Where Have We Been- Where Are We Going?

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Mon, Feb 15, 2010, 5:00 am  //  Craig Mayberry

I can distinctly remember standing in front of an Econ 100 class a number of years ago and teaching the students about business cycles.  One of the charts I showed listed all the recessions going back to the Great Depression.  What was interesting was that in the last 30 years there had only been 2 small recessions, one lasting 9 months in the early 90s, and the other about 9 years ago that lasted a whole 6 months.  In effect, most people cannot remember the last time there were significant economic hard times. 

 

The net result of these economic good times was Washington state government revenue growth in the 4% to 5% range and, with one exception in 2004, plenty of money to spread around and start new programs.  Most elected officials in Olympia have not had to make 'hard' decisions because the economy was whirling along and so was the revenue. 

 

Businesses had also become complacent and suddenly risky decisions seemed less risky.  So what if loan applicants could not really afford the mortgage, home prices would rise and the bank would still be covered in the end.  Automakers were no longer as innovative and got caught with gas prices heading north of $4.00 a gallon--and nothing to show but gas guzzling SUV’s in the showroom.  Making money was easy, and after a while it seemed like nothing would change and the government had figured out a way to permanently end tough times.

 

Individuals also got caught up in the illusion.  Taking on more debt was not a big deal, and saving was put on the back burner.  People felt their jobs would last forever and the more they bought the better they felt.  Pretty soon we were in a consumer society where big houses and big mortgages became the norm.

 

For most of the last couple of decades we have been in a feed-back loop with people spending lots of money, business accommodating without appreciating the risk, and politicians riding high with increased revenue and plenty of new programs to help their constituencies.  The fundamental question now is whether things have actually changed or whether this recession is just another speed bump on the road to never ending economic growth.

 

Businesses and individuals seem to have made some big changes in how they view the future.  Individuals are saving a little more and getting into a little less debt.  Businesses are scaling back and planning on little to no growth for the next few years.  Bank credit is like it used to be, available to those with good credit, tough for anyone without the means to pay it back.  Government however still seems to believe good times are just around the corner and after a short rest, revenue growth will chug along again at 5% annual growth.

 

The siren call to solve budget issues through increased taxes hums from Olympia and Washington, D.C. The assumption being lack of revenue is only a short-term problem, not a long-term structural change. But what if this is not a short-term problem, and what if revenue does not return to 5% growth and instead flattens out to close to zero growth?  Tax increases work when there is a short-term revenue issue and tax increases are used to fill the hole until better times return.  Increased taxes also work when the people paying them are seeing their salaries go up more than the tax increases.  If your salary goes up 4% and the government increases taxes by 2%, at least you are still ahead and will likely not complain too much. 

  

What happens however, if this is not a short-term revenue problem?  You increase taxes this year, but what happens in the next biennium when you have another deficit that needs to be fixed?  If revenue stays flat for an extended period of time tax increases only prolong the hard decisions.  What happens if taxpayers' salaries stay flat?  Do you really think a taxpayer is going to pay higher taxes and decrease their consumption?  People may adjust their spending patterns, but in the end governments will not collect any additional revenue. 

 

We spend a lot of time talking about the importance of sustainability for both businesses and individuals.  The implication is businesses/individuals need to conserve resources today and leave some for future generations.  If we over consume today, we destroy opportunities for future generations.  By the same token, maybe it is now time to talk about sustainable government.  There are far more reasons to believe economic growth will slow down over the next decade than there are arguments it will keep going at 5%.  If our elected officials continue to make decisions that require 5% growth, what happens if revenue growth does not materialize?  What are the implications of individuals and businesses resetting to a new model of lower growth, but government does not?   Do we really think government can continue business as usual while we expect everyone else to be more sustainable?  Businesses and individuals are now paying the price for the consumerism of the last couple of decades, is it now time for government to adjust as well? 


Sustainable government means three things.  First, that growth is based on conservative forecasts, not the most optimistic.  If revenue comes in high, first use it to make one-time investments (like pay down the unfunded pension liability.)  If after a few years the long-term revenue forecast improves substantially, then talk about realistic new or expanded programs.  The second implication of sustainable government is that local governments are the primary problem solvers, not the federal and state government.  All issues are local and need to be solved locally.  The third implication of sustainable government is that government employees are empowered to do their jobs.  Unempowered employees are less effective and it shows in most interactions with government employees.  Frustrations will grow and  the same conversations will be repeated again and again until government becomes more sustainable, right along with the rest of us.

Ryan M. Ferris  //  Tue, Mar 02, 2010, 7:21 am

Craig:

Thanks for your excellent article, but I disagree on many points. The banking and credit system is infinitely more well resourced than the government or the people. (Those of us who have worked in the world of Investment Banking know this quite well.)  The top world leaders and lenders knew what they were doing by suffusing the U.S. economy with liquidity.  Most consumers just wanted a better life. Literally, in the United States most consumers do not have the intelligence to read or understand the fine print or project “bubble economics” futures for themselves. When Jamie Dimon said we should expect a major economic crisis every 5 -7 years in the world we live in now, he is not talking about a reality most consumers know how to adjust to without savage damages to their communities and families.  The bankrupt dynamics of the financially engineered economy for the last ten years was predicted by many scholars and commentators, still there was something far too sequenced about the collapse for me to believe.

I’ve come to the conclusion that our economic hard times were pre-determined. The goal is to weaken China’s economy while we maintain military supremacy through out the world. Like the syphilitic English Kings of Old, the power elite in America literally do not care if communities (e.g. peasants) like Bellingham disappear into poverty for 6 , 8 , 10 years as long as strategic goals for the attainment of wealth and power are maintained.  And if such poverty brings down the entire country?  Then they will use such “shock and awe” to take us back to pre
“FDR” style middle-classless existence and invest in other countries besides the U.S. If this is not what has happened already.

The preservation of democracy and our middle class in this country will not be found by blaming ourselves, blaming the poor or “the consumer”, shrinking community-based government programs, or thinking “that we are all in this together”. We are not.

Ryan M. Ferris

The Way I See It - Mud resurrected

Wed, Jul 28, 2010, 4:39 am  //  Ham Hayes

It is time we gave “mud” back its good name.

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The Way I See It - En Garde

Wed, Jul 21, 2010, 4:42 am  //  Ham Hayes

“We have lots of robberies.” As I reported last week, that was the apocalyptic statement by the investigating officer to our recent plight in St.…

0 comments

Greed: The Shadowy So-called Non-profit Taecan

Mon, Jul 19, 2010, 11:53 am  //  Tip Johnson

For-Profit Non-Profits - Pulling the Plug on Services

0 comments

The Forsaken Constituents of Lummi Island

Mon, Jul 19, 2010, 11:20 am  //  Tip Johnson

Taxation without representation

3 comments; last on Jul 28, 2010

Libraries are still very valuable

Fri, Jul 16, 2010, 8:18 pm  //  John Servais

The New Spice Man tells us why libraries are useful and valuable. This applies to all libraries.

0 comments

Three Port Executive Finalists Withdraw

Fri, Jul 16, 2010, 1:30 pm  //  John Servais

In a surprise development, the Port of Bellingham is starting over again in their search for an executive director. Position now vacant for over a…

1 comments; last on Jul 18, 2010

Book Review:  Whole Earth Discipline

Fri, Jul 16, 2010, 4:44 am  //  Guest writer

Eric Hirst reviews this October 2009 book by Stewart Brand of Whole Earth Catalog fame. Stewart is critical of several mainstream environmental stances.

1 comments; last on Jul 19, 2010

The Way I See It - From Russia with Love

Wed, Jul 14, 2010, 5:17 pm  //  Ham Hayes

Ham's final post on his travel comments from Russia.

0 comments

Climate and transparent process

Wed, Jul 14, 2010, 11:52 am  //  John Servais

The Atlantic Monthly has an article on Climate gate that every Enviro true believer should read. Some healthy skepticism is very needed.

1 comments; last on Jul 17, 2010

Oil Spill - What is not reported

Mon, Jun 28, 2010, 1:17 pm  //  John Servais

BP oil spill video taken on a private plane flight over the Gulf of Mexico. The spill is worse than our media are telling us.

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Never Enough? Enough is Enough!

Mon, Jun 21, 2010, 4:40 pm  //  Tip Johnson

Wherein the absurdity of the Lummi Blockade is explored in yet more excrutiating detail

1 comments; last on Jun 22, 2010

Please sign the anti-whaling petition

Thu, Jun 17, 2010, 11:31 pm  //  John Servais

Let's help get one million signatures on the anti-whaling petition.

1 comments; last on Jun 20, 2010

The Way I See It - Heart and Gut

Wed, Jun 16, 2010, 4:56 am  //  Ham Hayes

Our society is out of its mind. Well, maybe not quite completely, but it needs to be.

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Public support saves Fairhaven Library

Tue, Jun 15, 2010, 11:36 pm  //  John Servais

Library Trustees reversed themselves from last week and spared closing the Fairhaven library.

6 comments; last on Jun 17, 2010

DOWNWARD BOUND - with Hippie Jim

Mon, Jun 14, 2010, 11:34 am  //  Kamalla Rose Kaur

Wherein Hippie Jim addresses a growing need in our modern age

0 comments

How to close a library

Mon, Jun 14, 2010, 4:44 am  //  John Servais

Yes, the city powers have decided to close the Fairhaven Library. Only strong citizen objections can change it.

0 comments

Apparently You Can Always Get What You Want

Fri, Jun 11, 2010, 3:08 pm  //  Guest writer

Marilyn Olsen is today's guest writer. She submitted this the day after the Library Board meeting.

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The Way I See It - A long way to go

Wed, Jun 09, 2010, 8:35 pm  //  Ham Hayes

Success often comes in small steps spread over time. A recent article from the local Seattle office of the FBI underscores one of those moments,…

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Barry Buchanan running for Mayor

Tue, Jun 08, 2010, 9:45 pm  //  John Servais

Barry Buchanan, city council representative from Bellingham's Third Ward, has filed papers to run for Mayor.

0 comments

The Dumbest Meeting Ever

Tue, Jun 08, 2010, 9:31 pm  //  Tip Johnson

I mean, come on!

3 comments; last on Jun 09, 2010

Fairhaven Library to be Closed

Tue, Jun 08, 2010, 12:13 pm  //  John Servais

Bellingham Library Board of Trustees decided today to close the library for cost cutting reasons. Branches are low priority. Formal vote next week.

2 comments; last on Jun 08, 2010

The Way I See It – The Return of the Grail: Seek Truth. Speak It.

Wed, Jun 02, 2010, 4:22 am  //  Ham Hayes

The unfolding story through time and space in France

3 comments; last on May 19, 2010

Five Minutes

Tue, Jun 01, 2010, 7:33 am  //  Tip Johnson

Oil Addiction: All Day Every Day

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Shame on Israel

Mon, May 31, 2010, 7:43 pm  //  John Servais

Israel is becoming a rogue state. It is showing a disdain for International law and world opinion.

13 comments; last on Jun 03, 2010

From a Political Junkie: That Anti-Incumbent Feeling

Mon, May 24, 2010, 4:34 am  //  Riley Sweeney

Riley Sweeney examines the primaries in PA, KY and AR and what it means for 2010.

6 comments; last on May 25, 2010

Re-Legalize Cannabis and End an Un-American Prohibition

Sun, May 23, 2010, 11:37 am  //  Guest writer

David Camp writes on Prohibition and the American Way

3 comments; last on May 28, 2010

An Affair to Remember

Mon, May 17, 2010, 3:42 pm  //  Guest writer

Sharon Crozier attended a meeting with Congressman Rick Larsen.

2 comments; last on May 20, 2010

From a Political Junkie: Marriage, Values and Culture

Mon, May 17, 2010, 4:55 am  //  Riley Sweeney

Riley Sweeney discusses the discomfort of religious and cultural differences among friends

1 comments; last on May 17, 2010

From a Political Junkie: The Golden Age of Radio

Mon, May 10, 2010, 4:44 am  //  Riley Sweeney

Riley Sweeney asks for plot ideas for a local radio drama

0 comments

The Story Of My Life

Sun, May 09, 2010, 1:58 pm  //  Kamalla Rose Kaur

Kamalla's connection with other Northwest news

0 comments

Craig Mayberry Announces Candidacy for the 42nd District State House, Position 1

Wed, May 05, 2010, 9:34 am  //  Craig Mayberry

Craig Mayberry announces he is running for the State Legislature.

2 comments; last on May 06, 2010

The Way I See It - Flights of Fancy

Wed, May 05, 2010, 4:24 am  //  Ham Hayes

Ham is preparing for another fun filled trip by air.

1 comments; last on May 05, 2010

 

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