Of Statistics and Strawmen

Blogger Mike McClellan criticizes the Goldwater Institute and me specifically for our estimate that the 1-cent sales tax rate increase would cost Arizonans 14,000 to 20,000 jobs. He cites the increase in the number of jobs in the state over the last two years and recent predictions that job growth will pick up as evidence of how wrong we were. There’s just one problem with McClellan’s thesis; it has no basis.

For the sake of illustration since I’m not for this type of policy, if someone were to say that a new tax credit, say for tourism, would create 3,000 jobs and two years later I looked at total job numbers and they were actually down, is that proof that the earlier prediction was wrong? No. Not at all. In fact, even if total tourism jobs were down in the midst of a bad recession that hit after the credit kicked in, the prediction would not necessarily be wrong. Without the tax credit, jobs in the industry might have even been lower.

Here are the facts: 1) As of last March, the state was over 200,000 jobs below the employment level of March 2008; 2) Since March 2010 the state has gained a “whopping” 66,000 jobs, a 2.7 percent job gain over two years after losing 11 percent during two years of recession; 3) There were fewer Arizonans working in March 2012 than in March 2009.

Our prediction was that between 14,000 and 20,000 jobs would be lost as a result of the sales tax increase. Perhaps it would have been better to add, “relative to the number of jobs there otherwise would be,” but most I’ve talked to understood that caveat without it being said. We never predicted the Arizona economy would never recover any jobs or that growth would cease permanently. We never said that the sales tax rate is all that matters and everything else that affects the economy is meaningless. McClellan builds that straw man all by himself.

Now, perhaps McClellan buys the alternative prediction by a professor at the University of Arizona that jobs would be created by the tax increase. He could claim that since private sector jobs started climbing after July 2010, the tax increase was, indeed, the magic bullet. More likely, we would have all that many more jobs if the tax had not increased and instead of still needing to recover 200,000 of the 300,000 jobs lost, we’d be that much closer to full recovery. Since we helped to delay the sales tax by at least year, a year when the state was bleeding jobs, we probably helped around 20,000 Arizonans, including Governor Brewer, keep their jobs just a little while longer.