As a free market organization that represents entrepreneurs,
job creators and hardworking taxpayers throughout the state, the Free
Enterprise Club has defended many of the actions that you have taken to combat
the Covid-19 pandemic. Dealing with a crisis in real time is always going to be
difficult, especially when information and data is incomplete. There was an
incredible amount of uncertainty and risk in mid-March, and a shutdown of the
economy–while drastic–was understood.
To say that the press conference announcing the extension of
the stay-at-home order was a disappointment would be an understatement. Your decision was confusing, provided no
certainty for the thousands of small businesses that are on the verge of
bankruptcy, and shifted the rationale for why we started the shutdown to begin
with.
The goal post shifting might be the most frustrating aspect
of the extended stay-at-home order. When the closures began in Mid-March, we
were told that these extreme measures were necessary to accomplish two tasks:
Flatten the Curve to ensure so we don’t see a
huge spike in hospitalizations resulting in our healthcare system being
overwhelmed.
Provide an opportunity for our hospital system
to ramp up and prepare for an influx of Covid-19 cases.
Both of these goals have been achieved by wide margins. The
curve has been flattened. There has been
no large increase in the number of Covid-19 cases in Arizona and hospitalization
rates have been flat for a month. Our healthcare system took advantage of the time
provided by increasing supplies of ventilators, beds and other essential PPE
needed to combat the pandemic. And residents throughout the state sacrificed
their income, jobs, businesses and mental health to do their part to stop the
spread.
Yet now we have created a new arbitrary set of metrics for
ending the shutdown. At the press conference you commented that a Fortune 100
company told you that public confidence is too low to open. That polling showed
some people believe Arizona is just not ready to reopen. You claimed that
another governor had a “bad experience” during their reopening (even though it
is way too early to make any such declarations). It was also mentioned that we
need better data trendlines than what we have seen.
It is easy to see why thousands of Arizona residents and
businesses owners were furious after the announcement. These explanations offered
no clear path forward and made it appear that the voices of large companies and
wealthy restaurant owners speak for the entire business community, not the
thousands of small businesses being wiped out because of the shutdown.
Even more frightening for those waiting to reopen is that likely
nothing will different by May 15th to satisfy your new criteria. The
number of new daily Covid-19 cases will be roughly the same and hospitalization
rates will remain flat. Public confidence won’t be improved. Doomsday modelers
that have been wrong
from the beginning will still be warning of dark days ahead if we end the
shutdown. And your office will encounter the same opposition to reopening from
the same politicians, media outlets
and twitter pundits, most of whom have not lost a single paycheck or suffered
any financial hardship during the pandemic.
Not surprisingly, citizens watching their lives be destroyed
are becoming more defiant in the face of what they see as government overreach
and abuse. The number and size of protests throughout the state are growing by the day. Restaurants
and other small retail shops on the verge of bankruptcy are beginning
to open despite warnings from law enforcement or concerns about losing
their business license. Social unrest is becoming a real threat, something that
is not carrying enough weight in the current decision-making process.
Now more than ever the residents of Arizona crave
leadership. This is not a crisis that can be solved looking at polling numbers
or crafting a snappy slogan. You have often spoke of “being bold” during
your time in office—that is what Arizona needs today! It is time to
lead, and here are a few suggestions:
Reopen Arizona Today! The debate has
often centered around reopening our economy, but this is much bigger than that.
This is about reopening society, and you need to lead on a plan
that gets our state opened today. Most understand that our lives won’t go back
to normal right away and that some activities (sporting events, concerts, large
gatherings, etc.) will be delayed. But there is no reason that anyone wanting
to get back to work should be denied that opportunity.
Provide Clear Guidelines for Businesses.
Missing from your press conference was any clear guidelines for businesses on what
to do when they reopened. This was rectified somewhat a few days later, but the
reality is that businesses are as confused as ever on what do to. Providing
simple guidelines will improve confidence for both employers and the public as
places begin to reopen.
Trust our Judgement. The primary reason
that the so-called “experts” and modelers continue to be wrong in their
predictions is that they believe they can predict and control the actions of
millions of people. They cannot and the more that the government or the Karens
of the world try to impose their will on others, the more it will backfire.
You must trust that citizens will make healthy choices and are better at
protecting themselves and their families than the government.
Provide the Facts on Covid-19. As Arizona
begins to reopen, people should be provided with an accurate picture of the
true risks associated with Covid-19. The data
is overwhelming that there are at at-risk populations, primarily those over
the age of 65 or with chronic health conditions. But it is also a fact, supported
by evidence, that healthy children and adults under the age of 45 are at an
extremely
low risk of getting seriously ill. There is also little
evidence to support the notion that major suppression/lockdown efforts have
been any more effective at containing the spread of Covid-19 than lighter
mitigation efforts. This information should guide our response and also help
people make informed decisions on the lifestyle decisions they choose to make.
Governor Ducey, if you lead on reopening, people will
follow. We urge you to take the reigns and lead our great state back to
prosperity.
This cannot go on much longer. The economic and societal damage being inflicted by the shutdown is escalating by the day, and Arizona business owners and families are getting crushed.
Even basic necessities and staples relied upon by everyone are beginning to falter as well. Major food providers are warning that supply chains are breaking down and we should expect shortages. Hospitals are beginning to lay off and furlough employees since the Covid-19 peak promised by the models never materialized. And our entire energy market is in disarray after the oil markets crashed last week:
U.S. equity markets slid Monday as oil crashed below zero and closed at its lowest level since record keeping began in March 1983.The Dow Jones Industrial Average fell by as many as
489 points, or 2.02 percent, before paring its losses. The S&P 500 and
Nasdaq Composite were down 1.53 percent and 1.01 percent, respectively, at
their lows.
Ongoing concerns over swelling oil inventories pushed West Texas
Intermediate crude for May delivery plunged
305 percent to
a record low -$36.73 per barrel. At a price below zero, buyers would be
paid to take delivery as there are costs associated with transportation and
storage.
Just 2 months ago the oil industry was thriving in America.
Now traders are being forced to pay vendors to unload their
product as inventories exceed capacity. That’s right, if you can safely store
crude on your property, someone is willing to pay you to take it (delivery not
included).
The reality is that lives are being lost and ruined by the current shutdown, and it will only get worse every day that we wait. Arizona must reopen, and fast. Governor Ducey announced that he is working on a reopening plan for the state, which will likely include a phased-in approach largely based on the guidelines provided by the Trump Administration.
That is good news, but the next step is going to be the toughest. Reopening Arizona is not going to be easy, especially since any discussion on relaxing the Covid-19 restrictions has become a politically divisive issue. The rhetoric has become so intense that in some corners any mention of ending the shutdown means putting the economy ahead of lives. This is complete nonsense.
Supporting an end to the lockdown means understanding
that lives can be lost to economic destruction just as easily as they are to
Covid-19. This is being recognized in other countries, as Austria,
Switzerland,
Germany,
Norway, the Czech Republic, Poland and many others has already begun easing
restrictions. Here in the US, states such as Texas,
Georgia,
Tenessee and Florida
have begun taking action as well on a reopening plan.
Arizona needs to follow suit, and it can be done in a smart
and safe way. Mitigation efforts such as continued social distancing,
encouraged teleworking, mask wearing and the suspension of congested gatherings
(such as sporting events) will continue. Extra precautions can be taken to
protect the most
vulnerable populations (senior citizens and those with chronic illness)
impacted by Covid-19. If the purpose of the lockdown was to prevent our
healthcare system from being overloaded, then a phase down of the restrictions
will be more than enough to prevent that from happening.
The end of the current stay-at-home order is April 30. That is the perfect time for Arizona to begin reopening for business. The process won’t be seamless, but the cost of inaction at this point will be worse than staying home.
Just like the rest of the country, Arizona residents have since mid-March hunkered down, self-isolated and followed the advice of medical experts and our political leaders to stop the spread of Coronavirus. The rationale provided to us was that if extreme actions were not taken, hundreds of thousands of people in the Grand Canyon state would perish. Hospitals would be overrun. It might be as bad as the Spanish Flu of 1918.
How do we know Covid-19 might be this horrific? Whenever this question was asked, defenders of the shutdown immediately pointed to the various models proving their case. Two in particular were cited the most—IHME and CovidActNow. Both produced dire forecasts for Arizona and both recommended draconian mitigation strategies. Both have proven to be wildly wrong.
The IHME Model
Designed at the University of Washington, the IHME model has been the most frequently cited the last 3 weeks and was the foundation for the nationwide projections developed by the Trump Administration.
On April 1st, IHME predicted dark days for Arizona. IHME forecasted that by April 15th over 2,500 beds would be needed and that Arizona would be at its ICU and ventilator capacity. At our peak on April 27th, Arizona would have 4,000 hospitalized Covid-19 patients and a ICU shortage of nearly 100 beds. Over 1,300 would be dead by August 1st.
CovidActNow
Founded and developed by four volunteers with very questionable credentials, CovidActNow became a frequently utilized source for politicians and governmental entities early on during the pandemic. In Arizona, CovidActNow was the primary model used in March by the University of Arizona College of Public Health to develop their pandemic response recommendations, which were cited by the media and referenced by politicians throughout the state.
On April 1st CovidActNow had concluded that Governor Ducey’s shelter-at-home policy was far too lax and that a much stricter statewide lockdown was necessary:
Without a “strict” stay-at-home policy, CovidActNow declared that Arizona on April 15 would have nearly 1,500 hospitalized, a hospitalization peak of 40,000 by June, and 28,000 dead by mid-summer.
Models vs. Reality
It is embarrassing how poorly both of these models performed compared to reality. As of today (April 15), Arizona has fewer than 500 Covid-19 patients hospitalized and around 100 admitted to ICU, a fraction of the predicted amount. Ventilator use is in decline and the state has already reduced their federal ventilator request from 5,000 to 500.
Fatalities are lagging behind the IHME model and will never approach the laughable figure cited by CovidActNow. There has been no Coronavirus hospital crunch. In fact it has been just the opposite–healthcare workers have been furloughed due to all of the empty hospital beds.
The excuses to explain away the modeling errors have been coming as fast as the downward revisions being made to both forecasts. Defenders of the modeling claim that the lower projections only prove that the current policies are working and thus fewer deaths and hospitalizations have been the result. The flaw with this argument is that both models as of April 1 were based on the mitigation efforts that are in effect today. This argument is simply an attempt to move the goal posts and avoid any discussion about why the models missed so badly.
Others have suggested that it is not really the fault of the modeler’s–Covid-19 projections are difficult and that a lack of data and changing assumptions hampered their effectiveness. These are all valid points, except that none of these issues were ever brought up when the public was being sold on their reliability and used as the justification for a nationwide shutdown of the economy.
Some are even saying that it doesn’t really matter that the models were wrong and that everyone should just be thankful that it is not as bad as they thought. This argument is not only wrong, but offensive. Thousands of people have lost their jobs, their livelihoods, and some will lose their lives because of the actions taken based on these models. If the goal is to completely erode all public trust and credibility in our institutions, this is the quickest way to do it.
Moving Forward
Unfortunately, what has transpired up to this point cannot be undone. Mistakes were made, yet rather than dwelling on them we need to start working toward solutions that address our overreaction.
The top priority should be to reopen Arizona in a safe and healthy way. Governor Ducey has announced that he is developing a plan to open up the economy; our hope is that it coincides with the expiration of the existing stay-at-home order on April 30th (if not sooner).
Of course, this doesn’t mean that Arizona should not take any precautions or that there won’t be certain restrictions when the shutdown ends. The models were useless, but that doesn’t mean we don’t have data showing that Covid-19 is a real danger to certain segments of the population (predominantly seniors and those with chronic illness). The Club believes a solution exists somewhere between doing nothing and the current draconian shutdown.
The other lesson that should be learned is a healthy amount of skepticism when politicians start using forecast modeling as their justification for their radical policy prescriptions. The public might have been fooled this time by the so-called experts and their doomsday modeling, let’s just make sure it doesn’t happen again.
When the Covid-19 pandemic hit the US in early March, it
became evident that the government lacked the capability, efficiency and nimbleness
to effectively contain the spread. Critical measures such as developing
accessible and reliable testing turned into a bureaucratic
nightmare, and a lack of critical life saving medical supplies and
infrastructure threatened to overwhelm our medical professional heroes on the
front lines trying to save lives.
Thankfully and in the true American spirit, the private
sector is coming to the rescue. Businesses large and small, entrepreneurs and
citizens have mobilized throughout the country to fight the pandemic.
In Arizona the story is no different. We are fortunate that
so many have been willing to step up to the plate and deserve recognition for
their efforts. Here is a list of some of the businesses working to fight
Covid-19:
Arizona Cardinals President Michael Bidwill
donated $1 Million to the Coronavirus Relief Fund, which will go toward PPE for
hospitals, food banks and provide technology to disadvantaged students needing
to transition to online learning.
The Arizona Diamondbacks have
donated over $1 Million to numerous charities to provide food, support for
children of healthcare workers and PPE for medical professionals.
Depcom Power located in Scottsdale donated
10,000 surgical masks, 10,000 N95 masks and over $225,000 toward Coronavirus
relief efforts.
Arizona Based Brooklyn Bedding has
repurposed their facilities to make hospital beds during the pandemic.
Honeywell is ramping
up their Phoenix facility and is hiring 500 people to produce N95 masks and
other protective gear.
Quick Quack car was is providing unlimited
car washes to all health care professionals.
Several hotels in the Phoenix area are providing
rooms free
of charge to medical professionals.
We acknowledge that this is not an exhaustive list, so feel
free to email the Arizona Free Enterprise Club at info@azfree.org and let us know of other
Arizona companies and individuals that deserve recognition for pledging their
time, energy and resources to the Coronavirus effort.
In an effort to save their failing ballot measure campaigns,
a coalition of liberal organizations have gone to state
and federal court to be granted the ability to collect initiative signatures
online. Among the groups looking to change the signature collection process are
proposals to double the state income tax, increase taxpayer funding for
political campaigns, enact same day voter registration on election day and roll
back school choice options for parents and students.
Their main argument is that the Covid-19 pandemic was an
unforeseen circumstance that requires special relief and that since online
signature collection is allowed for candidates, a similar process must be
provided for ballot measures as well. Neither argument holds merit and should
be rejected by the court.
Their lawsuits assert that under the current social
distancing/shelter-in-place requirements, it is not possible for them to safely
acquire the necessary signatures prior to the filing deadline in July. That may
or may not be true, but if lack of time is truly an issue that is a problem that
they created for themselves.
No one disputes that collecting the minimum signatures
required to qualify for the ballot is a tall task (237,645 for statutory
measures, 356,467 for constitutional changes), which is why the constitution
provides 20 months to anyone looking to submit an initiative to the ballot. That is more than enough time to gather signatures
and to plan for any unforeseen circumstance, including a pandemic.
Instead, most of these groups decided to wait until this
spring to go the streets, ignoring the risk associated with such an approach.
The court should not bail them out for choosing not to use the lengthy
collection timeframes afforded to them under current law.
The other obvious problem with their request is that online
signature collection for initiatives would violate the state constitution. While plaintiffs and supporters of an online
signature platform frequently cite that candidates can collect their signatures
online, they ignore the fact that Article
4, Section 1 of Arizona’s constitution prescribes the signature collection
process for ballot measures.
Specifically, the constitution requires that all signatures
collected must be “attached to full and correct copy” of the measure, that
every sheet is “verified by the affidavit of the person” circulating the
petition, and that all signatures collected are “signed in the presence of an
affiant.” For the court to allow such a process to occur would require a
complete rewrite of the constitutional framework for initiatives that was drafted
by our state founders.
Hearings on both cases are scheduled to be heard next week.
Democrat Secretary of State Katie Hobbs, who likely supports all of the liberal
ballot measures being proposed, announced
that she would not defend the law and is ready and willing to create an online
process for ballot measures.
Thankfully the legislature decided to step in and intervene
to defend our election laws against this frivolous lawsuit. Additionally,
Governor Ducey came out strongly
against the suit and made it clear that his office would not use any of his
emergency powers during the pandemic to provide relief. So now it is up to the
courts to decide whether pandemics can be used as an excuse to ignore the rule
of law.
Last week the Arizona Free Enterprise Club
released our report detailing the poor performance of the Low Income Housing
Tax Credit Program (full report can be viewed HERE).
The information in the study should provide more than enough evidence for
lawmakers to reject HB 2732, legislation that would give away millions in subsidies
to investors and developers to fund a housing program rampant with fraud.
The reports author, Everett Stamm, has
followed up by writing an op-ed explaining why Arizona would be better served
to look at other solutions to address housing affordability rather than funding
a risky program with a track record of failure.
Lack
of Oversight and Spiraling Costs Hinder Low Income Housing Tax Credit Program
Americans are increasingly unable to cope
with the ever-increasing costs of housing. Rising costs in Arizona,
and across our nation,
should be of interest to policymakers. One program that’s being used is the
Low-Income Housing Tax Credit program. This program has been one of the largest
suppliers of affordable housing throughout the past 30 years, but has had
consistent struggles with increasing operational costs and questions over
accountability and transparency. I’ve published a
report with the Arizona Free Enterprise Club analyzing these concerns and
recommending solutions for policymakers to consider.
What is the Low-Income Housing Tax
Credit Program?
The Low-Income Housing Tax Credit (LIHTC)
program operates by offering federal tax credits to developers who construct
new, rehabilitated, or refinanced rental housing that meets affordability
requirements set by the U.S. Department of Housing and Urban Development. This
program uses federal tax credits but is administered by the relevant State
Housing Finance Authority. In Arizona, this would be the Arizona Department
of Housing.
Each state is granted the larger of $3.1
million or $2.70 per capita to distribute in a competitive allocation process.
The competitive allocation process awards projects tax credits to new
construction at approximately 70% of the cost of the project. There is also a
non-competitive process for rehabilitation projects already being financed
through federal bonds, awarding tax credits at approximately 30% of the project
cost. Only the 70% tax credits come out of the amount allocated to the
state.
Rising Construction Costs
Looking through national level data, we
found the LIHTC program had around a 10% year-over-year cost increase in the
amount of tax credits required to build one unit of affordable housing
(adjusted for inflation). Additionally, our report investigates compares LIHTC-financed
housing to equivalent privately financed housing in Arizona and Washington
state. We found housing construction financed with the LIHTC program correlates
with significant increases in cost per square foot in Washington and increases
in both cost per square foot and cost per unit in Arizona.
Lack of Oversight and Accountability
The LIHTC program provides a considerable
amount of discretion to State Housing Finance Authorities during the
competitive allocation process. The United States Government Accountability
Office (GAO) published a report
in 2018 summarizing these concerns. Their report criticized the lack of
standardization, and sometimes complete absence, of cost management measures
set by state HFAs and the high
risk of fraud due to lack of oversight. Notably, the report found only 2
out of 57 LIHTC allocating agencies had limits on the development cost per unit
and only 6 out of 57 LIHTC allocating agencies limited the amount of tax
credits that could be issued per unit in a project. Additionally, just last year
a group of lenders entered into a settlement with the US Department of Justice
after an investigation revealed market manipulation by investors and developers
utilizing the LIHTC program.
Solutions
Our report discusses the concerns over cost
and accountability of the LIHTC program in much greater depth, including
suggestions on alternative ideas such as tenant-based
programs to address the issue of housing affordability. The full report can be viewed HERE
as well as other reports by the Arizona Free Enterprise Club at www.azfree.org.
Everett Stamm resides in Washington DC
and is author of the report ‘Analysis of the Low-Income Housing Tax Credit
Program in Washington and Arizona’
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