Olympia Business Watch

US gov't runs $1.3 trillion budget deficit in 2011

According to the Associated Presss today, the government ran a $1.3 trillion for the budget year that ended last month.  It is the third straight year it has operated more than $1 trillion in the red bringing the nation's debt to $14.8 trillion.

The 2011 budget deficit was the second highest on record. It's slightly ahead of the previous budget year's $1.29 trillion deficit but below the $1.41 trillion imbalance record in 2009. Our record debt is making it difficult for the U.S. government to borrow.

A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable. But those deficits now loom over tense negotiations in Washington.

Congressional lawmakers, led by Washington's Sen. Patty Murray (D), are under pressure to agree by Thanksgiving on where they can cut $1.2 trillion over the next decade. If they cannot, automatic cuts to Medicare, defense spending and other critical areas of the budget would go into effect in Jan. 2013.

As of this very minute, according to the federal debt ceiling clock, each U.S. citizen owes $47,508.  Even more troubling is that each taxpayer owes a whopping $132,165.

 

Brunell: Will America still aspire to space greatness?

Given the country's $14 trillion budget deficit, coming up with the $18 billion needed to launch a test flight of NASA's new space launch system could be a challenge, AWB President Don Brunell writes in his weekly column.

And that's just the beginning. The total price tag for the rocket program that would eventually carry U.S. astronauts to Mars is currently estimated at $35 billion, and it could cost more than $60 billion for an accelerated program.

Why spend the money?

For starters, the U.S. space program has solidified America's leadership role in the world, fostered incredible advances in science and technology, produced thousands of innovations and products we use in our daily lives, and inspired millions of American youth to pursue careers in science and math, Brunell writes.

In addition, we have a clear lead in space. So as other nations emphasize innovation as they attempt to attract research and development, America already has the space technology and R&D here.

Finally, reaching beyond our planet to the stars has long been part of our greatness as a nation.

Our struggles with debt and China's ambitious space agenda are prompting Brunell to wonder, "Do we as a nation still aspire to greatness in space and beyond?"

Brunell: The reality of world competition for America's factory owners

The story of FormFactor, a one-time California company that moved to Singapore in order to survive, illustrates the challenges facing businesses in today's cut-throat global competition.

The company founder didn't want to move his operation out of America, where he made his fortune, but he found himself competing with a Korean company that copied his device and started making it cheaper, AWB President Don Brunell writes in his weekly column.

When Singapore's Economic Development Board offered tax holidays, free property for a plant and headquarters and substantial grants for equipment and materials, he had little choice but to accept the deal.

His company was rapidly headed toward extinction and U.S. officials brushed him off his request for assistance.

As U.S. officials look for ways to restore jobs, they need to consider the reality of today's global economy, Brunell writes. And they need to make decisions carefully, based on economics not politics.

 

Rasmussen: America is in the midst of major change

Americans are deeply frustrated with their government and they're driving the country slowly but surely toward fundamental change.

That was the message Scott Rasmussen, founder and president of Rasmussen Reports, delivered Wednesday during AWB's annual Policy Summit.

It's unclear where things will end up. And it's unsettling, Rasmussen admitted. But he believes it's also a healthy part of American democracy.

Rasmussen, who is one of the nation's leading pollsters, has earned a reputation as someone who knows where the country is heading because he gauges the mood of average Americans rather than the so-called political class.

Americans today are frustrated with the economy and no longer view the downturn as a normal business cycle, he said. Rather they see it as a sign that something has gone fundamentally wrong.

In fact, they distrust the whole economic and political system to the extent that his polling shows most Americans not only think Congress is corrupt, but their own congressman or congresswoman is corrupt, he said.

Gregoire: Now more than ever, we must work together

Gov. Chris Gregoire blasted Congress for "failing to do what needed to be done in August," and she called on Washingtonians to work together to solve the state's budget problems during her luncheon address Wednesday to AWB members.

"Now more than ever, we can only get through the challenges ahead if we work together," Gregoire said during AWB's annual Policy Summit.

Her comments came after last week's news that state revenue projection dropped another $1.4 billion, raising the estimated budget shortfall to nearly $2 billion.

The forecast brought immediate talk of a possible special session of the Legislature, but Gregoire said she doesn't intend to call lawmakers to Olympia before the next forecast in November. Later in the afternoon came confirmation that Gregoire will call lawmakers back to Olympia in November for a 30-day special session.

"It's not a small, supplemental budget where you tinker, it is a new budget," she said.

Rosensweig: Exports will be economy's locomotive

There is about a one-third chance that the economy will enter a "double dip" recession, so business leaders should prepare for that possibility, Jeffrey Rosensweig told AWB members Wednesday at the start of the 22nd annual Policy Summit.

But Rosensweig, director of the Global Perspectives Program at Emory University in Atlanta, said economists believe it's more likely that it will grow at about a 2 percent or 2.5 percent annual rate.

And he added that all of the grim economic news misses some fundamental strengths going forward, including America's growing population and predictions that the nation's debt-to-GDP ratio will stabilize or decline in the next few years.

Rosensweig noted that America's population is growing about 2.5 million per year and it's the only wealthy country in the world with a growing population. That makes it harder to lower the unemployment rate. Even if the economy grows 2 percent per year, it's just absorbing new workers -- and not bringing the unemployment rate down.

State revenue outlook nosedives again - down $1.4 billion

Washington's state budget picture took another turn for the worse Thursday when chief economist Arun Raha announced a new revenue projection $1.4 billion lower than the previous forecast.

The bad news, which comes despite strong aerospace, software and agriculture sectors, had been telegraphed well in advance. But that doesn't mean it will be any easier for lawmakers to address, either later this year in a special session or in January when they are scheduled to convene.

A special session seems likely. Marty Brown, the governor's budget director, said Gov. Chris Gregoire held conference calls with legislative leaders, adding that she was "very uncomfortable" waiting until January.

Whenever they meet, AWB President Don Brunell said lawmakers must put aside partisan differences and concentrate on actions that will spur small- and medium-sized employers to start hiring again.

Despite strong employment growth at Boeing, which has more than seven years of commercial orders on its books, and a rebound in software publishing employment, Thursday's report showed that Washington's job market added just 8,300 jobs in June, rather than 13,600 that had been forecast.

Nationwide, there are still more than 6 million fewer jobs than at the start of the Great Recession, Raha said.

Brunell: Boeing's prospects are bright ... for now

Amid all the bad economic news of late, Boeing has supplied some welcome good news, AWB President Don Brunell writes in his weekly column.

The company has completed flights tests of its long-delayed 787 Dreamliner, and despite the delays the 787 remains in strong demand. Boeing Commercial Airplanes Chief Jim Albaugh says there are 830 orders for the 787 from 52 customers, and the plane is sold out through 2019.

Boeing is adding workers and Arun Raha, the state's chief economist, expects hiring to continue for the next couple of years.

So, thing are looking up -- but all that could change, Brunell says.

He cites the National Labor Relations Board claims against Boeing over its decision to build a second production line right-to-work South Carolina, and competition from manufacturers in China, Brazil and Canada -- in addition to rival Airbus -- as notable challenges facing Boeing.

"To survive in this aggressive global marketplace, Boeing needs certainty and stability at home, with its workforce and with government regulators," Brunell writes. "Without it, Boeing's future prospects are uncertain."

 

Welcome, Business, to Poland

This is Week 2 of Year 3 of Washington Business Week in Poland.  I am fortunate to be in Gdansk this week as one of 10 company adviser to 100 Polish high school students who all speak English. Included in the 10 Americans are two teachers--one from Monroe and the other from Vancouver (WA).

Last week, Poland Business Week was in Gdynia, where it started in 2009 thanks to a sister city relationship between Seattle and Gdynia.  This year it is in Gdnyia, Gdansk and Tczew---all in northeastern Poland bordering the Baltic. Next year, it may spread deeper into Poland, which until the Berlin Wall fell, was ruled by the iron-hand of communist dictators.

Poland Business Week is the same Washington Business Week started at the Association of Washington Business in 1975 and has spread to 26 states, Australia and now Poland.  AWB remains the founding sponsor and hundreds of AWB members help fund WBW.

The Polish government and business community hosts and welcomes Americans and embraces Washington Business Week as a way for its country to develop young entrepreneurs.  They believe their future is in free enterprise and our market-based system.

You see it everywhere, and unlike many places in America, construction is happening here....and they want more.   As you fly into the Gdansk/Gdynia airport, the first thing you see is a new terminal being completed.  Once in the terminal building the one thing you can't miss is the big sign:  "Gdynia, here one does business."  They want American private investment---as evidence that the sign is in English, not Polish.

More on Gdansk/Gdynia and Polish Business Week as the week progresses. 

Don C. Brunell, President (DonB@awb.org)

 

 

 

 

I-1053 legal challenge could make voters ask 'What's the use in voting?'

Voters could not have been more clear last fall on Initiative 1053, The Columbian editorial board wrote yesterday in response to the legal challenge brought this week against the measure.

In Clark County, home of Rep. Jim Moeller -- one of the dozen Democratic lawmakers who signed on as plaintiffs -- the initiative passed with a 71.3 percent approval, the paper writes.

The Columbian brings up the statistic after noting that Moeller's Web page includes this statement: "A big part of my job -- by the far most important part -- is listening to what Vancouver and othe Clark County folks have to say regarding the issues before us."

On I-1053, the people have spoken. Loud and clear. And with respect to a supermajority vote of legislators to raise taxes, they have spoken several times.

Is Moeller listening selectively, the paper asks?

Every time lawmakers overturn the will of the people, they risk alienating them -- possibly to the point that voters give up.

The paper concludes with this warning: "Legislators who disagree certainly have their right to pursue a legal remedy, but that doesn't make them right. And they do so at their own peril, as voters justifiably ask: 'What's the use in voting, if our voice will just be ignored?'"