Gloomy Forecast Could Prove This Session Bigger Trouble Than I Fear
Posted by Andy on May 20th, 2008
I’m not one of the Republicans or conservatives trying to spin this last session as some sort of brilliant victory. I see that we’re committed to long term and permanent spending that is going to be a constant burden. The amount of money every year that must be siphoned out of the economy is growing at alarming rates, and if we have anything less then 3+% growth in our economy, we’re going to be back trying to plug another budget hole and avoiding the dirty dark truth that no politician wants to talk about: spending reductions.
This interview is quite alarming. It is a Q & A with the State’s economist Tom Stinson & the Strib’s Lori Sturdevant. (I know, I know, but it is actually a pretty good one)
Here’s a taste of why it is such a big mistake to call this session a success.
How would you describe the state’s economic outlook?
A: Right now, we’re having a short, mild recession. The concern is, will we have a little bit of recovery, then go back down to zero growth? This one, partly because of the [federal] stimulus package, looks like it’s going to be a W — a peak this summer, followed by slow quarters thereafter.Q: Why the backsliding?
A: It’s all the usual things. It’s credit, it’s housing, it’s oil.
We’re in kind of a fragile position, if oil prices stay high. Global Insights [the state's national economic consultant] now projects oil prices at $112/barrel in this quarter, and falling to $100/barrel by 2009. [Oil was at $127/barrel on Friday.] Every $10/barrel in oil prices knocks 0.2-0.3 percent off real GDP growth in the U.S. If $120/barrel oil is where we end up, that’s going to knock us back to zero in GDP growth later this year.
Every penny per gallon increase in gasoline prices costs consumers about $1 billion. When the stimulus package was passed, gasoline was roughly $3/gallon. Now, it’s roughly $3.65. That means higher gas prices have burned up half of the stimulus package.
Will they be doing a victory lap around the state next year if the economy is still slumping and they have yet another budget deficit?
I always hate to rain on people’s parades, but we need to look long term at the risks the politicians are putting the taxpayers in. We’re on an unsustainable course right now.
BTW: What is the opposite of limited? Oh yeah, expanded.
Expanded government, the opposite of limited government.
I just want to make sure that gets out there so no one tries to tell us limited government conservatives that the turd is shiny and we should be happy.
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May 20th, 2008 at 12:02 pm
I see that we’re committed to long term and permanent spending that is going to be a constant burden.
That’s what happens when you try to teach Republicans a lesson by giving control to tax and spend happen DFL’ers.
I always hate to rain on people’s parades, but we need to look long term at the risks the politicians are putting the taxpayers in.
I would have probably considered that before trying to teach Republicans a lesson because you can’t really undo what’s been done. But I supposed you could try to keep the DFL from making it worse next term by voting for Republicans this November.
Or maybe more expanded government is a worthwhile price to pay to be able to teach Republicans a lesson. I don’t know, I hope not, but then I didn’t think it was in 2006 either, so who knows what conservatives are thinking.