By State Treasurer Ken Miller (Aug. 19, 2008)
OKLAHOMA CITY - It is widely understood that a free market economy has many variables on which growth is dependent. Less understood is the impact of the intangible determinant called confidence – how people feel about their financial situation, business and the direction of the country.
Lately, there has been a great deal of attention focused on this translucent and sometimes irrational economic variable. Such discussions center on how recent events affect public confidence.
The consensus is that insufficient fiscal policies, the credit downgrade, debt problems here and abroad, geopolitical events and volatility in the stock market have lessened consumer, producer and investor confidence and have contributed to anemic GDP and job growth.
An economist from Moody’s rating agency blamed the current economic malaise on a “crisis of confidence.” The fear is that the negativity will create a self-fulfilling prophecy resulting in a vicious downward cycle and another recession.
In spite of the recent negative financial news coming out of Washington and Wall Street, there are many reasons to remain bullish on the direction of Oklahoma’s economy. Although the external threats to our economy are real, our state continues to outperform much of the nation as demonstrated, in part, by a nearly eight percent increase in gross receipts from income, sales and energy taxes for the past 12 months.
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| Treasurer Ken Miller |
The fundamentals underlying Oklahoma’s economy have gained strength. Our leading sectors continue to expand and corporate profits are good, keeping our unemployment rate one of the lowest in the country. Productivity growth in Oklahoma was twice the U.S. rate for the first half of the year, and our banks and real estate prices remain healthy.
Of course, economic concerns remain for Oklahoma. Chief among them are the Washington-inflicted wounds to the recovery and their affect on our state prospects. Job growth is not what it needs to be to provide full employment for our citizens and investment returns are hampered by extraordinarily low yields and stock market volatility.
In spite of the downgrade by one rating agency, default was avoided and U.S. government debt remains among the safest in the world. Taxpayer funds are safe and liquid.
The current drop in yields has reduced fixed-investment earnings in the short term, but like investments with equity positions, will recover and grow with time.
Though difficult, one can find a silver lining or two in the nation’s current financial problems. The recent turmoil may have sent a wake-up call to federal policymakers forcing them to finally address the country’s long-term fiscal health. Low rates provide the opportunity to finance infrastructure improvement projects at less cost to the taxpayers.
Even a student of the dismal science can remain optimistic. While concerns over a double-dip recession are more understandable today than six months ago, predictions of another downturn are extremely premature.
Confidence can be restored and the feared vicious cycle can become a virtuous one if our nation’s leaders take credible action to put our financial house in order.
