Economist predicts more pain ahead

More information on our current and expected economic circumstances comes from the Public School Forum of North Carolina, which reports on a presentation by one of the directors of the Center for Economic and Policy Research:

Nationally Recognized Economist Predicts More Pain Ahead
This Tuesday NC Policy Watch and the NC Justice Center hosted a “Crucial Conversation Luncheon” with Dr. Dean Baker, co-director of the Washington, DC-based Center for Economic and Policy Research. Dr. Baker is one of the nation’s most visible, prolific and coherent voices for progressive economic policy change. He has authored and co-authored dozens of books and articles, including The United States Since 1980 (Cambridge University Press, 2007) and The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (Center for Economic and Policy Research, 2006).

With the current financial crisis, Dr. Baker’s presentation, entitled “America after Bush; What the next president must do to build an economy that works for all” sent shockwaves through the NCAE auditorium. His main speaking points included:

2009 Recession (we have a long way to go):

• The housing bubble will continue to deflate
• Commercial market has peaked
• Financial Sector experiencing big losses (mortgage & other debt)
• Consumption will fall
• State and local government spending will contract
• Unemployment will rise above 7%

Housing Market:

• Currently 10 month supply of new homes on the market
• More than 11 months for existing homes
• Rentals are at record high vacancy rates

Mortgages / Lending:

• Less subprimes (at one time made up 25% of loans)
• Tight down payments (higher rates and no more second mortgages)
• Loss of equity (20% of babyboomer homeowners will have zero equity in home in 2008)
• Less trading up in the housing industry

Economy / Job Market:

• Since January 2008 more than 100,000 jobs a month have been lost
• Banks – no new loans
• Savings rate since 2004 has been less than 1%. Expected to rise (meaning GDP will fall)

“Good News” – Reform:

• This will punish Wall Street
• Get the dollar down; more toward balanced trade
• Fix healthcare

We've entered a different world than we've seen in the past 50 years in terms of school funding - the days of annual increases in government spending are over, and it's time to adjust and not hold out hope that this is a temporary glitch. Most of the reaction I've seen to date has focused on cutting costs, and of course that's appropriate - I just hope that school and district leaders also consider increasing support from alternate sources, such as community partners.