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2008-12-07 BACK
Bad Year to be a Libertarian
Bad Year to be a Libertarian This article originally appeared in the Texarkana Gazette on December 7, 2008 Dr. Ed Bashaw, Dean, Texas A&M-Texarkana College of Business I recently attended a conference for Business School educators at the Federal Reserve Bank in Dallas. Sitting through this conference hearing one economist after another describe, from their point of view, the 2009 and beyond outlook, I was caught up in what 19th Century Victorian historian Thomas Carlyle undoubtedly was thinking when he termed economics the "dismal science". If these economists' outlooks are correct, expect the federal government's response to continue to be invasive. All in all, it is, and is going to continue to be a bad time for Libertarians. (Disclosure, I do not consider myself to be a Libertarian, but I do have a Libertarian streak.) Will all this intervention do any good? How is the Texas economy expected to fare? And, finally, what should we look for in Texarkana for signs of our local economy in 2009? I'll tackle each question briefly in today's column. The U.S. Treasury continues to buy assets. These new asset buys, on top of the AIG bailout, the $700,000,000,000 (it is more impressive, and frightening, to show the $700 billion with all of the zeroes) committed to" unsticking" credit by the financial firms, and many, many others that each of us can recall. All totaled, the federal government has committed, at least in the short term, to over $1,000,000,000,000 in deficit bailout spending. Hang on to your hats, it looks like we haven't seen the end of direct government investment in the private business sector. On top of this, Congress is talking about a "massive" (Speaker Nancy Pelosi's word) economic stimulus package that could total over $500,000,000,000. Just this week Auto makers went back to Washington, D.C. for more federal money. At what level should we not consider a bailout? What about Pilgrim's Pride who just went into Chapter 11 bankruptcy restructuring this week? Six months ago none of us could have foreseen all of this. And now, it all seems "normal". On Monday of this past week, the National Bureau of Economic Research (NBER) announced that the U.S. economy has been in a recession since December, 2007. Is anybody really surprised? The NBER, a private, nonprofit research organization consisting of academic economists, has the "official" say in matters related to U.S. business cycles. My guess is that that news means a new Obama administration will take whatever action they deem necessary to try to avoid a worsening recession. In the short-term, I'm hopeful that these actions will aid us in avoiding a massive downturn. In the long term I'm very concerned about the federal government's ability to service this new debt, pay down the previous debt, and continue to fund ongoing commitments made to U.S. citizens, such as Social Security and Medicare. Let's hope some of the Treasury's "investments" in the financial markets offer positive returns. There is some good news - really. Black Friday Christmas retail sales, a key economic indicator for the important Christmas retail season, were up 3% versus last year. Also, the Thanksgiving week retail sales were up .1% over last year. Early indications are that Black Monday (the term that refers to Internet sales that occur on the Monday following Thanksgiving) sales are strong. If these indicators hold throughout the Christmas, that would be welcome, if not surprising. Also, the U.S. unemployment rate of 6.5%, while continuing to rise, is still well below the 7.8% from 1993 and 10% or better levels of the early 1980's. The economists I heard at the Dallas Fed generally give the Texas economy much higher marks than the national economy. The Dallas Federal Reserve Bank reports monthly the expectations of manufacturing market conditions in Texas by manufacturers and producers in a study called the Texas Manufacturing Outlook Survey. Texarkana's Mike Craven of Red River Lumber is a participant in this study. The results show that the Texas outlook has deteriorated in November. Expectations are that production, new orders volume, growth rate in orders, inventories, prices paid for raw materials, prices for finished goods, number of employees, and capital expenditures all will be down. Employee wages is the only area expected to increase. The expectation, however, is for improvement in conditions in the next six months, but still mostly negative. The Texarkana economy continues to perform pretty well, even in the midst of a national recession. There were only five new building in October and 19 in last three months. This compares to nine last October and 61 over the three month time period from last year. This is, on balance a good thing for the housing market as the home inventory is lowered. There were 67 home sales for October and 231 for last three months. Last October there were 51 home sales and 204 for the same three months last year. The average home price this October was $140,300 versus last year at $129,200. The average home price over the last three months was $120,866 compared with last year at $136,863. Unemployment in Texarkana in October is estimated to be about 5.1%, up from 4.9 in September and 3.9 in April. For Texas the rate was 5.4% in October, 5.2% in September and 3.9% in April. To put this in context, the U.S. rate was 6.5% in October, 6.1% in September, and a low of 4.8% in February. What are some economic signs to look for in Texarkana to gauge our economy? I first track housing volume and price. Increasing housing volume and price will indicate to me that credit is available and that consumers have the confidence to make a high-dollar purchase. I will also watch the fate of retailers, particularly local retailers of discretionary item purchases. A massive closing will be a bad sign. However, retailers' remaining in business means a sufficient number of consumers are still buying in large enough levels to keep our retailers in business. The main economic indicator for Texarkana will be the fate of our Cooper Tire plant. If state and local governments can put together an incentive package that allows the strengths of the local plant (advantages in cost and the expertise gained from being a flex plant) to remain important in the plant closing decision, that will be extremely positive economic news. And there it is – the key to Texarkana's economy may well depend on anti-Libertarian market place intervention by government. Tough for a Libertarian to take. Contact me at Edward.Bashaw@tamut.edu. Ed Bashaw, PhD Dean, College of Business Texas A&M University-Texarkana 903.223.3106
TOP
Bad Year to be a Libertarian
Bad Year to be a Libertarian This article originally appeared in the Texarkana Gazette on December 7, 2008 Dr. Ed Bashaw, Dean, Texas A&M-Texarkana College of Business I recently attended a conference for Business School educators at the Federal Reserve Bank in Dallas. Sitting through this conference hearing one economist after another describe, from their point of view, the 2009 and beyond outlook, I was caught up in what 19th Century Victorian historian Thomas Carlyle undoubtedly was thinking when he termed economics the "dismal science". If these economists' outlooks are correct, expect the federal government's response to continue to be invasive. All in all, it is, and is going to continue to be a bad time for Libertarians. (Disclosure, I do not consider myself to be a Libertarian, but I do have a Libertarian streak.) Will all this intervention do any good? How is the Texas economy expected to fare? And, finally, what should we look for in Texarkana for signs of our local economy in 2009? I'll tackle each question briefly in today's column. The U.S. Treasury continues to buy assets. These new asset buys, on top of the AIG bailout, the $700,000,000,000 (it is more impressive, and frightening, to show the $700 billion with all of the zeroes) committed to" unsticking" credit by the financial firms, and many, many others that each of us can recall. All totaled, the federal government has committed, at least in the short term, to over $1,000,000,000,000 in deficit bailout spending. Hang on to your hats, it looks like we haven't seen the end of direct government investment in the private business sector. On top of this, Congress is talking about a "massive" (Speaker Nancy Pelosi's word) economic stimulus package that could total over $500,000,000,000. Just this week Auto makers went back to Washington, D.C. for more federal money. At what level should we not consider a bailout? What about Pilgrim's Pride who just went into Chapter 11 bankruptcy restructuring this week? Six months ago none of us could have foreseen all of this. And now, it all seems "normal". On Monday of this past week, the National Bureau of Economic Research (NBER) announced that the U.S. economy has been in a recession since December, 2007. Is anybody really surprised? The NBER, a private, nonprofit research organization consisting of academic economists, has the "official" say in matters related to U.S. business cycles. My guess is that that news means a new Obama administration will take whatever action they deem necessary to try to avoid a worsening recession. In the short-term, I'm hopeful that these actions will aid us in avoiding a massive downturn. In the long term I'm very concerned about the federal government's ability to service this new debt, pay down the previous debt, and continue to fund ongoing commitments made to U.S. citizens, such as Social Security and Medicare. Let's hope some of the Treasury's "investments" in the financial markets offer positive returns. There is some good news - really. Black Friday Christmas retail sales, a key economic indicator for the important Christmas retail season, were up 3% versus last year. Also, the Thanksgiving week retail sales were up .1% over last year. Early indications are that Black Monday (the term that refers to Internet sales that occur on the Monday following Thanksgiving) sales are strong. If these indicators hold throughout the Christmas, that would be welcome, if not surprising. Also, the U.S. unemployment rate of 6.5%, while continuing to rise, is still well below the 7.8% from 1993 and 10% or better levels of the early 1980's. The economists I heard at the Dallas Fed generally give the Texas economy much higher marks than the national economy. The Dallas Federal Reserve Bank reports monthly the expectations of manufacturing market conditions in Texas by manufacturers and producers in a study called the Texas Manufacturing Outlook Survey. Texarkana's Mike Craven of Red River Lumber is a participant in this study. The results show that the Texas outlook has deteriorated in November. Expectations are that production, new orders volume, growth rate in orders, inventories, prices paid for raw materials, prices for finished goods, number of employees, and capital expenditures all will be down. Employee wages is the only area expected to increase. The expectation, however, is for improvement in conditions in the next six months, but still mostly negative. The Texarkana economy continues to perform pretty well, even in the midst of a national recession. There were only five new building in October and 19 in last three months. This compares to nine last October and 61 over the three month time period from last year. This is, on balance a good thing for the housing market as the home inventory is lowered. There were 67 home sales for October and 231 for last three months. Last October there were 51 home sales and 204 for the same three months last year. The average home price this October was $140,300 versus last year at $129,200. The average home price over the last three months was $120,866 compared with last year at $136,863. Unemployment in Texarkana in October is estimated to be about 5.1%, up from 4.9 in September and 3.9 in April. For Texas the rate was 5.4% in October, 5.2% in September and 3.9% in April. To put this in context, the U.S. rate was 6.5% in October, 6.1% in September, and a low of 4.8% in February. What are some economic signs to look for in Texarkana to gauge our economy? I first track housing volume and price. Increasing housing volume and price will indicate to me that credit is available and that consumers have the confidence to make a high-dollar purchase. I will also watch the fate of retailers, particularly local retailers of discretionary item purchases. A massive closing will be a bad sign. However, retailers' remaining in business means a sufficient number of consumers are still buying in large enough levels to keep our retailers in business. The main economic indicator for Texarkana will be the fate of our Cooper Tire plant. If state and local governments can put together an incentive package that allows the strengths of the local plant (advantages in cost and the expertise gained from being a flex plant) to remain important in the plant closing decision, that will be extremely positive economic news. And there it is – the key to Texarkana's economy may well depend on anti-Libertarian market place intervention by government. Tough for a Libertarian to take. Contact me at Edward.Bashaw@tamut.edu. Ed Bashaw, PhD Dean, College of Business Texas A&M University-Texarkana 903.223.3106
TOP