Will “Butch” Otter’s Legacy Be Thwarted By Depression?

Driving home from work today I listened to the radio as my Governor outlined his 2016 wish list.  C.L. “Butch” Otter has had the job in Idaho for a long time now.  One year into his third term he originally took the office just as a worldwide recession arrived.  During his remarks today he spoke of his plans to establish a better educational system in the state, one he knows requires a large price tag.  He spoke of the “Great Recession” having come to an end and called on legislators to join him in lobbying the public for the money.  Otter isn’t up for election this year and is likely retiring at the end of his term.  The men and women assembled in the same room with him may well have other short-term motives.

During the last session there was a knock-down, drag-out fight over transportation funding.  The result was a higher gasoline tax and yet the projected highway needs are still more than double what the tax is expected to raise.

I get paid to criticize politicians, although.  I’m not sure I’d want to trade places this year.  There are indications something worse than recession was stuffed in a closet over the last 8 years and now is struggling mightily to escape.  I liken it to the old story about a drunk postponing a hangover by staying stewed.   Global panic may or may not be ahead but there are serious warnings to take shelter for the time being.  An editorial today in Australia’s Canberra Times cites a well-known economist:

Commentary on the significance of China's share and currency tremors is divided. Some believe the markets over-reacted, and that China's economic fundamentals remain sound. Others, like former US treasury secretary Lawrence Summers, say that because of China's "scale, potential volatility and … limited room for conventional monetary manouevres, the global risk to domestic economic performance in the US, Europe and many emerging markets is a great as any time I can remember". Hedge fund manager George Soros says the financial markets' serious challenge reminds him of the "crisis we had in 2008".

Summers warning comes from a lengthy essay published by the Washington Post.  What if Chinese growth has all been smoke and mirrors?  What if the Asian behemoth takes a great fall?  Will the tsunami race across the Pacific and drown the U.S. economy?  Summers’ alarm gets another airing at the Financial Times.  China is a country where more concrete was poured in under five years than during the entire 20^th Century by Americans.  There are towering ghost cities and roads to nowhere crisscrossing the exotic landscape.  It’s akin to building a brand new mall and then finding no takers for tenancy, of course.  It’s also on a much grander scale.

China’s suppliers are feeling the pinch.  Brazil, India and other emerging players have docks stocked with goods gathering dust.  Over-supply means production slows or grinds to a halt.  People lose jobs.  They drive less and shuttered factories don’t need fuel.  The price of oil is tumbling like a Flying Wallenda who missed a step.  Cheap oil is a wonderful thing for people still working.  Heating and driving costs plummet and if those people then turn around and spend the savings then other products begin moving.  Unless there is fear.  If you think you’ll lose your job soon you stash the money away.  My dad told me about the Great Depression when a dollar bought eight gallons of gas.  Getting ahold of a dollar can be tricky during tough times.  Jim Baxter, a man who once challenged and almost defeated Joe Biden for U.S. Senate, grew up on a farm in Southern Delaware.  Baxter graduated high school in the late 1930s.  Years ago we were talking and Mr. Baxter explained he didn’t know what a ten dollar bill looked like until he was an adult.  He issued an invitation for lunch at his farm and joked his wife would put another stone in the soup.

I make a living not only as a critic but often as a doomsayer.  This is why I’ve got some sympathy for my legislators.  Tomorrow a large rock could streak through the atmosphere and wipe out all life on the planet.  It’s just that we don’t know if it’s tomorrow (I should think NASA would keep us posted), next year or never again.  Man is a risk-taking animal.  Rare is the reward without boldness.  Maybe we can postpone mandatory kindergarten for another year.  Kids can’t get any dumber, can they?