Friday, January 20, 2012

28th Annual County of San Diego Economic Roundtable

Is the federal government to blame for the current employment slump? Today several economists and San Diego business leaders discussed the region's economic climate. To summarize the event, the government interrupted the economy's creative destruction process and negatively impacted new industry and job creation.

Key in the discussion was the employment market. San Diego has been leading the state in job growth behind the Bay Area and Bakersfield but it is a tenuous honor in the current economic climate. Ryan Ratcliff of the University of San Diego investigated why the economy is "stuck in the mud." With regard to my contention that the federal government's intervention has exacerbated the unemployment problem, Dr. Ratcliff felt such a simplification to be "glib." He does believe that "public sector drag" is an issue. The PhD believes that, in the best case, it will take 2 years to recover the 102,000 regional lost jobs.

Marney Cox, Chief Economist for SANDAG, believes that "2012 not looking that good" with regard to the employment issue. The region faces "slower growth." The long term unemployed (43%), who have withdrawn from the unemployment rolls, will stall improvements in the unemployment rate. Regional job growth will be narrowly based due to increasing sales taxes and uncertainty due to bad information about the future. San Diego can expect 6,000 to 12,000 new jobs in 2012. The region is facing "headwinds of jobs, consumption, income and Europe."

Another key discussion point was the San Diego housing market which will likely see falling prices for 2012 and 2013. Ernest Dronenburg, San Diego's Assessor/Recorder, proved to be the comedy relief. When he delved into the housing market "black hole" his tone changed. Phantom inventory are depressing the housing market due to liquidations. Foreclosures will peek in 2012 and liquidations are expected to peek in 2013. Home ownership will drop to about 45% due to the CRA policies that led to this economic disaster. Housing prices are expected to fall between 2% and 5% during 2012.

Mark Cafferty filled in for Linden Blue of General Atomics. Linden Blue planned on presenting on the Geo-political situation. Due to the focus of the economic roundtable, if I understand correctly, he was replaced at the last minute. Personally, I would have welcomed the Geo-political review.

The most terrifying presentation was by Steven Escoboza, President and CEO of the Hospital Association of San Diego and Imperial Counties. Mr. Escoboza was promoting the health care reform known as ObamaCare. He presented that "community care integrators" will get to choose who gets hospital care and when. The "care coordinators" will choose the "right care at the right time."

"Administrative support (employment) will be a big part of managed care." He stressed that lowering costs and "bending the cost curve" were the focus to help make health care "economically efficient." Enrollment in managed care programs through exchanges will see a "flood of new people coming in."

If you read through all the code language, the message is simple. To save money, administrators will choose quality of life for everyone. Primary care physicians will be scarce. Philip Drew will hold the power of life and death over us all. The only redeeming aspect to this part of the presentation was his repeated disdainful comments, "if the supreme court does not strike it down."

Dr. Lynn Reaser led off the roundtable. Dr. Reaser touched on the fact that unemployment declines will be stalled due to the employment participation rate. She felt good about the recent tree trade agreements with Panama and elsewhere.  Her worst policies of this recession were the quick fixes like Cash for Clunkers. The Chief Economist at Point Loma Nazarene University believes that 2012 may not follow the typical "economically good election year."

All the economists and speakers shared one common sentiment. The 2012 election year will decide if small or big government will rule our futures. My take on the situation is that a smaller government role is warranted. Keynesian economics has run its course. Small tweaks to capitalism work but socialist cronyism is not a small tweak. Making poverty and dependence comfortable and allowing the state to pick winners and losers is not wise in any civilization. Only the passion of self interested individuals who believe in their own ideas and benefit from taking risks can create a vibrant economy. No amount of marketing "green" or other state solutions will impassion true believers, investors and customers like an individual with an innovative idea.


SarahB said...

Excellent report! And your last paragraph really says it all.

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