Thursday, January 14, 2010

Reading the tea leaves with Charlie

Attending Charlie Colgan’s annual prognostications at various venues across the state have become one of Maine’s mid-winter rituals for many leaders, both on the private and public side of things. Once again, Colgan was in Lewiston-Auburn for the Androscoggin County Chamber's January meeting, delivering “At the Edge of the Woods: The Great Recession and Beyond.”

Its interesting that one economist would develop such a devoted statewide following, not because economists aren’t well versed in their respective field of study, but because the general public rarely takes much interest in things like leading indicators, risk studies, and anything that smacks of science.

Colgan has managed to package his forecasts, some of them quite dire, by delivering them in his characteristically dry, but humorous way. And Chamber groups and other a audiences eat them up as eagerly as the high cholesterol breakfasts that are standard fare at these early morning business soirees.

In brief, bulleted form, here is the gist of Colgan’s forecast from this morning’s breakfast. This may be one of the quickest releases of that data you’ll find. For more on his talk, you will no doubt want to tune into this evening’s six o’clock news, and read about one of his many appearances in your local daily. Tomorrow’s Sun Journal will surely have it in narrative form.

  • Are we out of the recession?
    --partly; Maine’s economy is growing in output, but a full recovery is a few months away.
  • When will unemployment improve?
    --job growth will resume mid-year; the growth will be there, but it will be weak.
  • How long will it take to recover?
    --one year on the GDP side.
    --two to three years on jobs.
  • What are the risks of Colgan’s forecast?
    --50:50, he said meaning the odds are equal that he overshot, and consequently that the potential is that he is being overly pessimistic.

A few additional items from Colgan’s talk this morning:

  • Coincident indicators are flat.
  • Leading indicators are pointing upwards.
  • The financial crisis has stabilized.

Job growth sectors for Maine?

  • Education/health (Colgan said “this means healthcare.”)
  • Business and professional services
  • Leisure and hospitality

Other concerns:

The decade of the “naughts” put the brakes on over 50 years of decade by decade growth in jobs. For the decade 2000-2009, there was zero growth.

Colgan closed with an interesting observation, diverging from raw data and information, something most economists rarely do.

He referenced a book that is now over 25 years old, Lester Thoreau’s The Zero Sum Society: Distribution and the Possibilities of Economic Change.

Written during a period of acute economic stagnation in 1980, this bestseller discusses the human implications of economic problem solving and offers a classic set of recommendations about the best way to balance government stewardship of the economy and the free-market aspirations of upwardly mobile Americans.

Basically, Thoreau’s zero-sum premise states that for every positive economic gain that I might realize, someone consequently loses. Benefits must come from somewhere, as the economic pie is static.

I took Colgan’s implication of this to be that while the economic data (impersonal and based on set mechanisms, like supply and demand) points to recovery at some point, the human equation, and he mentioned politics, is rooted in the personal.

The idea of zero-sum loss, which is basically pessimistic in outlook, is affecting America in a way that is uncoupled from the economy. Colgan mentioned healthcare reform—initially, Americans supported it, but because of political efforts mainly from the right (my analysis), the polls now show that Americans believe that healthcare gains for some, will be taken from others.

Colgan wrapped up by saying that Maine’s economic future is based on Green and Blue; wood chips, wind, energy efficiency. The state’s prosperity is tied to our potential to be an environmental leader. This requires some profound changes in the way policy is made. It also requires sacrifices by all—potentially in a combination of both taxes and program cuts. I also think, and Colgan alluded to this—personal transformation.

Personally, I think we all need to look closely at our own values. Are we willing to do what’s necessary to move Maine forward? Transformation of a personal nature, something I’m familiar with, is something that we all need to consider.

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