Arizona’s economic devastation projected to continue into 2015

Posted by AzblueMeanie:

Governor Jan Brewer is already threatening Arizonans with another four years of her failed leadership less than a year into her second term, despite a clear and unambiguous provision in the Arizona Constitution, Article 5, Section 1 (Version amended by 1992 Proposition 107), which provides that "No member of the executive department shall hold that office for more than two consecutive terms… No member of the executive department, after serving the maximum number of terms, which shall include any part of a term served, may serve in the office until out of office for no less than one full term." Gov. Jan Brewer: Term rules unclear (only to her).

Dream on, lady. With the economic devastation wrought on this state by more than 20 years of faith based supply-side "trickle down" GOP tax cuts, culminating in Brewer's "time bomb" corporate welfare bail out tax cut approved this year, has resulted in a permanent structural revenue deficit which prevents Arizona from investing in education and job training, research & development partnerships, modernization of its infrastructure and transportation systems, and to provide for "quality of life" factors, such as quality health care. Brewer's dream of reelection is pure fantasy. She will be lucky if Arizonans do not run her out of town on a rail.

Arizona is not even expected to begin to recover from the economic devastation of this fiscal mismanagement and the Bush Great Recession until 2015 — after Brewer has completed her term and left office. And this may be wildly optimistic, given our Tea-Publican legislature (i.e., TABOR spending limits and flat tax proposals). ASU forecast: 7%+ jobless at least till '15:

It's going to be at least four years until the state's jobless rate drops below 7 percent, according to Arizona State University economists.

The state will have nearly 300,000 more people working in 2015 than last year, predicts Lee McPheters, a professor at the W.P. Carey School of Business. He said the job growth will initially be slow – only about 1 percent this year – before finally picking up toward the middle of the decade.

But the consensus of the economists is that even by the end of 2015, there will still be fewer people working in Arizona than had jobs in the state when employment hit its peak in 2007, before the economic bubble burst.

"Arizona is still struggling," said McPheters, with job growth in the last year no better than 47th of all the states.

One factor is that the job market is changing in Arizona, said Robert Mittelstaedt, dean of the business school.

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"A lot of the jobs that have left the economy are not things that we're going to get back because the industries have to adapt to compete globally," Mittelstaedt said. That means some jobs are going to be shipped overseas.

At the same time, the jobs that cannot be shipped out – those in construction -are going to remain scarce for some time.

"You have a substantial excess supply of housing nationally, not just in Arizona," he said.

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Professor Dennis Hoffman, the self-acknowledged optimist of the group, said he foresees higher consumer confidence – and the purchasing that goes with it – without a major increase in employment or income.

"The way you can do that is you just come back slightly a little more toward normal consumption patterns," he said.

Hoffman acknowledged the "wealth effect" and how declining home values affect spending.

"But wealth has come back in a lot of other areas," he said. That includes the rise in the stock market and the commensurate increase in the value of 401(k) retirement accounts.

What really makes Hoffman upbeat on the state's future is that Arizona still has the same "fundamental magnetism" for growth.

"It was climate, it was the fact we don't have harsh winters they do elsewhere, we don't have Category 5 tornadoes," he said. "We don't have earthquakes, we don't have major flooding. We don't have things that folks are going to want to get away from."

Still, he acknowledged, there are other factors that temper all that.

"People are frozen in houses," unable to move to Arizona until they can sell what they have. "But they're not going to be frozen forever," Hoffman said.

There's that growth in the 401(k) values. "So they'll adjust their portfolios, rid themselves of a house in the Midwest and show up on our doorstep," Hoffman said. And that, he said, does not make him an optimist.

"You say, 'Why would that happen?' " he said. "I guess I would turn that around: Hell, it's happened for 50 years. Why wouldn't that happen?"

With all due respect, Mr. Hoffman should consider other employment where he can be of less harm. The single biggest economic policy mistake that Arizona has made since the end of World War II has been its single-minded focus on uncontrolled growth and construction as its principal economic engine. We have experienced several "boom and bust" economic cycles with the ups and downs of the housing market as a result of this economic policy mistake, most recently with the collapse of the speculative housing bubble beginning in 2006.

Arizona must begin a broad-based economic diversification into sustainable industries less subject to economic cycles, and new industries which are projected to create the jobs of the future. This will require a well-educated, well-trained work force, research & economic development partnerships between business and universities, modernization of infrastructure and transportation systems, and "quality of life" factors other than merely our climate.

As for our climate, Mr. Hoffman apparently did not consider environmental science in his research. He should be aware that we are in the early stages of a warming period that has already caused prolonged drought and should be expected to continue to produce extended periods of drought into the forseeable future.

Arizona's lifeblood is water. When water becomes scarce, we may find that we have already achieved a maximum sustainable population based upon available supplies of water. If so, you will begin to see an outflow of population (as we have seen recently due to poor economic conditions). And the cost of energy, specifically to air-condition our homes and businesses and to fuel our vehicles, will also affect our economic growth. Arizona's rapid growth over the past 50 years was fueled by inexpensive energy and air-conditioning. Those days are gone forever with the arrival of peak oil confronting the world economy.

Like other states which have experienced population loss down to a stable population, Arizona should be developing an economic plan now for a sustainable economy based upon a stable population, not reliance on the old model of uncontrolled growth.

Mr. Hoffman's statements above, particularly "Hell, it's happened for 50 years. Why wouldn't that happen?" just tells me that he is living in the past, and his admittedly optimistic forecast is not based upon sound scientific research or economic reasoning. His statements in the article above are a great disservice to any serious discussion of economic policy.

Link to the W.P. Carey report: Mid-year Economic Outlook: Slow Recovery – Knowledge @ W.P. Carey.