I want to thank Steve Hill for an excellent presentation last evening. Steve gave a leader’s view of Nevada’s embryonic statewide economic development program. He heads the Economic Development Commission and is a member of the Governor’s Cabinet. This is the first time the State has centralized  and coordinated the development efforts. As Steve explained there will still be regional efforts peculiar to each region but those efforts will need to be results oriented. Steve went through the process which lead to the creation of the state level effort. This started empirically by going to similar states and looking for best practices.

He applied much the same approach to his Hayek presentation and asked for questions and comments. As attendees will attest, comments were given, and sometimes loudly. Brad Schiller and Mark Pingle gave an economic perspective. Tony Ciorciari commented from a major employer’s perspective and John LaGatta from the perspective of heretofore unrecognized ”intangible” businesses. Joe Morabito who runs a major international relocation operation gave candid comments on where businesses are moving and why. All told, there was a major distrust of government efforts in this area.

The takeaway I think is twofold: 1. the group doesn’t trust government to pick winners and losers; in other words, the Texas giveaway model is wrong. And, 2. there are few if any unique, monopolistic opportunities for the state that has gotten fat, dumb and happy on such in the past; witness divorce in the early years, prostitution, then gaming and always mining. Two of those named have evaporated or significantly diminished. One unnamed remains: nuclear development: Yucca, related R&D, reprocessing, regeneration, etc.; ultimately the state can become an energy exporter, the energy capital of the country. There is strong demand for this. It isn’t a question of government creating jobs which it can’t do, or government picking winners which it can’t do, but government blocking a legitimate opportunity which it can do and now does for no legitimate reason.

Tuesday’s continuation of our immigration discussion was lively and air-clearing and we all thank Jesse Gutierrez and Jim Clark for a great evening. We prefaced the presentation by recalling Ty Cobb’s talk on the economics of immigration: Ty pointed out that it’s well established that the economic effects of illegal immigration are negative particularly in education, health care and criminal justice. Legal immigration problems include family preference admission and automatic citizenship by birth by illegal. Ty recommended four reform points: 1. Secure boarders economically, 2. End family preference admission. 3. Strictly enforce guest worker program. 4. End automatic citizenship by illegal birth.

Jesse Gutierrez reiterated the common belief that immigrants enrich America, culturally and economically. And immigration rates should be determined so that new entrants will assimilate.  Yet, companies and others take advantage of disparate cultures for profits or votes.

He took us through the history of immigration law: open immigration in colonial times with slaves forced to come. In the 1800s Irish and German Catholic immigrants were second-class residents; Chinese “coolie-labor” was ultimate barred in 1882. The 1900s saw legal Japanese and Mexican discrimination. In 1986 IRCA prohibited discrimination against immigrants granted immunity and sanctioned employers for employing illegals. A decade later antiterrorism motives entered the immigration legislation.

Jesse opined that immigration laws historically have been laced with racism, fear and often hate. Any successful immigration reform must be based on Christian principles of civility and compassion.

Jim Clark, a member of the Republican Central Committees, brought political focus to the fore.  According to University of Washington Think Tank Latino Decisions, Nevada is one of four states where Latino voters will drive the 2012 election. With 17% of its voters Latino and another 100,000 yet to be registered, polling shows Obama support is fading.

Operation Conservative Latino is an outreach to Latino voters and potential voters in Nevada. Its goals include forming Latino political educational organizations, polling, registration operations and get out the vote drives

Jim passed out an interesting “Political Compass” exam in English and Spanish, which demonstrates that most Latinos have strong family values, a strong work ethic and belief in individual responsibility. In short it shows them to be trending toward conservative candidates.

He also advocated a Conservative version of the DREAM act, which required two years service in the armed forces as the path to expedited citizenship; such a program eliminates the potentially abusive college requirement of other DREAM act versions.

The Q&A, commentary, discussion and debate was lively after Jesse and Jim’s presentations. It’s fair to say that most agreed on a DREAM act for those here who demonstrated allegiance to the country by serving in the military. Most agreed that assimilation was necessary but there was disagreement on single language education, public services and ballots. There was agreement that the boarders need to be secured economically.

There was strong disagreement on automatic citizenship from illegal birth mothers. The intent here was that prospectively a child born of an illegal would not automatically become a citizen. There was unresolved discussion on the need of a constitutional amendment in this regard with much caution expressed about opening up the 14^th Amendment. While there was no strong opposition to eliminating family preference admissions there was little hope that the family preference admission rules could be reversed because of Catholic opposition.

It was wonderful to see the press represented with folks from Lazer Broadcasting, Entravision and La Boz Hispania. Viola Cody suggested that the Republicans were late in coming to the Latino media. Alex Woodly’s suggestion that welfare benefits were too generous had great support. And Michael Hernandez drew much the same support in advocating individual responsibility and hard work. All in all, I believe the evening put the issues on the table and developed a good dialogue that should be continued with support of Operation Conservative Latino and attendance at events like the upcoming Chamber’s community luncheon “Latinos Today & Tomorrow” on October 26^th at Circus Circus Hotel.

We are very fortunate to have Jerry O’Driscoll, senior fellow at the Cato Institute, as one of our founding members. He was kind enough to distribute copies of an extensive brief, The Case Against President Obama’s Health Care Reform…a primer for non-lawyers, by Robert A. Levy, chairman of the Cato Institute. Thanks Jerry. I have a few extra copies for those who missed the meeting.

We also had an update on UNR’s prospective Center for Public Policy Studies from Brad Schiller and Kristen Kennedy. The plans are proceeding apace and we were pleased to introduce Ryan Stowers of the Koch Foundation the prospective sponsor of the Million Dollar Challenge Grant. Kristen left pledge cards for those of us willing to help bring this important market-based institution to life. Please contact me for a card.

We were pleased to provide a kick off forum on Tuesday for the University’s new Center for Public Policy Studies. Dr. Brad Schiller announced the $1 Million challenge grant from the Koch Foundation to start an independent center within the University to study the economic effects of public policy. It will focus on the application of theory to practice. “By bringing appropriately experienced faculty to the table and engaging and education the community in public policy, the Center will establish a forum, research environment, and incubator for understanding and evaluating the interactions fo the government decisions and private enterprise.” Brad said this would be the exclusive center in the West and had the potential to reach the level of that at George Mason University. Our advantage, of course, is our greater distance from Washington D.C.!

Kristen Kennedy, Director of Development, explained the challenge grant as a match of the Koch Foundation commitment over a five year period. So if we in Northern Nevada raise commitments for $200,000 a year for the next five years, we will have matched the Koch Foundation and shown the necessary support for the Center. The donation are, of course, tax deductible and can be made in various increments. (The pledge card had increments of Contributor at $500, Supporter at $1000, and Founder’s Club at $4000.) Kristen noted that the pledges would not be called until the challenge was assured.

Jerry O’Driscoll stressed the importance of the Center for our community, state and indeed the region. To the extent we can influence public policy with sound empirical research, we will have a more vibrant, growing economy. There were, as would be expected, several questions about the normative orientation of the Center and its independence from what some perceived to be a biased academic environment. The answers were that good research is good research and ultimately supports the correct theory. To have credibility over the long term the orientation cannot be biased one way or the other. Excellent public policy is the goal.

I urge a strong support of this effort. We at Hayek are fortunate to have five brilliant economists associated with our group; three of those five are from the University. The new Center for Public Policy will only enhance our access to quality research, discussion and debate.

If participation by our group is any indication, our dinner last evening was a great success. Ty Cobb did a masterful job in taking us through the economics of immigration, dispelling any notion that the economic impact of illegal immigration is positive. The negative impacts are broad in education, health care, and criminal justice and the offsetting direct taxes like payroll and sales taxes are minuscule. The bulk of illegals are from Mexico and there is little doubt that Mexico is exporting its poverty. There is also little doubt that our unchecked demand for narcotics has turned Mexico into a killing field. Foreign investment in Mexico has done little to staunch the flow of illegals. Likewise, our “free lunch” welfare acts as a magnet even when the market economics of employment are absent or reduced.

So far the “fence” we have in place has worked to some extent but to make it impregnable would be prohibitively expensive, the law of diminishing returns in force. So to, employer enforcement has had little effect. The E-Verify system is subject to criticism on a lot of sides and not all that effective as today’s WSJ article points out.

Even our legal immigration system has serious flaws: We favor family preference rather than skill, talent and investment. We allow children of illegals born here to become automatic citizens, exacerbating the low silled impoverished family chain.

The keys to a reformed immigration system are: 1. Secure the boarders as economically as possible. 2. End the system of family preference entry in favor of one based on skill and language capability. 3. Strictly enforce a guest worker program for the needed low skilled jobs. 4. End the automatic citizenship by birth even if it requires a constitutional amendment to correct judicial misinterpretation.

We thank Ty Cobb for an enlightening discussion and the lively participation it encouraged. We will continue this important topic at our next session with some key political outreach efforts currently underway.

Well, it was a fun evening with attendance over sixty last night. Leading off was our candidate forum in which both major party candidates were invited to give a brief update on key issues and then subject themselves to a Q&A from the floor. Unfortunately, despite urging from her Hayek Group supporters, Kate Marshall did not show up, so we did not get the benefit of her opinions or answers. Mark Amodei, true to his commitment, did come and hit the key issues, most of which centered on Washington’s big government overspending for which he called both parties at fault. The Q&A was lively with some good suggestions from the audience, like a simple government hiring freeze from Joe Morabito, which Mark thought was spot on.

Following an excellent dinner we had a Hayek first: our five economists, some products of the most “liberal” institutions of higher learning like Berkeley and Harvard, participated in a panel discussion on the debt limitation deal, the phony spending cuts, our political Fed, and the real decision between big government collectivism and individualism. The audience was attentive through the sometimes academic, sometimes lively exchange and the subsequent Q&A from the floor was engaging.

I prefaced my introduction of the panel by saying how truly indebted we are to these five gentlemen all distinguished Ph.D.s: Jerry O’Driscoll, Tom Cargill, Chuck Baird, Mark Pingle and Brad Schiller. We are blessed to be able to look at current issues through educated eyes. Eyes schooled in the ideas of the great economic thinkers of the past.

One correction I really appreciate was Tom Cargill’s scold of my characterization of the Hayek Group’s promotion of “conservative” economics. Tom distinguished between “positive” economics, that which we find to be the case by empirical observation (“what is”), and “normative” economics, that which we think will work and best fit our desired human outcome (“what ought to be”). In truth we learn from observation. Lesson learned. The Hayek Group’s mission is to promote those economic policies which best promote individual free market development and resist big government collectivism. In other words, like Adam Smith and like Friedrich Hayek, we are for individualism and against collectivism.

The panel format is something we will have again for special occasions. The positive reviews were almost unanimous. It was truly the highlight of the evening for which we are thankful.

I received an interesting request today from Professor Elliott Parker, Chair of UNR’s Department of Economics: Steven Levitt, author of Freakonomics will be the keynote speaker at UNR’s 30th Annual Reno Foundation Banquet at the Peppermill on Thursday, September 22nd, 6 PM. My sons tell me that the book is engaging and that tells me that the author must also be. So I’ve attached the details below for those interested.

Our thanks to Bob Brigham, Mayo Clinic’s Chief Administrative Officer for a great presentation on the value equation for healthcare. He picked up where he left off in August 2009, pre Obamacare, picked up with McClure’s dilemma: among the three desired wants from a health care system, high quality-low cost-and prompt access, we can only have, only afford two. Pick your poison!

Bob used his grandfather’s country doctor practice to illustrate the changes in healthcare needs and delivery and how each has been influenced by medical advances and society’s affluence. There were no knee replacements in his grandfather’s day.

He reviewed the basics of the Affordable Care Act, the 2000 page monstrosity known as Obamacare: Insurance coverage, Medicare payments, and Funding. And in fairness he finds good elements among the bad, like state and regional exchanges, which are a step toward the breakdown of state insurance silos. And he finds some embryonic pay-for-value pilots and elements; this is the favored Mayo direction. Of course, Obamacare is under fire judicially and legislatively. For conservatives, it’s not a market solution.

One key point, though, is that healthcare delivery can never be a completely market-based system. Society will not permit it. It’s socially repugnant to deny care to the destitute, the truly needy. No matter the source of their circumstances.

While that important point is undeniably true, there may be a difference between “society” and “government.” Bob went on to illustrate state government’s historical role: licensing, insurance regulation, and public health. But the federal government is where the rub is created. Whether it’s FDA regulations, strings on funding, or direct regulation, the federal role seems to be ever expanding. Witness Medicare expansion, and now Obamacare. Governments now pay 50% of all healthcare.

All said, Mayo finds many positives in Obamacare: first steps on pay for value, expanded insurance coverage, and financing. But Mayo, once the original model, did opt out of being an Accountable Care Organization because Obamacare had the tenets backwards. Mayo believes in properly organized and incented ACOs because they deliver “value”, that is “quality of outcomes” divided by “costs over a span of years.”

Our Hayek group participation especially from our doctors and economists last night was wonderful. This, clearly because of Bob’s great presentation.

NV4CFE: We also had an update on the Nevada Energy Park from Gene Humphrey. Counterintuitively, Japan’s tsunami is helping U.S. pols realize the danger in our current nuclear storage system. NV4CFE is actively promoting Yucca as a fuel-reprocessing center.

ETECHS: Mark Pingle, one of our economists, introduced us to one of his pet pro bono projects,  ETECHS (Entrepreneurial-Technical, Engineering Charter High School http://www.e-techsonline.org/ ):  ETECHS is a new charter high school that will start this coming fall, located at 850 Baring Blvd in Sparks (near Reed High School).  As a charter high school, the tuition is free, like any public school.  However, the charter designation gives the school special flexibility and ability to focus.  Some features that make ETECHS unique are:

(a)  Project based learning:  The only class all students will have daily is math.  Students meet the state standards for all other subjects by doing projects that the teachers design.  For example, one of the ETECHS teachers is a former NASA test pilot, and one planned project is the construction of an actual airplane.  Imagine learning geometry and algebra by actually applying it to airplane design, and learning the history of different wars by associating it with the history of airplane design.  (It all actually might stick!)

(b)  Focus:  Students can choose one of 5 tracks and obtain a more focused education.  The tracks are (1) Engineering, (2) Computer/Tech, (3) Business, (4) Medicine/Health, and (5) Aviation. All students will have more science at this school than at the typical public school.

(c)  Entrepreneurship:  This is a school where a student can nurture and entrepreneurial identity.  All students will take an entrepreneurship course, and the project based learning environment encourages creativity and entrepreneurial thinking.

(d)  Smaller school.  The school will begin with 50 students in ninth and 50 students in 10^th grade, accepted on a first come, first serve basis.  One grade will be added each year each of the next two years, and the grade size will be expanded over time to 100 students per grade.  The smaller size allows for more of a family atmosphere, and it is intended that students develop relationships not only with each other, but also with parents and partners in the scientific and business community.

(e)  Job skills:  While ETECHS will provide a college prep education, all students will also graduate high school with significant job skills in the area of their track.  For example, in the medicine/Health track a student would graduate with skills prepared to take a variety of med tech jobs.

(f)   Community involvement:  This is a school that will proactively draw upon the talent of engineers, entrepreneurs, scientists, computer techs and more from the community.  Students will job shadow, do internships, and have people from the community visit the school as parts of projects.   ETECHS grads will graduate with a network of community contacts.

This school has cleared the most significant hurdles, but still has significant needs that must be met to reach the goal of opening in late August.  The hurdles that have been cleared are:

(1)   Obtaining a building:  The former YMCA in Sparks provides perhaps the best building a new charter high school could hope for.  The lease is signed and funded.  All of the inspections have been completed, not a small accomplishment.

(2)   Obtaining state approval:  The huge task of designing a curriculum that meets the state approval has been complete.  ETECHS is a licensed State of Nevada Charter high school

(3)   Much of the prep of the building for the new school year has been completed, though much still remains to be done.

The primary needs at this point are

(1)   Recruiting students:  Students could not legally be recruited until state approval was obtained, which occurred in May.  Any help anyone can provide in terms of getting info about the school to prospective 9^th and 10^th graders would help.

(2)   Start up fundraising:  While tuition is free with a charter school, there is no state money for start up.  The difficult economy has made raising money for the school difficult.  Past donations have provided the building, inspections, and good portion of the supplies needed to start the school.  However, finances are very tight, like they are for most startups, so donations at this time will greatly help.

(3)   Various start up tasks:  Volunteers have been painting, cleaning up the grounds, assembling desks, and much more.  There is plenty to do if people have time to volunteer on start up tasks.

Mark reports a generous response to his presentation from our Hayek members. If you know of any 9^th or 10^th graders who may be interested in attending or know of any other way to help on this project, please email Mark:  Pingle@unr.edu.

Our thanks go to Mark Bailey of Mark Bailey & Company and John Williams for the detailed overview of the Dodd-Frank regulatory legislation. This is probably the most cumbersome, obscure piece of legislation ever enacted. And it really is a deferral of Congressional responsibility to regulatory agencies requiring 355 new rules, 47 studies and 74 reports to Congress. It is every bit as critical as Obamacare as a negative drag on the economy and creates as much uncertainty. Yet, it is ignored by most voters.

It enshrines “moral hazard” in the “too big to fail” doctrine by designating those favored institutions and thus insures the failure of smaller less competitive institutions. It fails to regulate derivatives that currently have a notational value of over $800 Trillion! By the way, a portion of those U.S. issued derivatives, in the form of credit default swaps, insures the European PIIGS bonds held by the French and German banks. As those bonds default, as surely they will, the U.S. issuers along with the U.S. taxpayers will be in serious trouble. It also creates an unaccountable Consumer Protection Bureau, which can enact rules contrary to rules of the traditional financial regulatory agencies, like the Fed, SEC, and FDIC. The titular head, Elizabeth Warren, is a radical Harvard professor that even the Democrats won’t confirm!

Credit and the financial institutions that extend it are the lubricant of the economy as a whole. Credit was brought to a halt in the recent financial debacle. Dodd-Frank, with its watered down Volker rule and Fannie/Freddie pass, solves none of the causes of that debacle; but it does exacerbate future insecurity and uncertainty. It also rewards moral hazard that will prove to be devastating. Understanding the effects of Dodd-Frank is critical to intelligent voting. We will call on Mark and John for a reprise as this plays out next year.

We also want to thank Greg Mosier, Dean of the College of Business Administration for his report on the College and the budding opportunity to institute a center for free-market public policy research, publication and education. This is exactly what the country needs and is in line with what our Reno Hayek Symposium is fostering.

Jim Clark followed our main presentation with a briefing on “Operation Conservative Latino.” His clever “Political Compass” showed that most Latinos are truly conservative with good family values and hard working attitudes. Democrats like Harry Reid have done nothing more than to use them, without even so much as a thank you. Thanks Jim for the great work; keep it up.

Last but not least, Ryan Costella, gave us an update on “Empowerment Nevada.” This political process of encouraging individual responsibility is exactly what this country was founded upon. Solve problems don’t rely on government. “Own It” is the attitude we want to encourage. Check out Ryan’s brochure and  http://www.empowermentnevada.com/.

Our next dinner is on July 19th with Obamacare as the topic; save the date.

I’ve been remiss in not thanking Brad Schiller sooner for the great presentation on The Listless Economic Recovery at last Tuesday’s dinner meeting. If the number of questions, comments and compliments mean anything Brad’s macro economic analysis was spot-on.

That can be illustrated with two charts from the talk, this showing the GDP components relative behavior. Our lesson, the relatively small but most important with the greatest effects on others is investment. In short, for various bad policy and regulatory decisions, uncertainty has really dented investment and thus this recovery.



The second chart reminds us not to look at economic issues statically. What’s the employment growth necessary to return the country to “full employment?”  Because of growth in the labor force the number of necessary jobs increase by maturity and immigration. Here’s the chart. As you can see, adding 250,000 jobs per month as recently reported, doesn’t cut the mustard!

Brad’s comments on the Fed were also interesting. At the start of the financial panic the Fed flooded the financial market with liquidity, the correct action for which Brad gives Bernanke an A. On the other hand, the Fed’s current deluge of liquidity with QE2 earns him a D minus! Who will buy US long paper when the Fed stops? What will this do to interest rates, not to mention the deficits and debt that our grandchildren will shoulder?

Again, thanks Brad for an outstanding presentation.

Those of us who attended last evening enjoyed an excellent insiders view of the Reagan White House. Ty Cobb’s presentation was interspersed with candid photos and colorful stories of the characters surrounding one of our great presidents. Ty would quote Reagan with such realism that your could close your eyes and picture the man himself. The challenges faced by the Reagan team both from a domestic economic standpoint and an international security standpoint were daunting and difficult. It was truly wonderful to have a deep insider on that team give us the up close and personal view. Thank you Ty Cobb.

We also announced our new companion website for the Hayek Group, http://hayekgroup.org. While its still in a build mode, we welcome your comments and suggestions.