by Byron Schlomach, Ph.D.
Goldwater Institute
Good economic news in Arizona is hard to come by these days. The state unemployment rate has been at 9.6 percent for three months in a row. But on the positive side, the Wall Street Journal recently published an article worthy of a smile. It reported Amazon.com has signed the biggest lease, by square footage, in Arizona’s history. PayPal also recently leased an office building in Chandler. Both companies are expanding and creating jobs for Arizonans.
Why did these companies choose to expand to Arizona? Barry Broome, president of the Greater Phoenix Economic Council, pointed out that key business costs such as unemployment insurance and workers compensation are lower here than in Los Angeles, a city currently with similar rents. That helps make Arizona more business – and job –friendly.
The lesson here is that costs matter. When it costs more to run a business, employers are less able to expand and hire new employees, and might even shrink their companies. That means fewer jobs for the rest of us.
Taxes and government regulations make it more expensive and difficult to run a business. So, if we really want to see more opportunity and jobs in Arizona, we have to cut taxes and minimize regulation. That’s the simple, unadulterated truth.
Byron Schlomach, Ph.D., is an economist and director of the Center for Economic Prosperity at the Goldwater Institute.
Two great studies out this summer prove that Obama-Pelosi-Mitchell-Kirkpatrick-Giffords are binging off the government wagon!
In May 2010, The Harvard Business Review (http://www.people.hbs.edu/cmalloy/pdffiles/envaloy.pdf) reported that federal government spending over the past 40 years impacted the private sector through:
• a drop in physical and R&D spending;
• reduced levels of employment;
• lower volumes of sales and general revenues;
• a limiting of the amount of tax dollars flowing into the federal treasury;
• “crowding out” of private firms by hiring away employee’s whom otherwise would be hired by a private firm.
A more recent study (http://mercatus.org/publication/does-government-spending-affect-economic-growth) reported in June 2010 by the Mercatus Center at George Mason University concluded that government spending crowds out private-sector spending and uses money in unproductive ways. Specifically, government spending:
• reduces savings in the economy;
• increased tax burdens which leads to reduced private spending and investment;
• increases interest rates;
• has a strong negative correlation with business investment (jobs).
Finally, the effects of government spending in a study examining 76 countries over time discovered that again, there was “a statistically significant negative correlation between government size and economic growth” (Journal of Political Economy, 2009).
The simple, unadulterated truth is that the “jobs” here will pay $8 or $10 bucks an hour for call center or warehouse work. Not enough to buy a house or a car. Stop pontificating and smell the coffee.
Yes, let’s bankrupt the state and destroy our public infrastructure so we can bring low paying jobs to the state. What a great idea! Hey, maybe we can finally edge out Mississippi for the largest portion of the state population living below the poverty line.
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