No Magic Bullets Expected From Economic Summits

Faced with the slumping California economy and a bulging state budget deficit, political leaders in Sacramento and Los Angeles are turning to special task forces and summit meetings for fresh policy ideas.

But many economists and political observers doubt that the various events, including economic summits today and Friday, will yield major solutions. Instead, they hope for some small, creative fixes that could take some of the sting out of the economic downturn and shorten its length.

The chief reasons for the modest expectations: The source of California’s recent economic problems are too global and the resources of state and local government are too limited to hope for much else.

What’s more, state leaders got mixed reviews for their efforts in the deep recession of the early 1990s, the last time officials took a high-profile approach to cure California’s economic ills.

Still, with a gross state product of $1.3 trillion, policymakers say there is too much at stake to simply rely on the federal government to take care of matters.

“California is fast becoming a nation-state; we just don’t realize it yet,” said Assembly Speaker Bob Hertzberg (D-Sherman Oaks), who formed a task force that is assessing the economic and safety issues for California raised by the Sept. 11 terrorist attacks.

Even analysts convinced that state and local government can play no more than a narrow role in guiding California’s economy, which is the world’s fifth largest, urge leaders in the short run to look for opportunities to act. That camp includes economist Edward E. Leamer, director of the UCLA Anderson Forecast.

Leamer said he believes the California and U.S. economies entered recessions before midyear and will continue to sputter until early next year. He blames California’s decline largely on sluggish demand for goods worldwide and, in particular, the big slowdown in technology spending that is so crucial to Silicon Valley and the Bay Area.

Yet, Leamer said thousands of low-income workers in all parts of the state also are threatened by a travel and hospitality industry nose dive that was worsened by the Sept. 11 attacks.

With that in mind, Leamer will offer tourism promotion suggestions Friday at Gov. Gray Davis’ economic summit in Burbank. That one-day event, hosted by Walt Disney Co. Chairman Michael Eisner and San Francisco real estate magnate Walter Shorenstein, will draw the CEOs of some of California’s biggest companies.

Eisner said he hopes helpful ideas emerge at the summit but declined to predict how productive the session will be. Likening the staging of the economic summit to making a movie, Eisner said, “We have a script. We have a budget. We have all of our good intentions. Sometimes they turn out great. Sometimes they just turn out OK. So, we’ll have to see.”

In addition to ideas for reinvigorating tourism, proposals to provide tax credits on high-tech investments and to reduce red tape on state construction projects are expected to be discussed.

Los Angeles-area officials also have put a spotlight on recent economic problems. The Los Angeles Economic Impact Task Force, appointed by Mayor James K. Hahn after the terrorist attacks, released its final report and recommendations Tuesday.

Hahn and County Board of Supervisors Chairman Mike Antonovich are co-hosting an “Economic Action Summit” today arranged by the Los Angeles County Economic Development Corp.

Among key proposals from the city task force to be discussed at the summit is accelerating public projects for which construction money already has been set aside.

Local leaders also seek to speed permit approvals for private-sector construction projects and to help laid-off workers from shrinking industries obtain monetary assistance or find jobs in still-growing fields.

To some extent, economic development officials concede, the proposals are rehashes of ideas that have been circulated before.

George Kieffer, chairman of the city’s economic impact task force, said the task forces and summit meetings can build confidence “that the government is doing things and that economic activity is underway.”

Yet, high-profile rescue efforts during the early 1990s, when California was in deeper economic trouble, seem to have missed the mark, focusing on business regulation and workers’ compensation woes.

Economists say that it’s clear in hindsight that the chief culprit behind the early-’90s downturn was the deep aerospace industry retrenchment--not, as one report put it, the widely shared perception “that California is a bad place to do business” or the state’s “indifference to the need for job creation.”

Likewise, economists say, the comeback in the late-’90s had far more to do with the national recovery and the high-tech boom than any legislative or regulatory reforms.

A major problem with high-profile conferences called by powerful politicians is that “sometimes people are reluctant to tell elected officials what they need to hear,” said Michael Boskin, a Stanford economist. Boskin served on an advisory council to then-Gov. Pete Wilson and was chairman of the President’s Council on Economic Advisors in the elder Bush’s administration.

“After the Gulf War, when President Bush needed to hear about what was happening to the economy, a lot of people told him what a great job he did in the Gulf War.”

Given the obstacles, Boskin said, the summits have “a small chance some serious good will come out, and a much better chance that not a bunch will come out of it.”

Still, Boskin said, even small ideas can make a difference. As an example, he cited bonuses that the state offered contractors who completed repair projects ahead of schedule after the Northridge earthquake.

Those incentives, he said, helped Los Angeles recover quickly. Boskin said the current forums could yield equally useful ideas.

Leamer, who established his academic reputation with complex economic analyses, has an idea that sounds like an advertising executive’s creation. He will urge state officials to recruit celebrities such as Arnold Schwarzenegger and Sharon Stone to greet arriving passengers at Los Angeles International Airport.

Leamer also suggests, if businesses are willing to pick up the tab, that the celebrity greeters hand out “Welcome to L.A.” kits containing $100 vouchers redeemable at local hotels and restaurants.

His aim is to help visitors take their minds off of security issues and to attract international publicity for Los Angeles.

Tourists from Japan and elsewhere need a reminder, Leamer said, that “this is still a great place to visit.”