By Peter Burrows 3/5/18 elburropete@gmail.com -- silvercityburro.com
Somebody once described the Republicans and the Democrats as "the stupid party and the evil party." That's a little unfair to the Republicans, as there is plenty of nonpartisan stupidity to go around, but last week the Republicans owned the title. No contest. Two examples:
First, Republican Lt. Governor John Sanchez visited Silver City to talk to local officials about the Air Force's proposed Gila Wilderness flyovers. He then spent an hour or so with local Republicans. At that meeting, he lamented to some of us about what a money loser Governor Bill Richardson's Rail Runner had proven to be.
He also mentioned another money-losing Richardson folly, the Spaceport. (I note that quite a few Republicans put on their stupid hats and supported Richardson's Spaceport idea.) New Mexico has spent $250 million on a facility that was supposed to start sending rich people into sub-orbit starting in 2010. That's right, 2010. Flights to date: Zero.
Surprisingly, the recent budget bill has $10 million for a new hangar at the spaceport, and when I asked Sanchez if that was going to get a line item veto, I got the strong impression that it would not. Sanchez told us the Spaceport has new management that is "really professional" and will sell the locale to aerospace companies around the world and the new hangar will facilitate that and blah, blah, blah.
Besides, the Spaceport, like the Rail Runner, can't be sold because nobody will buy it. Gee, I said, why not try to GIVE it to Jeff Bezos or Elon Musk, a couple guys who might know how to make a buck down there?
(Bezos and Musk are billionaire entrepreneurs operating their own space cargo/travel companies. I doubt if either would want a facility located in the middle of nowhere, but it would be worth a try.)
Sanchez looked at me as though I had lost my mind. He was probably thinking, "What a crazy Old Fart. The Spaceport cost a quarter of a billion dollars and he wants to give it away!"
Does Sanchez really think the state can hire a bureaucrat who will do a better job than Amazon founder Jeff Bezos? Is he that stupid? More likely, Sanchez has been a member of the political class for so long that he can't bring himself to admit that the State of New Mexico has made two of the most colossal, straight up stupid investments ever made by a state government.
That we won't shut them down or give them away illustrates the sunk-cost fallacy, in which previous investments, the sunk costs, compel people to add to those investments even though it doesn't make economic sense to do so. Here's a great definition I found on the web:
Sunk costs "are investments which can never be recovered. An android with fully functioning logic circuits would never make a decision which took sunk costs into account, but you would. As an emotional human being, your aversion to loss often leads you right into the sunk cost fallacy."
From another site: "The sunk cost fallacy is sometimes called the Concorde fallacy ---- a reference to the construction of the first commercial supersonic airliner. The project was predicted to be a failure early on, but everyone involved kept going. Their shared investment built a hefty psychological burden which outweighed their better judgements. After losing an incredible amount of money, effort and time, they didn't want to just give up."
Sound familiar?
Exercise of the fallacy is commonly called throwing good money after bad. Those of us with an MBA in finance have a more technical term for sunk costs: Spilt Milk.
The state should shut down both the Rail Runner and the Spaceport because doing so will save New Mexico money. It won't recover the investments made or the obligations incurred. Those are sunk costs.
There is no hope under any realistic scenario for the Rail Runner, but there is a slim chance the Spaceport could become viable if it was given to private investors with the promise it would be a tax-free zone -- forever. Do not hold your breath waiting for that to happen.
I can forgive New Mexico's Republicans for succumbing to the sunk cost fallacy concerning Richardson's boondoggles, but it is unforgivable not to make political hay out of them. These are two examples of Democratic stupidity that voters should be reminded of -- constantly. Not to do so is even more stupid than continuing to pour money into them. Damn RINOS. Might as well be Democrats.
The other great stupidity of last week belongs to President Trump. He proved his Republican bona fides by imposing tariffs on steel and aluminum imports, following in the footsteps of president George W. Bush, who imposed steel import tariffs in 2002.
The President of the Peterson Institute, economist Adam Posner, said on CNBC that Trump's tariffs were "straight up stupid," a wonderful phrase now a part of my lexicon. He also said Trump's move was "fundamentally incompetent, corrupt or misguided." Yes, indeed. Dictatorial, too. Obama-like.
I don't know if there is such a thing as "trade deficit fallacy," but there should be, right alongside sunk cost fallacy. Trump doubled down on his stupidity by saying "Trade wars are good, and easy to win." I wonder if there is an example in history where a nation "won" a trade war?
The effect of tariffs ripples through the economy in ways most people don't see. A good example, close to home, is Trump's import tariffs on solar panels, a move opposed by our Senator Heinrich, a Democrat, who urged Trump to "look at the bigger picture," that being that solar panel manufacturing is a miniscule portion of the solar industry, and the increased cost of panels would hurt demand, effecting installers, inverter manufacturers and so on.
The senator is right. Of course, the REALLY big picture would include the subsidies the solar industry gets, the uneconomic realities of solar power and the stupidity of New Mexico trying to save the world from Global Warming. (Always capitalize a religion.) So, in this case, import tariffs might actually have a good effect, though not in the way intended.
Stupid Republican thwarts evil Democrat. Nothing to be happy about.