Fife's strife, Pete's feat - potential Republican 1996 presidential candidates, governors Pete Wilson and Fife Symington

National Review, August 15, 1994 by Daniel D. Polsby

Fife Symington of Arizona has turned out to be one of the country's best governors. When he was elected in 1990, the state's Republican Party was still in paroxysms on account of Evan Mecham, the governor who crusaded against the Martin Luther lung holiday and whom the legislature impeached and tossed out of office in 1988. By 1992, Mr. Symington had successfully changed the subject. Republicans took back the state legislature, and the governor busied himself stumping for school vouchers, truth in sentencing, tax cuts, and other conservative staples.

On most of these issues, Mr. Symington has had some success. Although his voucher ideas ran into a political stone wall, he did get half a loaf in school reform. The legislature approved charter-school legislation that simplifies entry into the education market by private operators. A new law provides that public schools will receive report cards each year, which eventually will make transparent each school's progress, or lack of it. Though it is not choice, it is a step in the right direction.

Mr. Symington has also made much of his war on gangs and on crime in general, but much more important has been his war on taxes. Arizona has a projected $190-million budget surplus, a hospitable business climate, and a governor who is an unapologetic disciple of Arthur Laffer. Recently Mr. Symington signed legislation knocking $100 million off the state's projected income-tax receipts and reducing the assessment ratios for Arizona mines and utilities from 30 to 25 per cent. Now he proposes to wage re-election on the blockbuster promise to phase out the state's income tax altogether, which would amount to a tax cut of $1.5 billion. Can this work, or is it mere theatrics, voodoo economics in one state?

In fact, the abolition of the income tax represents a policy that even an unreconstructed Keynesian might embrace. Apart from its intrinsically stimulative tendency, a tax cut of this magnitude would undoubtedly appropriate economic growth that might otherwise go to California. In a federal system, states are supposed to compete with one another for business and citizens. In practice, much of this competition has been sublimated into tax shifting. Hence, for example, Wyoming taxes the mining of coal, for which electric-utility customers in other states must pay. Similarly, New York and many other tourist destinations tax hotel rooms; outsiders pay. No state has gone further than California, whose "unitary tax" attaches to the profits of companies doing business in the state, even if those profits were earned elsewhere.

Mr. Symington's astute variation on this strategy is to attempt to import the tax base rather than export the burden. The bet is that given a slight nudge, businesses located in tax-happy, regulation-happy California would enthusiastically head east. In fact, many have already done so. Arizona gained 6,000 transplanted California jobs in fiscal 1993 alone. And for the owners of many businesses, zeroing out the income tax would be more than a slight nudge.

Given his record and Arizona's still solidly Republican inclination, Mr. Symington ought to coast to re-election, but apparently he will not. Recent polls have his "negatives" at a troublingly high 30 per cent. He has attracted a strong challenger in the state's September 13 Republican primary, and even if he gains re-nomination, his lukewarm approval ratings foreshadow no walkover in November.

Most of this malaise can be explained by the governor's role as director of Southwest Savings and Loan Association of Phoenix, which went bankrupt in the 1980s. The Resolution Trust Corporation sued Mr. Symington and the other directors for $210 million. The agency alleged that Mr. Symington had used his position on the board improperly, to gain approval for the development of Camelback Esplanade, a large real-estate project on which he eventually made a great deal of money but the S&L lost a great deal more. A grand jury began sniffing around. Mr. Symington denounced the charges as contrivances and lies.

At the end of May, the RTC settled the lawsuit without obliging Mr. Symington either to admit guilt or to pay any money - a clue, perhaps, that their case was as flimsy as he had all along maintained. But the grand jury is still sniffing, and where grand juries are concerned, anything can happen. So Mr. Symington's star, which ought to be ascending, is on hold until the grand jury rises.

Whatever the eventual result, the S&L charges have probably ruined Fife Symington's national prospects. The ruckus that congressional Republicans have been obliged to make in order to get Whitewater hearings will be sauce for every Republican gander who ever got near a savings and loan. Arizona's governor has gone about as far as he is going to go in politics. This is good news for business but bad news for the Republican governor of the behemoth on Arizona's left border.

Betting Man

On the other hand, maybe not. Disaster-prone California's hapless governor, Pete Wilson, may yet turn out to be the luckiest man in the world. In the last month of his life, Richard Nixon conjectured that if only Pete Wilson could get himself re-elected governor in 1994, the Republican presidential nomination would be his to lose in 1996. How crazy would you have had to be, last spring, to bet on anything like that happening? But Mr. Nixon, they say, knew how to bet his cards. And Mr. Wilson's prospects are brightening.