Thursday, January 24, 2008


Economics 101

With the current uncertainties surrounding the economy, Eastern's own economics guru Doug Orr participated in an online chat with the Spokesman-Review's Jim Camden to answer some of the big questions on peoples minds.
Here are some highlights:

Q: How much of our economy relies on consumer spending?

A: Right now, 70 to 75 percent of the economy depends on consumer spending. For most of the past 30 years, the wages and incomes of the bottom 80 percent of the population have been going down or stagnating, which means more and more households have been relying on going into debt to try to maintain their standard of living.

That means many households have less wiggle room to try to deal with any economic downturn. If a household has some savings, it can use that in the short term to maintain spending during a recession. But if a household has more debt than it has savings, any negative impact of a recession on that household is hard to deal with because their only response is to go more into debt. Because banks are going to be reluctant to lend on home equity and mortgages, households are going to rely on credit cards, which have interest rates between 18 and 24 percent, which means the households simultaneously watch their cost of living skyrocket and their ability to consume go down. That drop in consumer spending, because it's 70 percent of the economy, will simply make the recession much worse.

Q: Mortgage rates have been falling recently, and many people are refinancing. Do you think they'll continue to go down, and if so, will that stimulate the local real estate market?

A: The housing market nationally is feeling a lot of pressure but Spokane isn't feeling it as badly as the rest of the country. Grant Forsyth, another economist at EWU, recently said the market here isn't in as bad of shape as the rest of the country would make you think. Still, declining interest rates generally will help the housing market so that should help the local market, at least a little. The bigger problem is, if the banking industry is made more cautious by the turmoil in the markets and the recession, it will be less willing to make loans at whatever rate, except to the most highly qualified borrowers.

Q: Will I get this $800 rebate being discussed by President Bush and Congress, or will it be deducted from any refund I was going to get?

A: We don't know for sure because there are several proposals being put on the table. We do know President Bush has backed off of his threat to veto any package that doesn't make all his earlier tax cuts permanent. Part of the proposal from the Democrats in Congress is a tax rebate similar to the one done in 2001, after Sept. 11. In that case, the $800 was an actual reduction in taxes owed, not just giving you your tax refund early. If it's similar, you would get $800 in addition to any refund. The government wants to get money into people's pockets right away.

Q: Does it matter to the economy if I use my rebate to remodel my kitchen? Buy a shotgun? Pay for dental work I've been putting off?

A: To the extent that people use the rebate to make purchases, that will tend to stimulate the economy. For example, using it to remodel a kitchen would have a strong stimulative impact because all of the labor and most of the inputs are created inside the U.S.

If you buy a shotgun, the impact would be where the shotgun is made, so if it's made in the U.S., it will help stimulate the economy, but if it's made somewhere off-shore, for example China, it would have less impact. But it will still have some impact because the shop that sells it here in Spokane will make some money on the sale and that money will be spent locally. If he buys it online, as long as it's in the U.S. it will still stimulate the national economy, but have less impact on the Spokane economy. If you use it for dental work that would help stimulate the economy as well.

Q: If the stock market is going down, should I put more money in my 401(k), or pull it out?

A: When looking at retirement savings such as 401(k), it's always important to take a longer view. The one thing that people don't want to do is to take money out of their 401(k)s right after a big drop in value, because they are locking in their losses. For someone who is not going to be retiring any time in the next 10 years, the value of the 401(k) plan here in January 2008 is fairly irrelevant. Over the next 10 years the stock market and the bond market are likely to recover, and all of the paper losses occurring now are likely to disappear. If you think that we've gotten to the bottom, putting more money in is a good idea. The problem is, no one – not Alan Greenspan, not Ben Bernanke, no one – can tell you when we're at the bottom.

Wednesday, January 16, 2008


From EWU to the PGA

Alum elected to PGA's Board of Directors. See story.



One Man Show

Here's something from the Seattle Times on humor writer Pat McManus and his latest show. McManus is a former faculty member in Eastern's renowned Creative Writing program.

Seattle Times

Friday, January 11, 2008



EWU expert weighs in on this topic. From the Spokesman Review:

Friday, January 11, 2008

Local recession unlikely
National downturn won't hurt us as much, experts say

Bert Caldwell
Staff writer

Two Spokane economists have joined the camp predicting a recession this year in the U.S. economy.

But Eastern Washington University's Grant Forsyth and Avista Corp.'s Randy Barcus also said they expect the Inland Northwest to ride out the storm in comparatively good shape. International trade and high times on the farm should moderate the effects of whatever recession does develop, they said this week.

Moderate, but not insulate.

"We're not separate from the national economy," Forsyth said. "The national economy, as it starts to slow, will push us down as well."

The United States wobbled in and out of a recession – periods of declining economic activity – during parts of 2000 and 2001. Credit market upheavals and a downturn in many housing markets threaten to end a long period of expansion since then.

The national economy's chief steward, Federal Reserve Bank Chairman Ben Bernanke, said Thursday he will do whatever is necessary to prevent a recession. But prominent investment bank Goldman Sachs, for one, has advised clients a downturn lies ahead.

Forsyth said he has been edging closer to a similar conclusion for months. As a member of the Washington State Economic and Revenue Forecast Council, he fills out a brief survey prior to each quarterly meeting that sounds out member expectations.

In November, he gave odds of 40 percent a recession loomed. "I was one of the more pessimistic people," he said.

With a Feb. 2 meeting ahead, Forsyth said he now gives a recession a 55 percent chance.

Credit market problems run deeper than was understood a few months ago, and weakening employment statistics have heightened apprehensions, he said.

Barcus gives 2-to-1 odds of a recession. Lifting a phrase from Bernanke predecessor Alan Greenspan, Barcus said he has become "less sanguine" as he reads national economic indicators. Some of his observations have reinforced his concerns.

As Avista's economist, he helps the utility plan for expected growth in its service territories. In mid-2006, he projected a 10 percent slowdown in new customer connections in Medford, Ore., where Avista delivers natural gas. Instead, the number tumbled 50 percent.

"That was the biggest projection error I've ever made," Barcus said, adding that activity in Spokane and Kootenai counties also trailed his estimates.

Nevertheless, Barcus said the Inland Northwest should continue to grow, in part because long-suffering natural resource sectors like mining and agriculture have rebounded.

Rural counties are again pumping income into Spokane's economy, as are Canadians crossing the border to spend the strongest Canadian dollar in 20 years.

"It's been a long time since the outlying areas supplied anything but workers," Barcus said.

He said international trade, long a mainstay for the state and region, should become even more important as the weaker dollar gives U.S. commodities, manufacturers and service providers an edge against foreign competitors.

Forsyth said stalwarts Microsoft Corp. and Boeing Co. provide underpinnings. About 40 Spokane-area companies are aerospace suppliers.

Jeff Zahir, labor market economist for the Washington Department of Employment Security, shares the optimism of Barcus and Forsyth regarding local economic conditions, adding that he is unsure recession accurately characterizes the nation's economic prospects.

"Use the word 'recession' with a grain of salt," Zahir said. "You can't say it's now. You can only say it was."

Zahir said Spokane County added 5,100 jobs between November 2006 and November 2007, a growth rate of 2.3 percent. Job growth in 2008 will slow to 1.5 percent, he said, but that's "nothing to sneeze at."

"It's good news. It's simply not as good as what we've seen."


Eastern Connection

With the Seahawks and Packers squaring off in the NFL playoffs this weekend, here's an article about Leon Hatch (EWU alum and football player) who took in a homeless senior while coaching at Federal Way High School. That kid is now a Packer in the NFL.

Tacoma News Tribune

Friday, January 04, 2008


World's Businessman of the Year

Sounds like a hefty title, but it's one that belongs to an Eastern alum. Read on.

India PR Wire

Wednesday, January 02, 2008


EWU Alum Excells

From the Longview Daily News

This page is powered by Blogger. Isn't yours?