Monday, May 04, 2009

A bit of Monday reading...

I saw a very good article posted online at City Journal. It is worth checking out. I will post some highlights of the Arizona discussion below and hopefully that wets your appetite enough to click on the link to read the whole thing...

Over the last few decades, when New Yorkers and Californians tired of paying high taxes to fund big government, they tended to migrate to what we might call the JetBlue states: Arizona, Florida, and Nevada. In those three low-tax refuges, the construction industry swelled to build houses for the new residents. And the construction workers themselves needed houses, providing jobs for still more construction workers. All the new people needed new places to shop, as well as new doctors, dentists, and restaurants. The local financial industry also grew and grew, filling office parks with the folks who did the back-office work for all the mortgages that New York bankers were eagerly approving. The result: double-digit population growth.

But during the boom times, elected officials in Arizona, Florida, and Nevada took a page out of the old states’ playbook, driving up spending at an unsustainable pace. Now that the growth of the low-tax states has hit a wall, shattering revenues, they face a tough choice: they can raise taxes to fund permanently higher costs, or they can aggressively cut spending. So far, it’s proving surprisingly easy for them to choose Option One, taking a small step toward transforming themselves into the high-tax states that so many of their own residents have fled.

Option two simply cannot be an option for republican state legislators, not with them gaining more seats in the last election AND losing the spendy-spend former governor (now the Secretary of Homeland Security).

A third of Arizona’s mortgage borrowers are now “under water,” according to the real-estate research group First American CoreLogic—meaning that they owe more money on their mortgages than their houses are currently worth.

And that one is tough to digest, but certainly believable -- unfortunately.

But in terms of flagrant profligacy during the good times, Arizona, Nevada, and Florida—those low-taxing, low-spending, every-man-for-himself states—have put New York and California to shame. Between 2000 and 2008, Arizona state spending (after inflation) grew by 41 percent, outpacing population growth by 12 percentage points.

This is why it is so important to choose our elected officials wisely here in Arizona at this time.

Similarly, the town has built a state-of-the-art library that looks more like a Barnes & Noble, where kids and adults take advantage of the late hours to read after work and school. (Queen Creek Mayor Art) Sanders doesn’t seem to prefer the public sector to the private sector for any particular task. But some basic service functions seem invariably to gravitate to the public sector, as the population evolves from a few farmers with their own informal network of services to individual homeowners, often from out of state, who expect the government to provide such services and much more.

Yet most of the three states’ dizzying spending isn’t the consequence of new public services required by new towns. It’s instead due to those culprits familiar to budget hawks on the East and West Coasts: education and health care. In Arizona, for example, education spending is up 32 percent in the past four years alone, outpacing the rest of the budget, says Byron Schlomach, director of the Center for Economic Prosperity at the Goldwater Institute. (Among other things, the spending pays for a new full-day kindergarten program for public school students.) Health care has more than held its own, too, as former governor Janet Napolitano tried diligently to expand Medicaid eligibility to middle-class families.

I've said before that I'm on the fence on education spending. I don't have children and likely won't be having any children that will utilize public education, so I can be selfish if I really wanted to be. My concern however on the spending is where and how is it being spent. I get the feeling that it is based primarily on administration (based on other articles and information I have posted). My hope is that some school district in Arizona can show the kind of leadership needed, one that can do more with less. Improve the education in the classroom, take care of the teachers, and limit the bureaucracy.

Why haven’t the JetBlue states reduced spending when faced with the downturn, instead of turning to new taxes? A big reason is the growing power of special interests that depend on taxpayer dollars, making these once-frugal states look a bit more like California and New York.

Any special interest entity depending on Arizona taxpayer dollars should fail, IMO. How about running an audit on any government department that requests increases in funding?? Let's just see why they need more and if they've spent the current alloted dollars in a productive manner.

Both Lawrence and Schlomach believe that demography has a lot to do with this shift. “The biggest risk is Californians moving here,” says Schlomach. “They are fleeing California, but they don’t have any notion of why it’s expensive to live there.” They don’t realize that part of the reason it’s still “not super-expensive here” is the relatively small extent of government services, he adds. Echoes Lawrence: much of the population increase into Nevada is from California, and “they’re taking their voting culture with them.”

Well, you get what you pay for and if you really want big-huge-out-of-control government, then you probably shouldn't want to move to Arizona. State leaders (again) have a golden opportunity to beat back all the expensive and unproductive ideas that new residents feel entitled to bring to Arizona. While Arizona has come a long way from the days of the wild-wild west... nothing wrong with simply remaining in the wild west. Not everyone here drinks Chablis or is otherwise all that cosmopolitan.

Bottom line, less government is better government.

Besides immediate, massive budget deficits born of boom-era spending, the frontier states face additional challenges, familiar to residents of older states. One involves infrastructure reinvestment. When high-growth states invest in brand-new infrastructure, they can be confident that new tax revenues—from the new development that the infrastructure will support—will pay for it. But it’s another thing altogether to keep investing in the same old infrastructure just to maintain your current tax revenues and prevent your existing residents and businesses from fleeing, as states like New York and California must do.

For the first time, in many cases, the JetBlue states must do this work of reinvesting in aging infrastructure. The American Waterworks Association has said of Arizona’s vast water-infrastructure needs that the state now faces the “dawn of the replacement era.”

New infrastructure brings new opportunities to help pay for replacement infrastructure, that is the way that I have always seen it. It is why I've been a strong proponent of proposed projects that would bring more opportunity to our area. When a community doesn't have the new growth to help pay for the costs, then it is the community that will ultimately part with more costs to pay for it (kind of like the increase in the local water bills lately).

And Arizona’s freedom-loving culture suggests that it won’t be turning fully to Gotham-style big government any time soon. When I asked various people there how the government ought to help, nobody advocated mass-scale homeowner bailouts. Sanders, the mayor of Queen Creek, didn’t cry about foreclosures in his town, grumble about plummeting property-tax revenues, or ask for government money. Many Arizonans seem to have acquired a new understanding of how markets work, rather than a new distrust of them. As Marylee Bell, a Queen Creek restaurant owner, says, “It makes sense for people who overpaid to lose their homes and rent them back from people who didn’t.” (Bell’s idea for an improved economic bailout plan from the White House: “Cut taxes.”) Stories are also starting to emerge of people who just purchased a house for $189,000 that had sold two years ago for $425,000.

Unfortunately, there are some local folks that simply don't get the concept of how markets work and their voices have helped turn would be new opportunities away from the area.

Demographically, too, the frontier states’ future still seems fundamentally sound, if based less on scorching growth in people and property values. If the past 200 years are any guide, the nation will keep getting bigger, and people will still seek cheaper places to live, something that Arizona, Florida, and Nevada have on offer once again.

Well... as long as the price is right, so to speak. I seriously doubt that lending will ever be like it was from say 1998 on up to about 2006 again, the fundamentals in Arizona could round back into shape to offer steady and reasonable growth.

I repeat, the whole article is worth reading (and longer than the bits I copied on this blog). What I took away from the article is that Arizona truly has an opportunity to be a shining example. Arizona won't be THE choice for every person in this country, a country that is simply too diverse. And that is fine really. Hopefully Arizona can simply appeal to folks that love independence, liberty, freedom, and the rule of law. Nothing wrong with actually portraying the state as the 'wild west'.

Big government has failed the citizens of California... we do not need to see it happen in Arizona.

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