Exactly four years ago this month, I predicted the economic depression that has since enfolded the entire world. Here is what I wrote:
"Could George W. Bush be the Herbert Hoover of the 21st century? Hoover was the guy who happened to be president when the Great Depression unfolded in 1932. I don't think what's ahead for the American economy will be a repeat of the Great Depression: In key respects I think it may be worse." (See http://www.adn.com/opinion/story/5904978p-5813081c.html .)
Being spectacularly right in a key economic prediction has earned me no accolades. At home, my spouse blames me for the big drop in the value of our retirement savings. And the newspapers I write for are not impressed. The embarrassingly small fees they pay for my columns will not be increasing. Could it be true in journalism - as it certainly is in government - that there is no greater sin than being right when all your colleagues are wrong?
Not all were wrong. A few well-known economic journalists forecasted the collapse just as early, and they, too, have received scant recognition. New York Times columnist Paul Krugman, for example, was repeatedly passed over for the Pulitzer. This year he copped a Nobel, not exactly a consolation prize, but it was for economic work he did years ago.
For all the real misery occasioned by the unwinding of our economy, this is a wonderful, target-rich environment for anyone combining the crafts of economics and journalism. Consider what's going on just in Alaska:
Earmarks from heaven. This was the year that every politician except Ted Stevens and Don Young denied soliciting state or federal earmarks. Now, with a massive federal public works program on the horizon as part of Obama's economic rescue package, Alaskans in high positions are jostling to get their pet projects at the front of the line.
Anchorage mayor and now Senator-elect Mark Begich, who ousted Stevens from the U.S. Senate, is pushing a $408-million package of Anchorage earmarks. Begich got the projects incorporated in the National Conference of Mayors' "Mainstreet Ready to Go" program unveiled Dec. 8. It includes goodies such as $75 million for the Anchorage port. Begich shoehorned the port pork in by redesignating it as a "transit" project.
Gov. Sarah Palin also caught the spoor of massive federal project handouts, but - to the chagrin of road builders at the state Department of Transportation and Public Facilities who were pushing for the Juneau "road" project - she directed officials to focus all the state's efforts on getting a massive federal subsidy for the TransCanada gas pipeline. Department of Revenue Deputy Commissioner Marcia Davis explained to me on Friday why her department is in the process of retaining consultants to help with the subsidy proposal: "If you ask the rest of the nation to build the ... line they may have a lot of questions, about the carbon effects, for example."
Bonds from nowhere. Remember the angst about how big a general obligation bond issue the Legislature would present to voters, and whose pet projects would be included? Most of the $315 million package was designated for roads, but $10 million was also included for the Anchorage port. Voters approved the bonds, but now, because of the breakdown in financial markets no one expects that these bonds will be marketable any time in the next few months, and perhaps much longer. That means less capital money on the street.
Oil prices in the tank. In a March 2008 column, I predicted a drop in oil prices and noted that the decline would throw the state budget into deficit. (See www.juneauempire.com/ stories/030908/opi_255333519.shtml.) That same month, the Department of Revenue forecasted prices at $84.18 per barrel, well above the level needed to balance the budget. Last week, when Palin rolled out her proposed spending plan for next fiscal year, a number in tiny print on an inside page revealed that the state is now in the red by more than $400 million. It's no big deal, because the state has lots of reserves, but it raises questions about the wisdom of the state's decision last April to move extra money into the principal of the permanent fund, where it is supposed to be off-limits to spending.
Funds in limbo. The need for more transparency in state investments was something I wrote about here in 2006. (See www.juneauempire.com/stories/031206/opi_20060312003.shtml.) State officials claimed last week that neither the permanent fund nor the state pension funds are exposed to losses from the collapse of hedge funds managed by indicted financier Bernard Madoff. Unfortunately, neither the permanent fund nor the pension funds have revealed the list of hedge funds to which they are exposed. Expect more shoes to be falling here in the future.
God willing, I'll keep writing about these issues. Maybe I'll be rewarded in heaven.
Juneau economic consultant Gregg Erickson is co-editor of the Alaska Budget Report, a newsletter covering the state budget and economy. E-mail, firstname.lastname@example.org.
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