January 6, 2010
Host: Ted Simons
Arizona Job Recovery
- Economist Elliott Pollack discusses a job recovery report his firm recently prepared for the Speaker of the Arizona House of Representatives.
The report contains a list of recommendations to grow high quality jobs and improve Arizona’s economy.
- Elliott Pollack - Economist
Ted Simons: Good evening, and welcome to "Horizon." I'm Ted Simons. The Arizona state treasurer sent a bill to the federal government for the cost of illegal immigration. Treasurer Dean Martin sent the invoice for $1 billion to homeland security secretary Janet Napolitano, who used the same tactic when she was governor. Martin says it's a 10-1 shot that the federal government will pay the bill. The city of Phoenix is facing tough budget cuts over the next two fiscal years. Budget and research director Cathy Gleason says the city face as shortfall of $245 million. Officials will present a budget to the city council on February 2nd, and cuts to vital Service and layoffs could be part of the plan to close the budget gap.
Ted Simons: House speaker Kirk Adams has announced an economic and job recovery bill to be introduced in the house after the legislature convenes next week. The bill calls for reducing corporate income taxes. It also offers companies tax incentives to attract and retain high-paying jobs, especially those in manufacturing, development, research, and mining. The bill is based on a report prepared by Elliott Pollack and company, and here with more is the company's CEO, economist Elliott Pollack. Good to see you again. Thanks for joining us. You base everything by saying that Arizona's economy has not evolved since the 1950s?
Elliot Pollack: It really hasn't. If you look at our history, most of the companies here today, not all, but most of them are grandchildren of companies that came here in the '50s and '60s, and when we were very strong, very good at economic development, had much more competitive taxwise, and we have lived on our laurels for a long time. It's finally caught up to us in this recession. This recession exposed the weaknesses of a population-based economy. It's imploding, plus people aren't showing up. We have to get high-wage jobs here. The other thing that's happened since the '70s, anyway, is that per capita personal income, which is an economic euphemism for stand of living, has been declining in Arizona relative to the U.S. And that's because the jobs we have beginning here have not been high-wage jobs. We've been -- we have not been good at getting those, and we're finally paying the piper.
Ted Simons: Gung ho in the '50s and '60s to get the big boys in town. What happened to the gung ho?
Elliot Pollack: Well, I think we became complacent. And we started basically biting the hand that feeds us, killing the goose that laid the golden egg, whatever you need. Let me explain the structure of this thing. If you think about the ghost towns of the old west, they became ghost towns because the reason for their existence went away. The mine petered out, the railhead moved, there was a drought so there was no more agriculture. Those things that brought money in from the outside, they stopped existing. The reason -- and so what happened is everybody left. The barber left, the mercantile store left, because money wasn't coming in, so those domestic sector companies had no money to chase. Well, essentially the reason we're here is because Boeing is here, because Intel is here, because JDA software is here, because American Express's regional office is here. If we don't attract those companies that pay above average wages, we're destined to have essentially a third world economy. Now, it's not only the high wages, but it's the multiplier effect. For every one job at Boeing, there's another 2.2 jobs created. Basically there are 3.2 jobs based on that one job. And they tend to be higher wage jobs.
Ted Simons: OK. So the idea is to get the big boys here-the Boeing’s and the base companies here.
Elliot Pollack: And then there's more money for the domestic sector companies, the Dillard's, and the Circle-Ks, and the Arizona Diamondbacks, and the banks to chase, there's more money bouncing around.
Ted Simons: Can you provide incentives for the big boys and not also put in the other guys chasing the multiplier money?
Elliot Pollack: You want to design it so as much as possible it's just hitting those base industries. Otherwise you end up with something called dead weight revenue loss. But, the way this is designed is that the incentives are paid for by the people that come in. In other words, we're not paying more to get a company here, than they're bringing in. So the original economic structure of this thing, which is a little different than what finally came out, was designed specifically to avoid that dead weight revenue loss.
Ted Simons: What finally came out was a series of tax cuts, including income tax cuts. And I know you didn't necessarily talk about that in your report, but the Pugh center on the states had a study saying that Arizona has been hurt by tax cuts, mostly income tax cuts, since the 1990s, and that talk about chickens coming home to roost, now we're not getting much revenue with spending accelerating here in the past few years, which is putting us where we are.
Elliot Pollack: OK. I won't get into the debate about whether it was tax cuts or spending. That's irrelevant. The issue here is to have a tax structure and incentive structure that gets us in the game to get these big guys here. To me, that means you have to incent the base sector industries. And I don’t even mean mining, quite frankly. I mean manufacturing, I mean guys who could pick up tomorrow and go somewhere else. If there’s a manufacturer here who could be in Austin tomorrow who could be in Tennessee tomorrow. We got to consider that, because they’re going to not only take that one job with then they’re going to take the other 2.2 because of the ripple effect. A company that’s going to be here anyway we don’t have to incent. But, in effect, you basically have to deal with the corporate tax rate, corporations don’t pay a lot of taxes anyway, just because of the way they’re structured at least not the base industries so we’re not losing a lot there. And the property taxes: originally we wanted a separate class for base industry jobs, there’s some question to the legality of that. But everything else, all the incentives, the job training money, the governor’s closing fund, the expansion of the enterprise. Those things pay for themselves, they don’t cost the taxpayers anything. They come out of money that these companies bring in and are paid for by those companies.
Ted Simons: So with that in mind, when critics say, basically, this is helping big business at the expense of the middle class, at the expense of homeowners, local cities, towns, you say?
Elliot Pollack: I say nonsense. It is helping big businesses because most export or base sector industries are big, that’s by definition. They have international and national markets. And so, yes they’re being helped. But think who’s really being helped. If Boeing leaves, not only that one jobs leaves, but another 2.2 leave. So essentially the average guy, basically, will lose is job. Compare that to let’s say, a retailer, who has a multiplier effect of 1.6, or even tourism which has a multiplier effect of 1.7. This is the best way to expand your economy, to get high wages in here and increase your standard of living. Is it perfect? No. But I’ve got to tell you I’ve been doing this for 40 years and this is the one that has the most economics behind it. In other words, what finally came out had a lot of what was in our report. A lot of times the state does things, like the citizen’s finance review committee, where nothing comes out of it because politics gets in the way. My guess is that when the dust finally settles and politics between the Democrats and Republicans gets involved, it’ll look a little different than it does today.
Ted Simons: But I was gonna say, politics always gets involved. Will politics get involved to the point where your report and what you’re calling for here becomes a distant memory?
Elliot Pollack: The answer is, I hope not. But if it does, I’ll be the first one to tell you that it’s nonsense.
Ted Simons: Another idea –another criticism-is that regardless of how much it costs the state. And you’re saying that this thing shouldn’t cost the state much, if anything at all.
Elliot Pollack: With the exception of the income tax – personal income tax.
Ted Simons: Yes, indeed. Um- that when corporations and CEOs are looking to move, it’s in your report here: Number one is transformation infrastructure, number two is existing workforce skills, third is state and local tax scheme, which makes sense. But what happens to infrastructure and workforce skills – euphemism for education – when there’s no money for it.
Elliot Pollack: Well, let’s take it a step at a time. First of all, you have to get in the game. In other words, it’s great to have great transportation or a good school system. But if you’re not in the game it doesn’t matter. You have to have a corporate tax rate that makes you competitive, and you have to incentives that make you competitive. Otherwise none of that other stuff matters. And by bringing that in, it will create more tax revenue because the economy is growing more rapidly. So it will create more tax revenue to build the very things – the roads the schools , the things we really need – once the economy is growing again.
Ted Simons: So basically, when people say, like the critics are basically saying, that this is the wrong time for any kind of tax cut. And certainly – the bill is to be phased –
Elliot Pollack: Yes phased in over four years.
Ted Simons: Starting in 2012?
Elliot Pollack: Right.
Ted Simons: Even that’s too soon, say the critics.
Elliot Pollack: Well, again, I’ve been a practicing economist in Arizona for 40 years. If we don’t do something now, If there’s no political will in this environment to do something to help create quality jobs it will never happen. And we are destined to have a lower standard of living relative to the U.S.
Ted Simons: The phrase “political will”. We started the conversation with what happened in the 50s and 60s . Getting the big guns here and letting them flower, that whole euphemism. Is Arizona the same now as it was in the 50s and 60s?
Elliot Pollack: Well there was great leadership back then. We had a lot of leadership in the congressional delegations, and I see that lacking now in terms of bringing jobs to Arizona. And I’m hoping we can find some Republicans and some Democrats who’ll sit down and find a reasonable solution. Keep in mind there’s two issues here. There’s the budget issue and there’s the economic development issue. This is to create a situation where we bring in companies that prevent us from coming into this particular economic environment again.
Ted Simons: And yet, can you divorce that from the budget issue when the budget issue is so big?
Elliot Pollack: Well, I think they’ll have to both be resolved pretty quickly.
Ted Simons: Ok. Are you optimistic about Arizona’s future?
Elliot Pollack: I think we are at a crossroads. I think you have to strive not to grow and you have to strive to grow well and we haven’t been doing that over the past few decades. And if we don’t do it, there’s no reason to expect that we’ll have turned the corner. So, I don’t know, ask me in three years and I’ll tell you.
Ted Simons: Last question here, before you go. I’m going to try to get some movers and shakers that come to the program to answer one basic question as the year goes on. Your vision for Arizona, what do you see?
Elliot Pollack: Well, again, what I think I’d like to see is a state that’s competitive, that brings in high quality jobs, that allows you to have a higher standard of living, that allows you to have money to fund infrastructure and education to the point where people are getting what they think they’re getting. And that we basically go into the sunset growing quality jobs and growing a better standard of living. Whether that happens is still up in the air.
Ted Simons: Alright Elliot, thanks for joining us.
Elliot Pollack: Thank you.
Maricopa County Issues
- Arizona Republic reporter JJ Hensley will sort out the myriad of infighting going on in Maricopa County government.
- JJ Hensley - Arizona Republic
Ted Simons: Infighting among Maricopa County officials remains at unprecedented leves, with allegations and legal actions flying back and forth. Criticism of Maricopa County’s political mess is even coming from officials outside the county. Joining me now for the latest on all this is J.J. Hensley, who covers county politics for the Arizona Republic. Good to see you again, thanks for joining us.
J.J. Hensley: Thanks for having me.
Ted Simons: We had a stay now in the case against judge Donahoe, correct?
J.J. Hensley: Yeah, that was yesterday. It came out of Pinal County. Judge O’Neil down there granted the stay, pending the outcome of the Supreme Court’s decision on whether Andrew Thomas is conflicted in prosecuting Donahoe. He based the stay using four criteria, he said: public interest, likelihood of success, balance of harm, and irreparable harm. He did all of this without passing judgment on the merits of the case. The irreparable harm, though, the interesting thing he mentioned was the irreparable harm that could be done to the justice system.
Ted Simons: Interesting.
J.J. Hensley: And then he granted the stay, so the Supreme Court will take up the matter whether Thomas is conflicted in prosecuting Donahoe.
Ted Simons: And that will put on hold any mug shots, fingerprinting and all that business, correct?
J.J. Hensley: Exactly, so there will be no perp walk.
Ted Simons: Does the stay suggest though, as you mentioned, it seems to suggest that there could be success on the Supreme Court with this. Does it look like a little bit of a suggestion there.
J. J. Hensley: I suppose it’s depending on how you read into it.
Ted Simons: Yeah.
J.J. Hensley: I mean, I know Donahoe’s supporters, Thomas opponents are definitely hopeful of that. But I mean, when he issued the stay he was careful to say he wasn’t doing anything on the merits on the case, it was all about these four criteria and how they figured it in his decision.
Ted Simons: And again the Supreme Court in March will finally figure that one out.
J.J. Hensley: Right. They’ll take that up in March.
Ted Simons: Are you hearing anything from retired Chief Justice Ruth MacGregor who now is an overseer on all this business? Any hearings, any meetings coming out there?
J.J. Hensley: She’s playing it close to the vest, which I think is why she was given this task of riding herd over these conflicts. You know, both sides, whether she was appointed to this role as special master, said they were pleased with it, and hoped that she could finally cut of sort through all of the legal machinations that have been going on over the last few months. So one of her first decisions -- judge O'Neal, who made the decision yesterday, everything now is coming in front of her, which should hopefully prevent constant calls of conflict that have been in the rising from either Thomas or the judges or anyone else who’s involved.
Ted Simons: And again what is her role? What can she do, what can't she do as special master here?
J.J. Hensley: Right now -- in theory she could probably take these things under advisement, but she reviewing the issues and farming them out to other justices around the state right now.
Ted Simons: We've had county attorneys now from Yavapai county, Pinal county coming up against the county attorney's office and sheriff's department. Are there any more out there? Are you hearing anything from other parts of the state?
J.J. Hensley: Not so far. Sheila Polk and James Walsh are the two that came out, this was leading up to Christmas, Polk actually had the case for six months, and reviewed it. She was fairly familiar with it, though the sheriff's office says she has no idea what she was talking about. She did review the case for six months, and wrote a letter that was pretty strongly worded saying that they were doing irreparable harm to the justice system. Walsh kind of followed on her heels and he said I support her, he's a democrat, which Arpaio's people were quick to point out. Interestingly, though, everyone said, they're going to be indicted immediately, they've come out talking against these guys, which is what happens. They were both out of the country when the letters appeared --
Ted Simons: I also noticed that Maricopa County attorney's office was critical, especially of Walsh in the sense that they accuse him of poisoning of the jury pool by making his statements. My question is, does that mean any statements regarding anything would poison the jury pool? If that's the case, we've heard a lot of statements coming out of the sheriff's department and the county attorney's office as well.
J.J. Hensley: Yes. That means they're -- their organization is known to fight their battles publicly. Everything from Stapley’s original indictment from -- I don't think anyone gave a lot of credence to their complaint that Walsh was poisoning the jury pool. The issue I suppose for them was that he is saying this and at least one of these cases is down there now, so he could potentially be impacting that, but they really didn't give his letter much credence because he wasn't -- they said Polk wasn't familiar with the case, she had had it for six months, and Walsh has only read what Polk said--
Ted Simons: We've seen the release of the deposition of sheriff Joe Arpaio. Nine hours. 300-some-odd pages if you want to go through it as opposed to watch it. What did we learn?
J.J. Hensley: Boy. I think the headline was that he hasn't read the book that he coauthored last year. He told me, I looked -- lived it, why would I need to read it? That's his explanation. I think the picture that emerged from that interview, it was in the racial profiling lawsuit, which there are five residents in Maricopa County in the ACLU and some other organizations that have brought it. I think that the thing that came out of that that was most striking was just how much authority he delegated to his undersheriffs or chief deputies, things like that. Particularly on issues that are high-profile and in court. He hadn't read the complaint that he was there giving this nine hour deposition for-- he said, my legal team takes care of that. But I think people were struck by that.
Ted Simons: Yeah, and also I know that there were no racial profiling training apparently for deputies, and the sheriff basically didn't think it was necessary.
J.J. Hensley: Yeah, Doesn't need it. That could be one of the outcomes of this case for the justice department's civil investigation into allegations that racial profiling -- that's really -- that's one of the key things that could out of that investigation, they're saying sheriff, here's how you can do a better job of being sheriff, and one of those things could easily be institute some training on racial profiling.
Ted Simons: The plaintiff’s attorney, David Bodney, well known in media circles, certainly. What do you think he was trying to show?
J. J. Hensley: Well, he’s our attorney at the Republic. He serves a many of the media outlets here. I don't know exactly what he's trying to show. Arpaio's attorney said, look, they are -- they're losing this case so their attack now is to go after a celebrity in this case, that celebrity is the sheriff, and try to embarrass him publicly. I think the Bodney would say he's probably trying to show that this man has no idea what's going on in his operation, and lets his undersheriffs and chief deputies take care of things, and they're not the elected officials that who should be responsible for making these big decisions.
Ted Simons: It seemed like there was a lot of repeated questions as well about whether or not this was done for the media, or whether or not this was done to get into how much the media and the sheriff's fascination with the media, or relationship with the media, factors into some of the stuff he does.
J.J. Hensley: Yeah, that was an interesting thing out of that deposition. A lot of his answers were "I don't know," "you'll have to ask Brian sands" my chief deputy," the only things he could really talk about in depth were press releases he’s issued, interviews he's done, newspaper stories, magazine articles he's been in, things like that. So, yeah, his relationship with the media seemed to figure heavily in his testimony.
Ted Simons: Last question on the deposition, it seems as though one of the stories, one of the bigger stories that has come out of this is not so much what you can read, but what you can see. And the view of the sheriff not so much as he is a press conferences, but as anyone would be, I imagine, in front of an attorney taking a deposition.
J.J. Hensley: Right. Nine hours. It was a long day for him. I think that was what some of the other media in town latched on to, was this picture of Arpaio as not the blustery tough-talking, blow-hard sheriff that people, the public typically sees, either in press conferences or speeches he might give, but someone who is very reserved and kind of reticent to say much, and very -- didn't raise his voice, didn't get angry. A lot of the characteristics that we are used to seeing from Arpaio weren't evident. But, he says, in a deposition, you want to give the attorneying as little to go on as possible, to I -- so I didn't see anything more than I had to.
Ted Simons: OK. The role of county board looks like it's going to be up for revision this next legislative session. What's going on here? This looks like it's targeted toward Maricopa County but it will affect boards throughout the state?
J.J. Hensley: This is Russ sell pierce's legislation, brought up last year and died in a committee. What we do right now is kind of anyone's guess. He says it would allow elected county officials to have sort of ultimate control over their budgets once that pot of money was given to them by the board of supervisors. The concern from some of the folks we talked to is that this would allow sort of silo- governments to form, so that the sheriff's office, the treasurer's office, the county attorney's office would with all have their own purchasing, hiring, procurement, all these different departments within them that are now kind of under the umbrella of county, the county government in general.
Ted Simons: Yeah, these freestanding governments for elected officials, and it sounds like other parts of the state are not too pleased with this legislation.
J.J. Hensley: Pierce says he has the support of five sheriffs. He said he didn't want to name them. I called around and couldn't find any, but I didn't get a hold of all the sheriffs out there. The sheriff in Pima county, though, is adamantly opposed to it, he says sometimes working with the board of supervisors through financial issues is painful, but it's necessary.
Ted Simons: Tomorrow we're going to have supervisor Stapley on this program, and we're going to talk as much as we can about things going on with the county. But it sounds as well like tomorrow supervisor Stapley will be named chairman of the board of supervisors. Correct?
J.J. Hensley: Yeah. He's coming back to be the chairman. It's a rotating position, and the supervisors elect one of their own each year to serve in that role. So he was there two years ago, one year ago, and then Andy Kunasek’s been there for the last year.
Ted Simons: And this is -- pardon me if I'm wrong, mostly ceremonial position, but would I imagine having him as the chairman is somewhat a message driven.
J.J. Hensley: Yeah. I think you're right, that it is probably largely ceremonial. He is still one vote among five on the board. But, yeah, there's definitely a sense that it's thumbing their nose at the county attorney and the sheriff to name an indicted supervisor as the board.
Ted Simons: It sounds like a lot of things are going on. Is there a little lull happening right now or are we getting ready to kick off another round of allegations and cross allegations?
J.J. Hensley: I think we always expected something to happen in the weeks leading up to the new year, and things slowed down a little bit, so maybe the detectives took some time off to spend with their families. Who knows what the New Year holds?
Ted Simons: Good to have you. Thanks for joining us.
J.J. Hensley: Thank you.