Monthly Archives: October 2009

In the Sunday, Oct. 17 edition of the Arizona Republic there was a column on “creating” the new Arizona economy. It made the usual argument that we don’t subsidize enough cool stuff to have a “knowledge” economy, but that wasn’t the good part. Along side this story was a sidebar developed by the Morrison Institute at ASU titled, “Milestones in helping Arizona build its economy, 1991 – 2009. Here are the milestones (my description in parenthesis).

ASPED (public/private blueprint for economic development strategies)
State Job Training Program (government job training program)
Proposition 301 (sales tax increase for education funding)
Bioscience Roadmap (study by Flinn Foundation to advocate biosciences)
“Angel” Tax Credits (legislative program to subsidize private investment)
Science Foundation Arizona (public/private program to fund research grants in high tech areas)
Moving Arizona Forward (ASU study focusing on increased education spending)
WIRED (federal government program to spur high-tech businesses)
STEM (A Science Foundation program to support education)
Solar Energy Tax Credits (legislative program to subsidize the manufacturing of renewable energy components)

Look at all the government programs that built Arizona’s economy. I love how ASU and Flinn Foundation studies make the list, but 7 consecutive years of tax cuts in the 1990’s don’t. I love how the solar energy tax credit bill makes the list (the bill was signed on July 10 OF THIS YEAR and therefore hasn’t had — couldn’t have — one iota of impact on Arizona’s economy) and the 2006 personal income and statewide property tax cuts don’t.

Don’t be insulted if you are one of the thousands of companies who took risks, invested your own capital, produced goods or services, and otherwise actually built Arizona’s economy.

Forget that. Feel free to be insulted.

The White House is cheering today’s news that GDP last quarter was up 3.5%. But they’re also cautious not to get too excited. They know they goosed the numbers a bit.

It’s no secret that the government can artificially boost economic activity. Take, for example, the cash-for-clunkers program. Auto sales (contributing 1.66 percentage points of the 3.5% GDP growth) jumped in July and August in large part due to the fact that the government handed out $4,500 to people to buy new cars. It looks like auto dealers had some false hope of a turnaround since September auto sales are down 10%. It seems a lot of people who were going to purchase a new car anyway, simply did so during the cash-for-clunkers time period. Those who couldn’t afford a new car then still can’t. The net effect is that government artificially boosted demand for new cars for two months, destroyed many usable cars in the process, and cost taxpayers $3 billion for its work.

Another factor that contributed to the GDP increase (about .5%) is home building. Part of the significant 23% jump in new home building last quarter comes from the federal homebuyer’s tax credit. We really don’t know for sure if the sector is going to turn around or not because government artificially inflated this sector as well.

These programs don’t do anyone any favors. If auto dealerships or home builders need to close or consolidate, the sooner that happens, the better. Federal programs like these only prolong the pain.

When the GOP had control of the WH and Congress, fissures occurred in the Party over issues like immigration, government spending, and the wars in Iraq and Afghanistan. Divisions in the Party aren’t always bad because a Party that stands for something is by nature going to cause some strong disagreements. And what’s the use of belonging to a political party that doesn’t stand for something (or tries to stand for everything)?

Whether it’s healthy is one question, but what influence peddlers do in response can be quite interesting. Filmmaker Michael Moore as reported in Politico:

“To the Democrats in Congress who don’t quite get it: I want to offer a personal pledge. I – and a lot of other people – have every intention of removing you from Congress in the next election if you stand in the way of health care legislation that the people want,” Moore told supporters of women’s groups and unions gathered at the headquarters of the government watchdog group Public Citizen. “That is not a hollow or idle threat. We will come to your district and we will work against you, first in the primary and, if we have to, in the general election.”

Moore issued a not-so-veiled warning to Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee and an opponent of the so-called public option, though not by name, asserting that his movie could be a rallying point for people across the country – including in Montana – to work to defeat Democrats who opposed the public option.

“You’ve made a serious mistake,” he warned Baucus.

Mr. Moore’s “pledge” didn’t influence Chairman Max Baucus and four other Democrats on the Senate Finance Cmte, who last week joined Republicans on the committee to shoot down the ‘public option’ on a 8-15 vote.

Read more: http://www.politico.com/news/stories/0909/27703.html#ixzz0SWqnTcm0



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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.