September 28, 2009

(Faintly) hopeful signposts on the western economic front

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There are a couple of faintly hopeful signposts on the western economy today. The biggie – the California budget doesn’t look so bad.  Despite regular tidings of gloom and doom, comes now a glimmer of good cheer. Buoyed perhaps by a resurgent stock market and other signs the recession is on its way out, reports the San Jose Mercury News, the state’s revenue and spending projections “ought to hold up to at least mid-January, and maybe even beyond,” according to analysts and economists. Woo-hoo.

 However, “the glad tidings may be temporary,” writes Merc reporter Denis C. Theriault, who notes the deficit for next year is already estimated at $7.4 billion.

Still, it’s the first time this year when when deficit slashing wasn’t the chief occupation in the state capital. And it’s good news for state parks in California. Remember those 100 parks that were going to be shut down because the state simply didn’t have the money to operate them? Well, Gov. Arnold Schwarzenegger now says he won’t have to shut them down, but he is going to stop buying equipment to maintain them and lay off many of the employees who staff them. His decision also came after activists launched campaigns to keep the parks open, and a Sacramento environmental group posted a memo from state park attorneys warning that taxpayers could be on the hook for breaching park concession contracts if parks were closed.

There is more upside to the bad news of state budgets. In Colorado, where the state is facing a $318 million shortfall, some social justice advocates see the the draconian cuts the state is forced to make as a way to face up to some real problems in the state prison system. That has already happened in California. Just  last month, as InvestigateWest reported on this blog, budget shortfalls finally pushed the state to yielding to humanitarian demands and state shutting down its most violent and notorious youth prison.

Other western states are in bad budget straits, as they search for combinations of cuts, stimulus funds, and new taxes and fees to fill holes in the budget. Oregon, for example, is looking at a $4 billion hole  in what it needs to cover schools, prisons and other services for the next two years. Washington state, where Gov. Christine Gregoire also believes the recession has bottomed out, is looking at a $430 million shortfall over the next two years. Utah is facing a $700 million budget deficit, and today the state Medicaid program said it plans to ask the Legislature for $17 million more to keep it afloat through fiscal 2010 as demand increases. Utah legislators are firing back, telling the department to look inside for ways to cut costs. Of course, we’d like to see Colorado and California do the right thing in their state prison systems without being forced into it by massive spending crises that doubtless will hurt others in those systems. And we know other states are going to have make tough and creative choices without doing massive harm as they wait for state coffers and employment to catch up with the “recession over” tidings.

But I digress. Here’s the other signpost. Nearly half of retailers said they would hire the same number of workers this holiday season as last, and 40 percent said they would hire 5 to 25 percent fewer workers. Of course, you could look at that statistic the other way. Forty percent of retailers are going to hire 5 to 25 percent fewer workers this holiday season, and demand for those jobs is up. But  I think it’s fair to say that last holiday season the full extent of just how bad the recession was going to get hadn’t hit retailers yet. Many were still hoping the holiday season would pull them out of what had been a slow year. So maybe this is just the year they’re facing it full on. And yet, nearly half of the employers – 48 percent – are going to hire the same number of workers.

And good news does seem to beget more good news. In California, lenders are willing to bet on the state again — the state sold more than $9 billion in short term bonds, one of the largest such sales ever. And job losses in the state are slowing.

That’s my Paul Krugman for the day.

— Rita Hibbard

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