by David Safier
Funny thing. The Goldwater Institute tried to defend its assertion that Arizona will lose 14,000 jobs if we pass Prop 100, and ended up getting a slap on the wrist from the Beacon Hill Institute that gave G.I. the original information.
Beacon Hill Institute said basically, We stand by our assertion that Arizona will lose jobs if the proposed sales tax hike passes, all other things being equal. But look, we didn't claim to factor in the jobs Arizona will lose if the state forfeits $442.5 million in federal matching funds. That was never part of our economic analysis. Blame that failure on G.I., not us.
It's a beautiful thing when G.I. proves how deceptive its pronouncements are while it's trying to "prove" it wasn't being deceptive. This one isn't as outrageously comical as Ladner's assertion that bus drivers are
bureaucrats, but it's pretty damn funny — and telling — nonetheless.
Warning: From this point on, I'm going to get kinda wonky in a field where I only have an educated layman's understanding, and my explanations promise to be boring to boot. Proceed at your own peril.
The Goldwater Institute maintains that Prop 100 will cost Arizona 14,000 jobs, based on "economic modeling" done by Beacon Hill Institute, a conservative/libertarian institute out of Suffolk University.
Alberta Charney, an economist at the UA Eller School of Management, wrote a response to the Beacon Hill figures. Lots of it involves the kind of arguments economists have with one another about which economic model gives a more accurate economic forecast. But at one point, Charney says, the 14,000 job loss figure (which she thinks is too high anyway) leaves out one important factor. Without the funds Prop 100 brings in, we'll lose $442.5 million in matching funds. Keeping that money will save lots and lots of jobs, which will more than balance out however many jobs are lost because of the sales tax hike.
Thursday, G.I. linked to what it proudly referred to as "the Beacon Hill Institute's Rebuttal to the Eller Study on the Effects of the Sales Tax Increase."
And, as advertised, much of the 10 page report rebuts Charney's arguments. So far as I can tell from my limited economic understanding, Beacon Hill and Charney come from different economic perspectives, and each argument makes sense if you accept certain economic assumptions. The arguments are far too complex for me to weigh in on, or even completely understand.
But at one point, Beacon Hill's rebuttal discusses that $442.5 million figure, and that part is perfectly clear. First, Beacon Hill quotes Charney's argument:
[T]he $442.5 million in federal matching funds associated with state government funding were not considered in the Goldwater Instituteʹs press release. Not assessing the loss of federal matching funds is really not a failure of the STAMP model [which Beacon Hill uses]; rather it is the fault of the Goldwater Instituteʹs use of the STAMP model when they neglected to incorporate those additional dollars.”
Then comes this priceless line that begins Beacon Hill rebuttal of Charney's point:
We thank Dr. Charney for absolving us of this “failure.”
In that sentence, Beacon Hill reinforces what I've said repeatedly about G.I. It pulls together the facts, factoids and distortions that fit its preconceived notions and ignores the rest.
Beacon Hill used its economic model to predict what will happen to jobs in Arizona if taxes are raised by a certain amount. It's one of those theoretical models which assumes everything else remains constant except the tax hike. Then G.I. puts the model in a world where the "constant" is blown apart by a $442.5 million loss in federal matching dollars. And, in typical fashion, G.I. ignores the hundreds of millions of dollars lost to Arizona's economy, because that would mess up its neat, erroneous conclusions.
For the sake of completeness, I'm including Beacon Hill's entire rebuttal to the $442.5 million argument so I'm not accused of cherry picking. Beacon Hill quibbles but doesn't disagree with Charney on the issue, saying, basically, Oh, so you think it's OK to hurt the rest of the country by making taxpayers in other states pay for jobs in Arizona.
Here's the entire passage:
We thank Dr. Charney for absolving us of this “failure.” But while she’s providing absolution, she should consider the implication of her argument: which is that Arizona should raise taxes high enough to maximize in the inflow of federal dollars. This amounts to a policy of pushing a part of the burden of increased Arizona taxes onto taxpayers in other states. It also confuses the discussion of the effect that the higher tax, in and of itself, would have on the state economy. If Arizona wants the federal money badly enough, the state can get it by raising taxes but only at the cost of a shrunken state economy. The purpose of STAMP is to identify this cost. Because Dr. Charney sees only benefits, not costs, of expanded government spending, she ignores this tradeoff.
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As long as Arizona keeps enacting stop-gap measures rather than dealing with the real problems – an income tax that is not progressive -those with less pay less, those with more pay more – and refuses to collect taxes from corporations who make their money doing business here, in Arizona, the state will go from crisis to stop-gap solution ad infinitum(that means forever!). If we do not enact that tax, we will precipitate a crisis of large enough proportions that we stand a better chance of getting serious, long term resolution. It’s sort of like the Dutch kid with his finger in the dike – remember that story??? The Arizona legislature has to address this problem with long-term, equitable measures. Passing 100 will not cause that to happen.