe, AZ).  And many state parks, such as Fool Hollow and Slide Rock in AZ and Burney Falls in CA that operate on US Forest Service land have been allowed to remain open and still use Forest Service land for recreation.  In fact, the only groups that seem to be closed in the US Forest Service are private concessionaires, which increasingly appear to have been singled out for rough treatment by the Administration.
  • We have received emails from the US Forest Service that these closures are required to be consistent with the NPS, but the NPS is allowing its parks to be reopened if they are funded by outside agencies.  Both Arizona and Utah have reached agreements to reopen National Parks in their states through use of state funding.  So why can't private parks on Federal lands be reopened through the use of private funding, which is how we operate anyway?  Its almost as if this Administration has some sort of bias against private activity.

Resort with Spectacular Views

I don't like to recommend destinations that are really expensive (why get people excited about a place they can't afford to visit) but we splurged this weekend on the Enchantment Resort in Sedona, Arizona.  It is the most spectacular location I have ever seen for a landlocked (ie non ocean-front) resort.  It is almost impossible to do it justice in photos, because it sits at the end of a box canyon and is surrounded on three sides by red rock walls.    Some pictures are here in the google image result.  Expect to pay $300-400 and up for a night, though you will get a very nice room even for the lower rates, and large casitas for higher rates.  As is usual for resorts, meals are crazy expensive -- its hard to get through breakfast, for example, for less than $20 a person.  But the views and hiking and everything else here are just beautiful.

One of the things I enjoyed was the resort had a native american climb onto a local rock outcropping a couple of times a day and play peaceful flute music that echoed around the resort.  You can see a group gathered around to watch (update:  A reader was nice enough to Photoshop out some of the haze using a levels command trick he taught me a while back -- you can compare below to this original)

enchantment1 copy

It freaked me out for a while because I would here this low-volume music as I walked around the resort and I could not figure out where it was coming from (I kept looking for hidden speakers until I figured it out).

As an added bonus, the night sky is totally dark -- you are out in the wilderness about 15 miles from Sedona and out of site of any other habitation of any sort and almost completely surrounded by canyon walls.  As a result, it is one of the few places where us city folk can see the Milky Way in all its glory (below is my amateur photography (you may have to click to enlarge to really see the Milky Way, but its there).

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The restaurant there is quite good and there are excellent tables on the deck outside to watch the sunset.  But if you want a slightly different Sedona experience (though equally expensive) the Restaurant at the L'Auberge resort right in the town of Sedona on Oak Creek is terrific.  The food is great and the location on the creek is very romantic at night.  Here is the view from my table right around sunset.

laub

You can't get closer to the water than that!

Postscript:  If you like the idea of creekside dining but don't want to blow a hundred bucks a person for dinner, I have eaten at a much less expensive, much less highbrow restaurant that had a very similar location.  It is the Rapids Lodge Restaurant at Grand Lake, Colorado, and is a great place to eat on a trip through Rocky Mountain National Park before you turn around and head back to Estes Park.  Here is the view from our table there:

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PPS:  Other US resort views I like:  Highlands Inn, near Carmel;  Hapuna Resort, Big Island, Hawaii;  Sanctuary Resort, Phoenix, AZ (though the rooms really need an update);  Trump Hotel, Las Vegas (located right on the bend of the strip so the strip view rooms look straight down the strip at night).

Update:  In the spirit of equal time, a reader writes that the Enchantment Resort ruined Boynton Canyon.  Its impossible for me to say -- I never knew it in its pristine state.  I will say the resort itself does a pretty good job of keeping a low profile in the canyon -- no buildings that I saw over 2 stories tall, most of the old trees are preserved.

Most Unsurprising Headline of the Year

Via the AZ Republic:

The pay gap between the richest 1 percent and the rest of America widened to a record last year.

...

Last year, the incomes of the top 1 percent rose 19.6 percent compared with a 1 percent increase for the remaining 99 percent.

...

But since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.

That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession.

The Federal Reserve is pumping over a half trillion dollars of printed money into inflating a bubble in financial assets (stocks, bonds, real estate, etc).  It should be zero surprise that the rich, who disproportionately get their income and wealth from such financial assets, should benefit the most.   QE is the greatest bit of cronyism the government has yet to invent.

(yes, I understand that there are many reasons for this one-year result, including tax changes that encouraged income to be moved forward into last year and the fact it was a recovery off of a low base.  Never-the-less, despite decades of Progressive derision for "trickle down" economics, this Administration has pursue the theory that creating an asset bubble that makes the rich much richer will in the long term help the economy via the "wealth effect.")

A Crony Gift By Any Other Name is Still The Same

Via the AZ Republic

The true cost to operate Jobing.com Arena ranges from $5.1 million to $5.5 million a year, which is about $10 million to $20 million a year less than the Glendale City Council has agreed to pay hockey-related interests to manage the facility in recent years.

The net management costs, included in documents recently published on the city’s website, are bundled in the city’s solicitation for a new company to operate the city-owned arena.

Glendale council members interviewed by The Arizona Republic said they hadn’t reviewed the documents and were surprised by the figures.

“I wasn’t aware of that,” Mayor Jerry Weiers said. “Then again, I know damn good and well that the way it’s been run, they’re not putting anything extra into it whatsoever.”

This is unbelievably easy to understand .  It is a hidden subsidy, and everyone knows it.  The pictures of politicians running around saying "what, we had not idea" is just hilarious.  The Phoenix Coyotes hockey team has the lowest attendance in the league, and loses money.  In addition, the NHL, which owns the team, has committed to its members that it will not take a loss on the team, meaning that it needs to sell the team for north of $200 million.  The team is worth over $200 million, but only if moved to Canada.  In Glendale, it is worth $100 million or less.

The city was close to a deal a few years ago to sell the team.  It tackled the team value problem by basically throwing $100 million in taxpayer money into the pot for the sale (to make up for the difference in value between the asking price and actual worth).  When this encountered a Constitutional challenge (under the AZ Constitution corporate welfare is illegal though you would never know it living here) the city council disguised the subsidy in the form of an above-market-rate payment for running the arena.

So absolutely everyone knows what is going on here.  This has become a massive black hole for the town of 250,000 people that achieves nothing but the self-aggrandizement of the local politicians, who feel like bigshots if they have a real major sports franchise in town.  Oh, you heard that this all actually pays for itself in tax money?  Hah!

The justifications for previous management deals revolved around a commitment to keeping the team in Glendale. Loyal fans pleaded with council members for the team’s future. And a council majority saw advantages, including thousands of fans trekking to their city 41 nights a year to watch hockey and spend money in the city’s restaurants and shops.

The city collects revenue associated with the team and arena through leases, parking fees and tax collections for food and merchandise sales in the nearby Westgate Entertainment District. Those figures have been on the upswing, particularly since an outlet mall opened last fall.

Total collections were $4.7 million in fiscal 2011, and reached $6.4 million through just the first eight months of the 2013 fiscal year, according to the city. That money helps pay, but doesn’t fully cover, the city’s debt to build the arena.

The town spent $300 million on a stadium and subsidized the team between $25 and $40 million a year, depending on how you count it, all to get an "incremental" $6-8 million in tax money.  And by the way, just because they collect it in this area does not make it incremental -- these sales could well have cannibalized another area of town.

More Arizona DMV Madness

My daughter is ready for her final (in-car) driving test to try to get her driver's license.  But it turns out that the AZ DMV only gives driving tests before 3PM each day.

This is yet another policy designed for the pleasure of government workers (who want to get home nice and early) and not customer-citizens.  Ask yourself:  Who are 99% of the people who take the in-car driving test.  Answer:  16-year-olds, also known as high school sophomores.  And what are they doing up until 3PM weekdays?  Why, they are going to school!

So I have to pull my daughter out of school to take the driving test.  But it is worse than that, because we can't just show up at 2:30, missing perhaps her last class.  The AZ DMV has this insane process that is essentially a series of chained queues.  One waits in line for the receptionist, who gives the "customer" a number based on what task they want to complete (license, tags, etc).  One then waits endlessly for this first number to come up, only to find that the person who calls you up can only complete half the task (at best), so you then have to wait in line for the next person to complete the next task, etc.

Well, reports from all the other parents tell us that if you show up two hours early (e.g. at 1PM), there is a very good chance you will not get the driving test.  If all the prior queues one must work through cause one to show up at the driving test queue even at 3:01 -- Sorry!  You have to come back another day and start all over.

This is obviously insane.  The chained queue process is nuts.  The fact that the one portion school age kids must complete ends before school is out is nuts.  The fact that the person who performs the last step in the chained process goes home first is nuts.

Until last year, and with my previous kid, we did not have to do this.  AZ had a very sensible law that allowed private licensed driving schools to give the driving test.  You could still go through the DMV, but for a $100 or so one could get this done via a high service, no-queue, work-on-the-weekend private company.  But of course our legislature ended this sensible service last year, ostensibly over concerns about quality, but likely because the DMV folks didn't like competition from outsiders who actually gave a sh*t about customer service.

End Sports Cronyism

Florida editorial via the Crony Chronicles

The problem with [the theory that sports subsidies help the economy] is that there is scant evidence that such economic benefits actually occur. Numerous studies done over the last 25 years have found that professional sport teams have little, if any, positive effect on a city’s economy. Usually, a new team or a new stadium location doesn’t increase the amount of consumer spending, it merely shifts it away from other, already existing sources. Entertainment dollars will be spent one way or another whether a stadium exists or not. Plus, the increase in jobs is often modest at best — nowhere near enough to offset the millions invested in the projects.

It's amazing they got the local paper to print this.  Most local papers would be defunct without a sports page.  As a result, local newspapers generally bring to bear tremendous pressure in favor of subsidies to attract and keep new professional sports teams.   Our local paper the AZ Republic tends credulously publish every crazy, stupid benefit study of sports teams on the road to promoting more local subsidies for them.

Cardinals Make A Mess of Choosing Their New Leader

No, not the Pope.  The AZ Cardinals QB.   Anyone with some high school experience might want to send in a resume.

Sequester Fear-Mongering, State Version

The extent to which the media is aiding and abetting, with absolutely no skepticism, the sky-is-falling sequester reaction of pro-big-government forces is just sickening.  I have never seen so many absurd numbers published so credulously by so much of the media.  Reporters who are often completely unwilling to accept any complaints from corporations as valid when it comes to over-taxation or over-regulation are willing to print their sequester complaints without a whiff of challenge.  Case in point, from here in AZ.  This is a "news" article in our main Phoenix paper:

Arizona stands to lose nearly 49,200 jobs and as much as $4.9 billion in gross state product this year if deep automatic spending cuts go into effect Friday, and the bulk of the jobs and lost production would be carved from the defense industry.

Virtually all programs, training and building projects at the state’s military bases would be downgraded, weakening the armed forces’ defense capabilities, according to military spokesmen.

“It’s devastating and it’s outrageous and it’s shameful,” U.S. Sen. John McCain told about 200 people during a recent town-hall meeting in Phoenix.

“It’s disgraceful, and it’s going to happen. And it’s going to harm Arizona’s economy dramatically,” McCain said.

Estimates vary on the precise number of jobs at stake in Arizona, but there’s wide agreement that more than a year of political posturing on sequestration in Washington will leave deep economic ruts in Arizona.

Not a single person who is skeptical of these estimates is quoted in the entirety of the article.  The entire incremental cut of the sequester in discretionary spending this year is, from page 11 of the most recent CBO report, about $35 billion (larger numbers you may have seen around 70-80 billion include dollars that were going away anyway, sequester or not, which just shows the corruption of this process and the reporting on it.)

Dividing this up based on GDP, about 1/18th of this cut would apply to Arizona, giving AZ a cut in Federal spending of around $2 billion.  It takes a heroic multiplier to get from that to  $4.9 billion in GDP loss.  Its amazing to me that Republicans assume multipliers less than 1 for all government spending, except for defense (and sports stadiums) which magically take on multipliers of 2+.

Update:  I wrote the following letter to the Editor today:

I was amazed that in Paul Giblin’s February 26 article on looming sequester cuts [“Arizona Defense Industry, Bases Would Bear Brunt Of Spending Cuts”], he was able to write 38 paragraphs and yet could not find space to hear from a single person exercising even a shred of skepticism about these doom and gloom forecasts.

The sequester rhetoric that Giblin credulously parrots is part of a game that has been played for decades, with government agencies and large corporations that supply them swearing that even trivial cuts will devastate the economy.  They reinforce this sky-is-falling message by threatening to cut all the most, rather than least, visible and important tasks and programs in order to scare the public into reversing the cuts.  The ugliness of this process is made worse by the hypocrisy of Republicans, who suddenly become hard core Keynesians when it comes to spending on military.

It is a corrupt, yet predictable, game, and it is disappointing to see the ArizonaRepublic playing along so eagerly.

Claiming to Find One Variable That Explains Absolutely Everything in a Complex System

Of late I have been seeing a lot of examples of people trying to claim that complex, even chaotic multi-variable systems are in fact driven by a single variable.  Whether it be CO2 in climate or government spending in Keynesian views of the economy, this over-simplification seems to be a hubris that is increasingly popular.

The worst example I believe I have ever seen of this was in the editorial page today in the Arizona Republic.  Titled Arizona vs. Massachusetts,  this article purports to blame everything from Arizona's higher number of drunk driving accidents to its higher number of rapes on ... the fact that Arizona has lower taxes.  I kid you not:

In the absence of discernible benefits, higher taxes are indeed a negative. We would all like to keep more of what we earn. That is, if there are not other negative consequences. So, it is reasonable to ask: What do Massachusetts citizens get for these increased public expenditures? A wide range of measures from widely disparate sources provide insight into the hidden costs of a single-minded obsession with lower taxes at all costs.

The results of such an investigation are revealing: Overall, Massachusetts residents earn significantly higher salaries and are less likely to be unemployed than those who live in Arizona. Their homes are less likely to be foreclosed on. Their residents are healthier and are better educated, have a lower risk of being murdered, getting killed in a car accident or getting shot by a firearm than are Arizonans. Perhaps these factors explain the lower suicide rate in Massachusetts than in Arizona as well as the longer life spans.

None of this supposed causation is based on the smallest scrap of evidence, other than the spurious correlation that Arizona has lower taxes at the same time it has more of the bad things the authors don't like.  The authors do not even attempt to explain why, out of the thousands of variables that might have an impact on these disparities, that taxation levels are the key driver, or are even relevant.

Perhaps most importantly, the authors somehow fail to even mention the word demographics.  Now, readers know that I am not very happy with Arizona Conservatives that lament the loss here of the Anglo-Saxon mono-culture.   I think immigration is healthy, and find some of the unique cultures in the state, such as on the large tribal reservations, to make the state more interesting.

However, it is undeniable that these demographic differences create wildly different cultures between Arizona and Massachusetts, and that these differences have an enormous impact on the outcomes the authors describe.  For example, given the large number of new immigrants in this state, many of whom come here poor and unable to speak English, one would expect our state to lag in economic averages and education outcomes when compared to a state populated by daughters of the revolution and the kids of college professors (see immigration data at end of post).  This is made worse by the fact that idiotic US immigration law forces many of these immigrants underground, as it is far harder to earn a good income, get an education, or have access to health care when one does not have legal status.  (This is indeed one area AZ is demonstrably worse than MA, with our Joe-Arpaio-type fixation on harassing illegal immigrants).

By the way, it turns out Arizona actually does pretty well with Hispanic students vs. Massachusetts  -- our high school graduation rate for Hispanics is actually 10 points higher than in MA (our graduation rate for blacks is higher too).  But since both numbers are so far below white students, the heavy mix of Hispanic students brings down Arizona's total average vs. MA.   If you don't understand this issue of how one state can do better than another on many demographic categories but still do worse on average because of a more difficult demographic mix, then you shouldn't be writing on this topic.

Further, the large swaths of this state that are part of various Indian nations complicate the picture.  AZ has by far the largest area under the management of tribal nations in the country -- in fact, almost half the tribal land in the country is in this one state.  These tribal areas typically add a lot of poverty, poor education outcomes, and health issues to the Arizona numbers.  Further, they are plagued with a number of tragic social problems, including alcoholism (with resulting high levels of traffic fatalities) and suicide.  But its unclear how much these are a result of Arizona state policy.   These tribal governments are their own nations with their own laws and social welfare systems, and in general fall under the purview of Federal rather than state authority.  The very real issues faced by their populations have a lot of historical causes that have exactly nothing to do with current AZ state tax policy.

The article engages in a popular sort of pseudo-science.  It drops in a lot of numbers, leaving the impression that the authors have done careful research.  In fact, I count over 50 numbers in the short piece.  The point is to dazzle the typical cognitively-challenged reader into thinking the piece is very scientific, so that its conclusions must be accepted.  But when one shakes off the awe over the statistical density, one realizes that not one of the numbers are relevant to their hypothesis: that the way Arizona runs its government is the driver of these outcome differences.

It's really not even worth going through the rest of this article in detail.  You know the authors are not even trying to be fair when they introduce things like foreclosure rates, which have about zero correlation with taxes or red/blue state models.  I lament all the negative statistics the authors cite, but it is simply insane to somehow equate these differences with the size and intrusiveness of the state.  Certainly I aspire to more intelligent government out of my state, which at times is plagued by yahoos focusing on silly social conservative bugaboos.  I am open to learning from the laboratory of 50 states we have, and hope, for example, that Arizona will start addressing its incarceration problem by decriminalizing drugs as has begun in other states.

The authors did convince me of one thing -- our state university system cannot be very good if it hires professors with this sort of analytical sloppiness.  Which is why I am glad I sent my son to college in Massachusetts.

PS- If the authors really wanted an apples to apples comparison that at least tried to find states somewhat more demographically similar to Arizona, they could have tried comparing AZ to California and Texas.  I would love for them to explain how well the blue state tax heavy model is working in CA.  After all, they tax even more than MA, so things must be even better there, right?  I do think that other states like Texas are better at implementing aspects of the red-state model and do better with education for example.  You won't get any argument from me that the public schools here are not great (though I work with several Charter schools which are fabulous).  For some reason, people in AZ, including upper middle class white families, are less passionate on average about education than folks in other states I have lived.  I am not sure why, but this cultural element is not necessarily fixable by higher taxes.

Update- MA supporters will argue, correctly, that they get a lot of immigration as well.  In fact, numerically, they get about the same number of immigrants as AZ.  But the nature of this immigration is totally different.  MA gets legal immigrants who are highly educated and who come over on corporate or university-sponsored visa programs.  Arizona gets a large number of illegal immigrants who get across the border with a suitcase and no English skills.  The per-person median household income for MA immigrants in 2010 was $16,682 (source).  The per-person median household income for AZ immigrants was $9,716.  35.3% of AZ immigrants did not finish high school, while only 15.4% of MA immigrants have less than a high school degree.  48% of AZ immigrants are estimated to be illegal, while only 19% of those in MA are illegal.  11% of Arizonans self-report that they speak English not at all, vs. just 6.7% for MA (source).

Cronyism and Corporate Welfare, in Hawaii

I don't know if its the distance from the Mainland or something about its history, but Hawaii often appears to be among the worst states for regulatory capture by local businesses.  This example was brought to me by a co-worker, who lives in AZ but wants to buy a condo in Hawaii.  They want the condo for their own use, but also hope to rent it out.  This kind of model is more appealing nowadays given the ease (and low cost) with which one can advertise rentals on various Internet sites.

But not so fast, not in Hawaii.  In legislation that reminds be of stuff from the 1990's when businesses tried to fight Internet-driven disintermediation, Hawaii is proposing to force non-Hawaiians to use a local broker to list their rental properties.  Apparently local residents can still list their properties on low-cost Internet sites, but folks on the mainland (also known as "the United States") must use a high-cost locally licensed broker, who typically charge 50% of rental fees as a commission.  These type of commission rates are farcical - they imply that fully half the value of a one-week condominium stay is due to the broker, not the condo itself, its location, etc.  The only way brokers can charge these fees is by maintaining a tight cartel enforced by government licensing laws.

Any reasonable person will look at this law and immediately know it is about crony protection of local real estate brokers.  Of course, that is not what the law says.  It is all about "consumer protection"

The legislature also finds that requiring nonresident owners to employ a licensed professional such as a real estate broker or salesperson or a condominium hotel operator is an important consumer protection measure. Consumers who use real estate companies, real estate brokers, real estate salespersons, or condominium hotel operators for their transient accommodation rental needs can do so with the knowledge that all money generated will flow through a client trust account, the appropriate federal tax form 990s will be generated, and accurate transient accommodations taxes and general excise taxes will be paid. Real estate companies, real estate brokers, real estate salespersons, and condominium hotel operators must comply with specific licensing and bonding requirements, thus offering additional protections for consumers.

So consumer protection is defined as making sure taxes get paid and the government forms get filled out.  Because God knows my entire vacation would be ruined if Federal tax form 990 was not filled out properly.

This is total BS, and Milton Friedman called it years ago when he wrote on licensing:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

This is also a great example of voters agreeing to add costs on everyone but themselves.  If the almost inevitable Constitutional concerns with this law forced in-state and out-of-state condo owners to be treated equally, local owners would immediately push back, hard, against the costs this law would impose.  Only  by structuring this law to apply to those annoying out-of-staters could it ever be passed.

I have been considering taking advantage of low prices in Hawaii to buy a condo, but I may rethink that plan given this pending legislation.