New Mexico’s economic stagnation shows effective policy questions


Downtown Santa Fe, New Mexico (Sean Pavone/Getty Images)

Until a concerted effort is made to make the state more attractive to business, it will remain on the same unfortunate trajectory.

Jhe The US Census Bureau recently released demographic data showing how the population of America and its 50 states changed between 2010 and 2020. As has been the case for decades, states in the “rust belt” of the Midwest overall lost representation, while fast-growing southwestern states gained seats (Texas added two and Colorado one). For the first time ever, California has actually lost a seat in Congress.

Yet the national media has overlooked in all of this what can only be described as the impending creation of a population “doughnut hole” in the otherwise rapidly growing Southwest – i.e. my State of origin, New Mexico.

While Utah and Arizona did not add congressional seats like fellow New Mexico neighbors Colorado and Texas, both states experienced double-digit population growth during the decade. The population of New Mexico, on the other hand, increased by only 2.8% during this period. That puts the state tied with Vermont and just ahead of Maine at 2.6%.

When neighboring Utah is growing 18.4% and Texas is growing 15.9% – and your own state’s population is barely growing – there must be a problem. Hint: It’s not the weather. Various factors caused the Americans to move from the northeast to the southwest, including the search for better weather. But that of New Mexico is unprecedented. It’s sunnier than Florida and doesn’t have the oppressive 120-degree summer heat of Phoenix. And it really is “dry” heat without the clammy Texas humidity.

As if New Mexico’s tiny 2.8% population growth wasn’t pathetic enough, the details are even more troubling. During the decade, New Mexico, a state of just over 2 million people, gained 103,506 people over 65. Clearly, the state’s climate, inexpensive housing, and unique cultural offerings appeal to a certain segment of retirees.

But during the same period, New Mexico lost 71,142 people age 64 and younger, including 51,382 residents age 24 and younger. This kind of demographic stagnation just isn’t supposed to happen in the booming American Southwest. This is New Mexico’s slowest growth since the state was established in 1912; and, to make matters worse, analysts believe that New Mexico could lose its overall population when that data is collected again in ten years.

Could New Mexico, with an ethnically diverse, rapidly aging and slowly growing population, somehow serve as an early proxy for the nation as a whole? The population of the United States has nevertheless increased by 7.4% over the last decade. How, then, could a state smack in the middle of the country’s fastest growing region do so badly? More importantly, what can be done about it?

First, to begin to appreciate the magnitude of New Mexico’s problems, we must understand its lack of economic freedom. According to the Fraser Institute’s annual Economic Freedom of North America report, New Mexico is in the bottom quartile states when it comes to its residents’ ability to keep their hard-earned money and cope with reasonable economic regulations.

All of New Mexico’s fast-growing neighbors rank higher. Admittedly, this is remarkable but not surprising: high levels of economic freedom are strongly associated with increased population growth.

New Mexico’s path to becoming “the sick man of the American Southwest” is complicated. Unlike California, another state with great weather and physical beauty, but terrible public policies, New Mexico was never the place to be. Despite its many flaws, California remains the most populous state in the country, with dozens of the world’s most recognizable companies headquartered there.

New Mexico chose a different path. Not only do we have no headquarters here, but the state only has a few publicly traded headquarters. Instead, since the end of World War II, New Mexico’s economy has relied on a combination of massive federal spending and a robust oil and gas industry.

While California has many tech companies and their wealthy employees to pay the state’s ever-increasing tax burdens, New Mexico remains one of the poorest states in the country. Of course, it shouldn’t be, but like California, bad public policy is holding the country back from enchantment.

By any measure, New Mexico is heavily dependent on federal spending. (According to WalletHub is more than any other state.) Other than Washington’s largesse, oil is New Mexico’s other big industry. In fact, New Mexico is the third largest oil producing state in the country. Depending on the year, it represents between 30 and 40% of the State budget.

One would expect that having two national nuclear laboratories – along with their highly skilled and well-paid employees – would be a ticket to economic prosperity. Add in the billions of dollars in annual tax payments and the jobs and economic activity they bring, and it would seem to most outsiders that New Mexico should be the wealthiest state in the region.

But it turns out that having sound, liberal public policies trumps massive federal “investments” and natural resource wealth. New Mexico’s lack of economic freedom is a direct result of the state’s political leaders not wanting to do the hard work of enacting the free-market policies that would make New Mexico competitive with its neighbors.

It doesn’t have to be that way. With its excellent climate and numerous outdoor and cultural activities, New Mexico remains well positioned for growth in the years to come. The fate of the state ultimately rests with the voters who must decide whether to elect politicians to the legislature and the governor’s mansion who are willing to embrace the free-market policies upon which growth depends.

The same is true for New Mexico as it is for California and various other states. Until a concerted effort is made to make the state more attractive as a relocation destination for businesses, it will continue on the same unfortunate trajectory. Getting rid of our unseemly title will require dramatic changes in direction. The only outstanding question is whether we are ready to do so.

Paul Gessing is president of the Rio Grande Foundation of New Mexico.


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