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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

May 1, 2009 at 10:19 AM

Phoenix crashing: Lessons for Seattle

Top of the News: My book tour brings me back to my homwtown of Phoenix. If Seattle is in a severe recession, Phoenix is in an outright depression. Housing values have fallen 50 percent from their peaks, the biggest decline in the nation — and this is the local economic indicator here.

Over the past several decades, Phoenix grew into the nation’s fifth most populous city by betting the ranch on population growth and housing. With a few small exceptions, such as tourism and a diminishing semiconductor sector, the economy is based on massive new construction of houses and retail. Now…nothing.

Comparisons with Seattle are difficult, because Phoenix lost its major headquarters companies long ago, and failed to build new ones or capitlize on the new economy. “Growth” seemed enough. In a few boom years, house-flipping and home equity loans propped up the middle class and development enriched the elite. Now the freeways and streets are eerily uncrowded. Whole subdivisions, especially on the fringes, are ghost towns.

Phoenix’s mayor is reduced to a publicity stunt of signing an economic agreement with Dubai — also in a real-estate depression. It’s allegedly about sharing Phoenix’s knowledge about solar power and sustainability.

The trouble: Phoenix birthed solar research in the 1950s and let it get away. As for sustainability, it is a poster child for worst practices: sprawl, poor infrastructure, bad schools, low-wage jobs and big questions about water. Suburbs fight the center city. The local stewards who could write checks and knock heads died out, leaving a disengaged elite in north Scottsdale.

Seattle, don’t do this.

State finances are a disaster, to the point that the conservative Republican governor has outraged her base by calling for a big tax increase. The local sheriff, a publicity hound, became notorious internationally with “sweeps” aimed at illegal immigrants — but sometimes at anyone with brown skin. The low-wage economy was propped up by this workforce. Many are leaving. But a large underclass remains, shut off from the mainstream, trapped in poor schools and lacking “port of entry” jobs into the 21st century economy. A tragic waste of human capital.

Cities such as Phoenix, which became totally dependent on the old housing boom, will have a very difficult time coming back with any competitive juice, especially for high-paid jobs and talent. The comforting news for Seattle: Light rail opened here late last year — a starter 20-mile line in this road-warrior city — and it’s a huge success. Now many suburbs are clamoring for it.

As for sunshine: the temperature has gone up 10 degrees in my lifetime. Get me back to my new home, Seattle.

Today’s Econ Haiku:

What is a hemi?

It can’t power Chrysler now

Facing a Fiat

I’m on the road, so no haiku poll this week. It will return next Friday.

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