By Howard Fischer
Mail | X: @azcapmedia

PHOENIX — Gov. Katie Hobbs is claiming credit for the state’s rate of inflation dropping from 13% before she took office to 2.7% now.

It actually is even lower than that, with Hobbs using numbers for the Phoenix area from December. The most recent data from the Bureau of Labor Statistics puts the annual rate of inflation at 2.3% compared with 8.5% a year earlier.

But whatever the numbers, the governor would not provide a single example of anything she has done in her 14.5 months in office to actually bring down prices — or even anything that she could do as the governor.

“We’re doing a lot to lower prices for Arizonans,” Hobbs said during a Thursday press conference to talk about economic development even as she issued a press release citing the new inflation figures. And the governor deflected questions about specifically how she has affected the new inflation numbers.

“We’ll move on,” Hobbs said before turning to questions on other subjects.
But four Arizona economists interviewed by Capitol Media Services said there really is little ability of this governor — or any governor — to do anything meaningful about prices paid by local residents. In fact, Lee

McPheters, a research professor at the Seidman Research Institute at Arizona State University, called any such claim “dubious at best.”

Gubernatorial press aide Christian Slater disputed that assessment.

“The results speak for themselves,” he said, saying Arizona went from “having one of the higher inflation rates in the nation to now one below the national average,” he said. “We did not get here by accident.”

But economist Jim Rounds said that’s not exactly how it works.
“Part of it is some simple math,” he said.

“We had a higher rate of inflation than the U.S. for awhile,” he said. “That means that to get back down to normal we have to have a lower rate of inflation than the U.S. for awhile.”

And the rate of inflation has been dropping nationally.

Rounds did say things like economic development, which he said Hobbs has been pushing, can have some impact at the state level. But he said, given the complex nature of inflation, the effect would be “at the margins.”

And as to taking credit?

“No single individual has 100% control over any individual item,” Rounds said. He said claiming credit for cuts in inflation is no more valid that those who make claims that “Biden did this” when complaining about the higher costs of some items.

Central to the whole debate is the local consumer price index. Prepared bimonthly by the Bureau of Labor Statistics for the Phoenix area — there is no statewide index — it tracks the prices of multiple elements of items that individuals purchased.

Some are items that vary a lot, like food.

In the latest report, for example, BLS said the cost of food purchased at home has dropped 0.4% in the past year, though some items, like fruits and vegetables, are more expensive. And the cost of eating out is up 3.1% year over year.

It also shows the cost of electricity up 8.8%, though the price at the pump for unleaded gasoline has dropped by 5.9%.

And the cost of rentals is up by 4.1%.

But economist Alan Maguire said the factors that affect all of this are at a national level.

He said inflation was way up, initially because of constraints on oil production. And that affected not just the cost of fuel and energy.

“Petroleum is kind of the leading ingredient in food,” he said, being the source of fertilizer.

That was followed by the supply chain disruptions, particularly of items needed for manufacture which in turn led to some factories shutting down. That eased, Maguire said, when the ports reopened and boats started moving again.

“But really what drove the real inflation in the U.S. was the massive amount of spending,” he said, including the federal reserve “dumping literally trillions of dollars into the U.S. economy during COVID.

“And so there’s all this money flopping around, looking for someplace to go,” Maguire said.

“If you’ve got $50 in your pocket, that $5 burger doesn’t sound so bad,” he said. “But if you’ve got $10, you go, ‘Eh, I’m not sure.’”

And all that, he said, is beyond the reach of any state — or state officials.
Economist Dennis Hoffman, who is the research director at the Seidman Research Institute, said there can be some state-specific things that affect elements of the consumer price index.

One of those, he said, is the fact that Arizona relies on certain “boutique” fuels that have to be used in certain parts of the state during summer and winter months to reduce pollution. He said when a plant in El Paso that produces that fuel went down, that made it difficult to find that mix, driving prices up.

Now that, said Seidman, is something the state could address.

There actually is legislation sponsored by two Republican lawmakers — Sen. Justine Wadsack of Tucson and Rep. Alexander Kolodin of Scottsdale — to do just that.

Senate Bill 1064, introduced after gasoline prices approached $5 a gallon last summer, would allow the state to permanently use different blends in affected areas, such as those already allowed in and being produced for California.

When the plan was first introduced in December, Hobbs press aide Christian Slater called it “half baked.”

The measure was approved last month on a 17-11 vote, with only a single Democrat in favor, and now awaits House action.

“So we just got lucky this spring so far,” said Hoffman of the generally lower gasoline prices.

And there’s one other area that he said might be subject to some local influence.

“If you increase the supply of housing somehow, that would definitely help,” Hoffman said.

That, however, may relate directly to legislation Hobbs has on her desk, pushed by a bipartisan coalition, to override certain city planning and zoning regulations.

It would allow more homes on certain parcels of land in cities of more than 75,000. Proponents say that will lead to construction of more “starter homes.”

On Thursday, the mayors of several Arizona cities gathered at the Capitol to urge Hobbs to veto the measure. They decried the idea and said it is simply an effort by developers to increase their profits with no promise of more affordable homes.

Hobbs, who has until Monday to sign or veto the measure, said Thursday she has not made a decision.

What that leaves, said McPheters, are factors that are outside of the control of any state official.

“Inflation is subject to the national business cycle and, if anything, controlled by the Federal Reserve to the best of their ability,” he said. “There are no models that I know of where the governor, in particular, would have any influence on the components of inflation.”

About the best a governor could do, said McPheters, is react to the effects of inflation.

That, he said, could take the form of adjusting fees or changes in tax policy. But here, too, McPheters said, that would require more than gubernatorial action but need approval by the Legislature.

Slater, for his part, said Hobbs should get credit for things like getting the Legislature last year to put more money into programs to build affordable housing. And he said she is doing other things that would help in the future — if enacted by the Legislature — including a push to lower the prices of some prescription drugs and seeking state funds to help homebuyers with down payment assistance and interest rate buydowns.