WatchThis op-ed is brilliant and exactly what I've been telling people on occasion:
http://www.lvrj.com/opinion/nevada-the-republican-promised-land-132035853.html
They were also discussing this on NPR this morning: http://www.npr.org/2011/10/19/141493959/ask-nevada-do-low-taxes-less-regs-create-jobs
Summary: Nevada has very low taxes and very low regulation. There is no corporate tax and no state income tax. There is even a constitutional limit on mining taxes, which means that tax receipts don't go up even if commodities skyrocket, as they have in recent years on occasion. Nevada is 49th in taxation, with the lowest burden of any state except Alaska (which gets massive federal subsidies of more than $20K per person per year from you and me, and oil money). In fact, much of its "regulation" is directly written by businesses and their lobbyists, and their legislature rarely meets. Nevada also has the fewest public employees per capita of any state.
Yet, Nevada still has:
1) highest unemployment rate
2) highest foreclosure rate
3) highest personal bankruptcy rate
4) biggest drop in median income
5) one of the biggest drop in property values of any state, if not the biggest (maybe Florida beats it?)
My own editorial portion:
If the GOP Paradise didn't work in Nevada, why would it work elsewhere? Why is "lower taxes" and "get rid of regulation" always the solution? It's not!
Nevada has lots of mining, but its job market is not particularly skilled or deep, which is why companies are staying away. It also has lots of gambling, but its other industries are pretty thin. Companies don't have a great job pool -- Reno and Las Vegas, the main population centers, just don't have deep job pools with skilled workers.
Low taxes and low regulation are not the only concern for businesses -- being able to get skilled workers in a diversified economy matters a lot too. Nevada is failing because it went too far to one side of the political spectrum in thinking the market would save it. There are plenty of other factors besides simply taxes and regulation that matter.
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corntrollio says
I don't get what's the irony.
Unstable monetary system, rigged markets => more regulation required to keep things in check.
Sound, stable monetary system, fair markets => adequate regulation required, too much regulation is redundant and actually inefficient.
corntrollio says
:) very well said.
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corntrollio says
Yes, by 0.0000000004%.
corntrollio says
Not exactly, you misunderstood me. With the demographic shift, there was also a substantial cultural shift as well. Have you been to Reno or LV before the boom by any chance?
corntrollio says
I would say yes, particularly in terms of sprawling population growth, relative to before the housing bubble. This is certainly based on my own experience, but I imagine that with a little digging I could find some metrics to support this thesis.
corntrollio says
Try the past tense on this one, dude. Boomers DID move to NV during the boom, DID speculatively buy investment properties, and it DID result in a massive, destabilizing influx of cash. I don't think many Californians are moving to Nevada now, and I didn't assert that they were, either.
corntrollio says
Fair enough. Marcus posted this last week:
Also, I am using 'free market' here to mean free of regulation. Defining a 'free market' strictly as one driven by supply and demand always seems a bit slippery to me... I'd be inclined to describe the latter as a market in dynamic supply-demand equilibrium. Catchy, no?
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terriDeaner says
Sure, of course, I have. You know, my experience with Nevada is not just casinos, but, as an example, some casinos still do that thing where they tag employees' hometowns. Certainly there are some folks from California, but most of the dealers that I talked to that were from California moved a long time ago (15-20 years ago) and are not boomers who moved recently, and some of those former Californians had lived in Nevada so long that they started putting their Nevada residence as their hometown. Not to suggest that casino workers are representative of Nevada, but it is one of the primary jobs there.
terriDeaner says
Well, hang on there. If there was a past cash influx to Nevada, and it was destabilizing, that just means that native and resident Nevadans didn't use that influx of cash wisely with their low taxes and low regulation -- i.e. to buy a cheaper house for retirement, to invest, to start a business, etc. Why does cash have to be destabilizing? Also, most boomers aren't quite at full retirement age yet (do the math, 1946-1964) -- are you saying that lots of people were moving for job opportunities in Reno/Las Vegas?
The housing bubble on its own ran a frenzy in Nevada. It didn't need Californians to do anything. The Californian thing is just what people in Vegas and Phoenix said to justify the housing bubble. Turns out they were wrong, and the housing bubble had other causes.
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Huntington Moneyworth III, Esq says
Obese women are not a paradise at any time.
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corntrollio says
It doesn't have to be, but funny money in the hands of stupid people is VERY destabilizing - and we have ample evidence of that from the past 10 years. And it was in Reno and LV...
And I bet that MANY Nevadans that initially profited from the boom did just as you suggested - bought lower-maintence retirement houses (which would have been MORE expensive, since prices were rising, and since before the boom housing was pretty cheap to start with, relative to CA), invested their money in their businesses, in investment properties, and whatever else they percieved to be responsible investments. And I'm sure plenty of them blew their dough on fancy cars, McMansions, and shiny crap from China as well.
The problem, however, is that all this economic activity happened in an unnaturally short period of destructively high demand - such that years (decades? who knows...) of growth and productivity were pulled forward. So now the most heavily populated areas of NV languish in depression.
The same thing happened in much more heavily taxed and regulated California too. So I don't think this is primarily a tax/regulation issue - it's just that the NV economy is fucked because it is much smaller and and less resiliant to the boom-bust than other places in the country that had less of a boom-bust and/or more resilient local economies.
corntrollio says
But would it have been as bad in Reno and LV (people and inflationary money sink during the boom) if NV wasn't geographically proximal to the large population centers of CA (people and inflationary money source during the boom)?
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terriDeaner says
Without evidence to the contrary, I'd say yes. What are the real numbers of Californians who moved to Reno/Las Vegas during the boom, and how many of them owned houses previously in California and used the boomtime windfall to overpay in Nevada? That's the question one would have to answer.
I've heard anecdote, but I've also heard that foreigners will save our housing market, numerous times. Hasn't happened yet. 5 years and counting. My anecdotes matter just as much as everyone else's -- I knew people who were busy buying up rental properties during the boom in cities like Reno, Las Vegas, and Phoenix as residents of those cities (some were glorified slumlords). The money didn't have to come from California or New York or China to cause a boom. Bank lending was enough.
terriDeaner says
But again, this is my argument. Taxes and regulation are merely two factors for businesses. However, if the most favorable environment possible wasn't enough, that should tell you something -- that they are not as big a factor as many people think.
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MarsAttacks! says
Wow, Texas has that kind of laws? that's pretty good. explains why there was lesser of an impact in Texas compared to hard hit areas because of the bubble.
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elliemae's website
Let us not forget that Vegas & Reno are single-industry towns. Tourism & gambling (go hand-in-hand).
The place attempts to re-invent itself on a weekly basis. I've watched it go thru so many attempts to do so. It tried to be family friendly "themed" resorts (Treasure Island, Excalibur, New York New York roller coaster), then to mimic different landmarks (Paris, New York New York), then do the corporate landmark thing (Hooters Hotel, Hard Rock Hotel...). Anywhere else, they renovate. Vegas blows shit up right & left.
When tourism was great, Vegas was great. Now that it's in the toilet, so goes Vegas. sucks.
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Las Vegas IMO is missing out on most of it's "sin" image. Gambling eclipses all else. 6 other deadly sins not getting due attention. Although monetizing "acedia" seems like it'd be a tough one.
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austrian_man says
A deregulated and gamed market IS an unregulated market. It's easy to game the system if there are no rules.
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iwog says
A free market cannot include any of the following:
Central Bank(latest established 1913)
Government regulation in favor of mega-corporations
Manipulation of markets by central powers(economical and political)
Quit gutting the English language with you post-modernist "This word stands for whatever I think it stands for" attitude.
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Chula Vista, CA
To the point of this post, how can a state be GOP when it's run by the Democratic Senate Majority Leader
The Democratic vs Republican paradigm - Like have a masturbation contest with the mirror.
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iwog says
Iwog,
you should understand that I am not advocating for anarcho-capitalism. I see your point that human greed (if unchecked) will result in the same thing, regardless of whether the monetary system is sound or unsound.
Which is why I emphasize moral character at the highest level of governance. Big or small government will fail if there is no consistency and character.
Here's your favorite Jon Stewart on Ron Paul:
“He’s the one guy in the field, agree with him or don’t agree with him, who doesn’t just regurgitate talking points or change what he believes to fit the audience in front of him.”
You tell me, if we have this moral character at the governance today. It's all well that the bankers have been saved for all their bad mistakes and no wonder, they'll continue backing the POTUS who saved them.
http://www.washingtonpost.com/politics/obama-has-more-cash-from-financial-sector-than-gop-hopefuls-combined-data-show/2011/10/18/gIQAX4rAyL_story.html?hpid=z2
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NuttBoxer says
Actually none of that has anything to do with a free market. A free market by definition is simply the freedom of a individual or a business to make financial decisions without restriction by the government.
The federal reserve system is what we all use for money. To claim that we don't live in a free market because our central bank does stuff is ridiculous. At worst, the federal reserve has a slight impact on interest rates and can sometimes change margin requirements on Wall Street. (but doesn't) In the past three years, it has also attempted to inject liquidity into our economy and has mostly failed in that task.
Anyway back to the housing crisis. The housing crisis was primarily caused by:
1. Removal of restrictions on points and fees for loans in 1995.
2. Removal of barriers between Wall Street and banks in 2000.
3. Removal of government oversight of the financial system by George Bush in 2001.
Freddie and Fannie had absolutely nothing to do with the mess and neither did the CRA. They didn't start drinking the kool aid until very late in the game.
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Ron Paul is Don Quixote de La Mancha.
Many people like reading that book, they have a fondness for the madman tilting at windmills. That doesn't however mean they are going to saddle up and follow him.
Just to name 2 flaws:
1) Ending the Federal Reserve. The finance industry is utterly structurally opposed to this, so you can forget their support.
2) Ending military adventurism, retreating to a small standing army sufficient only for national border defense.
These are ideas many like in the abstract over the water cooler, but are not going to have millions marching with pitchforks and torches. Actually I argue they are very conflicted over #2, some just plain want an endless war, but more importantly many like having the biggest stick to wave around and are not going to vote to put that down.
Our admiration for Ron Paul is exactly the same as Don Quixote. Even when you don't agree with his ideas, which Jon Stewart and many others do not, you can abstractly admire his style but do not mistake that for meaning we want to see ideologues in 100% power. You cannot lead anyone, anywhere they don't want to go. Clearly we WANT people in power who are like us, full of contradictions and craziness, if we didn't we wouldn't keep electing them over and over.
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austrian_man says
You are advocating a system that has destroyed the economy and/or resulted in armed revolt every time it has been tried.
This is exactly why you can't point to any historical examples. You cannot say "look at this country during this decade! Look how their unregulated market prospered!" Just like Ayn Rand, your perfect system only exists in fiction.
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Vicente says
He wants to audit the Fed, which might eventually lead to ending the Fed. You did see that the Fed injected liquidity to foreign central banks during 08 right? There is no congressional oversight on any of these things. it is out of control. Frankly - I don't see how everyone thinks this is A-OK.
Vicente says
May be we should think about whether we can afford to fight wars or to improve the quality of life domestically. May be we should rethink priorities, rather than bossing around.
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iwog says
lol, for the record - I think her moral philosophy is quite under-developed. She is full of contradictions. So that's not the system I want.
iwog says
I don't see how. If we continue to run deficit spending, how long can that continue? may be it'll feel good in the short term, but pain will be there long term. What is better?
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austrian_man says
If we continue to run deficit spending, eventually we'll have to monetize the debt. That's a good thing and results in more wealth to workers and less wealth to hoarders. Unfortunately it also screws people on a fixed income, but then that's better than the alternative which is:
The end of the Monopoly game. The top 1% have everything and the bottom 99% beg for scraps. That's the situation in Mexico and it's exactly where your deregulation will put us.
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iwog says
I think that puts the currency at risk, so a bad thing. A better alternative is to target NGDP. Sweden did that in 1991. See more details here: http://macromarketmusings.blogspot.com/2011/06/what-successful-and-unsuccessful.html
iwog says
We are already there....due to both Rep and Dem. Deregulation happened under both parties.
iwog says
Still, you're not seeing my point. I'm not asking for deregulation under an unstable system as it stands today. In fact you need more regulation that what's currently in place. Glass-Steagall was good, should be restored.
Nevertheless, you can't say that things would go so out of control as it stands today, if there was a restraint imposed by gold.
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austrian_man says
This is exactly was the wealth hoarders would want at this point. Those who currently have would continue to hoard, and going back to the gold standard would make lending standards even tougher.
Who benefits from debt and a hard currency? Those that are owed the debt.
If the relative value of the debt is decreased compared to wages (ie through inflation) that benfits those that OWE the debt.
Going away from an asset based currency helped cause this problem, but going back to one would exascerbate the problem.
The are two solutions to wealth inequality:
1. Confiscate the wealth (through a highly progressive tax system)
2. Increase the relative value of labor compared to capital (income inflation)
Pick your poison. Bottom line is the 99.9%ers might be waking up. The world has seen it before and it never ends well for the .1%.
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david1 says
Sweden did both actually in 1991. They raised taxes and they also targeted NGDP (which sort of raises wages, people can spend more only if they get more cash).
I do think for the long run, a high tax system actually hurts the economy rather than hindering it.
See this study: http://www.libera.fi/content/uploads/2011/10/Libera_The-Swedish-model.pdf
The Swedish model is often dramatized in the public policy debate, described as
either a social democratic utopia or a failed socialist experiment. These views are
far from the truth. Sweden is a successful country in terms of low poverty rate and
long life expectancy. However, these factors have much to do with Swedish culture
that existed already when taxes were still relatively low.
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According to the US Census, Mississippi has the highest poverty rate in the United States [Yahoo News, 10/20/2011]
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Iwog, dont disagree with those 3 contributors to housing bubble, just sayimg your evaluation that a free market(per our definition) was a bit off. your perception of central banking influence is not realistic.
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Central Banking = price fixing, false market signals, bubbles, unemployment, economic chaos, and inflation, to name a few if the benefits.
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Ron Pauls ideas are practical, but I doubt such a longstanding power structure will let him near the white house.
We only elect these officials because we have been duped into believing freedom means sitting on our ass in front of the tv while everything great about this country is systematically dismantled. We are to blame for taking our responsibility for granted, but these people do not represent who we are, only how we have failed.
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Honest Abe says
To be more precise, fixing the price of money
price of money = interest rate
Without any intervention, interest rate demonstrates the willingness of market participants to part with their money for a duration to earn return.
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NuttBoxer says
well said.
NuttBoxer says
yep, common sense is not beneficial to the elite.
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austrian_man says
Actually I agree with you. However, consider this. Most people when they say they want to end our current wars, do not actually mean they want to slash the WAR MACHINE to the bone. They want the troops to come home and have a period of quiet. However they by and large would not agree with decimating our military. And as long as you have a large standing army with a large force projection ability, it's only a matter of time until adventurism comes around again. The American public likes that big stick, they are conflicted about it's use, but they like it a lot despite how stupidly expensive it is. I'm not arguing this point in detail, I'm explaining why I think Ron Paul will never get real traction on this.
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Vicente says
He gets more donations from military than all Rep. Candidates combined and he gets more than Obama. So the people who are in the ground get this.
Vicente says
I don't think Dr. Paul's stand is to completely eliminate the military. His position is clear. Defend the country, don't defend the world.
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austrian_man says
However many in the MIC, the ruling class, and the voting public LIKE having a big military with bases all over the world. Defending the homeland doesn't require B-2 bombers any more. It doesn't require a Navy bigger than the next 13 navies combined. Are we going to bring home all those troops from bases around the world and pay them to dig holes and fill them up in Kansas? No. Nobody really wants to think about the real consequences of stripping down to homeland defense, which would mean laying off >50% of the troops and mothballing a lot of equipment and shuttering huge swaths of the MIC. They'd like less adventurism for NOW because their bellies are kind of full, but they might be hungry in the morning so stick the leftovers in the fridge....
I'm trying to explain why so many people you would think should back him, instead ignore Ron Paul. He's got some ideas that people feel they OUGHT to be for, but actually have mixed feelings about. Hence he'll always be a fringer.
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Sometimes when we take positions on things we talk as if the changes should be made tomorrow. Obviously when we are so far from where we started as a country, we can't get to where we need to be overnight. These are still good principles, but enacting them in a way that won't destroy the country in the process will take years, decades if we move at a normal pace. Eight years is enough for Paul to start his plan, but much will need to be carried on by those who follow.
Still, we need to start somewhere.
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See, we had a real good thing going in NV... but our entire economy was based on home construction & gambling. So when home prices crashed, they stopped building homes in NV. And then everybody from CA who won unreasonable amounts money in the housing boom didn't have the cashola to go all Fear and Loathing anymore. Beyond that, they have recently built huge indian casinos in between every major CA city and NV city, so people are lazy and just don't go all the way to NV...
I also strongly disagree with the untalented labor pool. You can get better educated folks for less money in NV, and they are starving for jobs. And if you think mining is easy, you're a frakkin moron. Don't get me wrong though, we have our fair share of undesirables.
These days, NV is not much of a GOP-run state. The cities are fairly liberal while the rural areas hold a strong Republican influence. overall its about 50-50.
Its kind of hard to throw stones at NV from a state that is almost bankrupt. We don't issue IOUs to our gov't employees. We have the cash. And we don't pay anywhere near the taxes you do in CA.
And yes, I can go out at 3am, pick up a 40 of mickeys and a shot of jack, drive out to the whorehouse, and pick myself some lucky lady from a lineup and she'll do whatever I pay for. and I love that.
Paradise found.
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austrian_man says
Hah. Nice Freudian slip.
Vicente says
Well, let's be honest, he is far right on some things too. On this two axis test, Ron Paul is as libertarian as John Edwards, but as far right as Tom Tancredo:
http://www.politicalcompass.org/uselection2008
So sure, he has some good ideas, but he also has some bad ones. No different from most other politicians, really. Also, presentation matters too, not as much to me, but to many other people it does.
Bitcoins are the future says
Hmm, I'm going to start taking you less seriously just because of your username. Did you see this recently, by the way?
http://www.betabeat.com/2011/10/17/price-of-bitcoin-still-dropping-falls-below-the-price-of-mining/
Bitcoins are the future says
No one said mining was easy -- some types of mining are more sophisticated than others, obviously. However, people skilled at mining are not skilled at other non-mining businesses that might relocate in Nevada. The overall job pool is not very useful to relocating businesses.
Bitcoins are the future says
Bitcoins are the future says
It's hard to reconcile that. Did you put your zip code as 90210? :)
Bitcoins are the future says
I might add that it's apparently okay to blame California for Nevada's massive failings (however misguided that is), but it's not okay for Californians to comment on it. That seems entirely consistent, doesn't it. :)
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corntrollio says
what are you talking about? it is not a verbal or a memory mistake.
You want the data? Here it is: http://www.digitaljournal.com/article/310783
corntrollio says
yeah, but he is consistent. He doesn't flip-flop, he says what he means and he means what he says. His track record should speak for itself.
He saw the housing bubble way back in 2001. That's pretty good, of course nobody wants to listen to 'Crazy Uncle Ron' though.
No one can agree with any presidential candidate 100%. It is certainly about whether you can agree with the person more than you can disagree with. On the critical issues such as economy and monetary policy, it is important for anyone who votes for Ron Paul to truly understand what his guiding principles are.
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corntrollio says
1. You shouldn't take anything seriously on this forum.
2. Of course bitcoins failed! It was a corrupt scam of an e-currency.
3. Then again, a bitcoin isn't much different than an electronic counter in a banking software that represents the money they are supposed to be holding for you.
4.
corntrollio says
Nah, its ok to comment on it, but to blame all of the results of the housing bubble on the GOP is ignorant. That was a team effort.
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austrian_man says
Dude, read your typo. You said "in the ground" not "on the ground." I wasn't disputing the substantive point at all (and honestly I don't care about this data point very much), although it's interesting that Obama draws 78% of what Paul does and the overall split Obama to R is 36/64. That's a lot more than most people typically expect for Dems when you're talking about the military.
austrian_man says
Without getting into the substantive political points, if you are using "flip-flop" in the traditional US political sense, that's not really a great quality. It was a very effective criticism on John Kerry because he did a terrible job explaining, but there's nothing wrong with changing your mind based on new information or based on context, and it'd be stupid not to do so.
austrian_man says
Again, without getting into substantive political points, and as an aside, using this as a positive trait here sort of negates the criticism of Robert Shiller made by someone else on this forum.
Bitcoins are the future says
Read my comments again more carefully. None of this was blamed on the GOP specifically (and it's silly to assume that it was). It was an observation that the current stated philosophy of the GOP has not worked very well in one US state. Obviously, YMMV, and this experiment can be repeated in other states to see what happens there.
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corntrollio says
that's correct.
corntrollio says
i'm not saying in the traditional sense. If you look at specific critical issues (say for example bank bailouts), many of the Rep. candidates said yes, Paul said no. That's the kind of consistency I'm talking about.
corntrollio says
I don't know what the other point made was, but Paul's economic philosophy is Austrian and it's pretty solid in predicting bubbles. Nobody can predict the timing, but the trend is there for all to see.
For example, Fed is engineering a bubble in bonds. It is obvious that it is becoming frothy, but nobody knows when that will pop. Paul made this point in the debate yesterday, which also stems from his strong understanding of business cycles and Austrian theory.
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I think I should kinda put that Nevada isn't all the same. Northern nevada has some huge gold mines and not much for people (Elko county).
Also if you go to western states BLM owns large chunks of land..we're talking serious amounts.
Since the state government cannot tax federal land that limits revenue..
NV boomed by making things legal there that weren't elseware. It was easy to get married/divorced, allows sports betting, obviously has casinos..some counties allow prostitution.
There are sales taxes but there's a fixed percentage that goes to education instead of a general fund.austrian_man says
Don Imus said before on his show that if someone cannot change their mind then what are they supposed to do? If someone votes say..for a war does that really mean they should be for it all the way?
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mdovell says
Hey I don't have a problem with politicians changing their minds. All I'm saying is I haven't seen even a single politician to be as consistent as Ron Paul. On the things such as economics, monetary policy in which he has essentially never wavered, it is grounded in sound economic theory.