Our economy hits bottom, stays there
Fishkind on Obama, BP and Jackson Lab
Less war and more domestic support will not pay quick dividends as the national and local economies grind along, says noted Florida economist Hank Fishkind.
He is this week’s guest on "One on One with Jeff Lytle.’’
He also sizes up employment, Jackson Laboratory and his role as a consultant to BP.
This is an edited transcript of the first half; video highlights as well as partial video/texts of past interviews are available at naplesnews.com/oneonone.
The entire 30-minute program airs Sunday at noon on Comcast channel 9.
Lytle is editorial page/Perspective editor of the Daily News.
Lytle:We heard the president last night (Tuesday) talk about phasing out our military operations to focus more resources and time and effort on the national economy.
Does an improvement in the economy necessarily follow that? Does he have it right?
Fishkind: I think it’s a basic right idea. Sure, we need to invest more in our country. We need to give less resources over to foreign adventures. No doubt.
Lytle: But how soon can we look for an impact from that?
Fishkind: Oh, that’s pretty far off — a couple of years maybe, at best.
What’s going to happen over the next 90 to 120 days is baked in the cake, Jeff. Nobody is going to change that.
Unfortunately, the recovery is stalled. Odds are that we don’t have a double-dip recession, but it’s not impossible. Fiscal policy is no more stimulus; no more political appetite for it. It’s too late to make it work effectively for the next 90 days anyway. So it’s left to monetary policy to try to provide a safety net should the economy begin to turn sour again ... or more sour than it’s turned.
Lytle:Looking back on the stimulus, some would say it was a total, total bust. Others would say, yeah, but we’d be in worse shape if we hadn’t done that.
Fishkind: It’s the latter. Anybody who says that it was total loss just isn’t reading the data and has a political agenda purely.
The economics are that we would have been in much worse shape. This would have been the Great Depression, not the Great Recession had we not taken the steps that we’ve taken.
Lytle: Even though we got ourselves into deeper debt.
Fishkind: Correct. Deeper debt in the short run is OK. If deeper debt in the short run was a problem, interest rates would be much higher. We have some of the historically lowest interest rates.
It’s not that the deficit is not a problem, Jeff. It is. It’s just not a problem right now. Right now our problem is, we’re mired in a recession, and we need additional aggregate demand to get us out of that recession.
Lytle:You’re here in the Naples area today (Wednesday) meeting with clients. Can you give us a preview of what you will tell your clients about the economy?
Fishkind: We’re going to tell them over the next 12 months, interest rates are going to stay very low and aggregate demand is going to be about where we see it today, which is very modest, 1 percent growth.
Lytle: Demand for housing?
Fishkind: Demand for everything in the U.S. economy. In terms of the local area, we’re going to tell them that the worst of it is behind us, but there’s no recovery in sight for another 18 months. So we are going to kind of bump along the bottom here.
The Naples area finally has stopped shedding jobs. The last 12 months we actually had 100 jobs on the year-over-year basis. Not enough to be statistically significant, but it depicts and is emblematic of the fact that the worst of the contraction is behind us.
That doesn’t mean recovery is in front of us, unfortunately. And that’s where the conundrum is. We’ve had three and a half, almost four years of contractions; now we’re going to have another two years of prime bam bam along the bottom.
Lytle: Is it possible on a national or a local scene that we will see an economic recovery that does not include new jobs? In other words, could we have a jobless recovery?
Fishkind: Well, that’s what we’re having right now. The answer is yes. That’s what we’re having right now. But when we have jobless recoveries, they typically come after very deep recessions, and what that means is that the overall aggregate amount of growth is very slow — 1 to 2 percent gross domestic product (GDP) basis; 1 to 2 percent gross Naples basis. So unless and until we get more momentum, we won’t have neither faster growth, nor greater job growth.
Lytle:You mentioned GDP, and I want to get this before we go any further. I need to ask you about Jackson Laboratory. One of our readers ... I don’t have his letter in front of me, so I can’t be very detailed, but here’s his pitch. He wanted me to ask you is it possible or true that the local investment, which is $130 million over some time, in the proposed Jackson Laboratory project ... will the size of that investment be a net drag on our economy. In other words, will it reduce GDP in our local area?
Fishkind: I think that’s exactly the right question. My view is, it will increase GDP by a substantial multiple of that investment.
Lytle: Over time.
Fishkind: Over time. And I base that on what’s happened in Port St. Lucie, where they invested in Torrey Pines and the Vaccine Institute, and already there’s been a substantial return on that investment.
There is a substantial job growth and the creation of a biotech hub that otherwise would not have occurred.
The same thing is happening in and around Orlando with the Burnham Institute for the Veteran Affairs (VA) Hospital; the $300 million that Orlando invested is not being returned today, but I believe there will be a substantial rate of return in excess of 20 to 30 percent over time.
Now that doesn’t happen every time. Scripps Research Institute has not generated a substantial return on the state’s investment.
Lytle:That’s in West Palm Beach.
Fishkind: So there’s no guarantees, but two out of three suggests there would be substantial return.
Lytle:This letter writer — and I just found his document here — his name is Duane Billington. Our readers know him. He is a long-time and intense critic of this project, and that’s OK.
I think if he were here, he would say, OK, but this is still huge risk. How could you recommend that a community invest this heavily on such a risky proposition?
Fishkind: Well, I don’t think it’s a huge risk. It is a risk.
I think this community really is at a very important crossroads. However, it can take some risk to diversify its economy, to change the structure ... there is no biomedical hub here ... really have the opportunity to change the structure and create a biomedical hub, or decide as a community that we don’t want to take that risk and we would prefer to be the best tourist and retirement place we can be.
But that’s really kind of the crossroads. Communities that aren’t willing to take the risks tend to go down a different pathway.
And those choices are all good; they’re all for the community to make.
Lytle:We’re in the peak of the election season now. We’re headed down the home stretch. And all the candidates, even for local offices — and state and federal offices — are talking about the economy; they’re talking about "creating jobs."
Do the elections really matter in how all that plays out? Or is all this just wishful thinking and rhetoric?
Fishkind: Well, it can really matter, Jeff. But it requires some bold decision-making, and we’re real light on bold decision-making. We’re real good on lip service about jobs.
Lytle: But how can we know whether candidate A, he or she really has it right; or candidate B, not so much?
Fishkind: I think that there are some obvious things at the state and local levels that can be done. Not the national level. I mean they can’t run money fiscal policy.
I will say for Rick Scott running for governor, he has a bold plan: seven years, 700,000 jobs; eliminate the corporate income tax. I’m not sure all the math adds up for me. But that aside, it’s visionary; it’s bold; it’s the kind of thinking that we would need to be able to create real jobs at the state level with the limited tools that the state has locally.
One of the biggest obstacles to economic growth in this state, and in this community, is the extraordinarily high level of impact fees. The incredibly difficult process of getting anything approved. Those are under the control of the county and city governments.
So, yes, if people really want more jobs, there’s way to accomplish that. But in economics, there are no free lunches. You’ve got to make some bold decisions and you’ve got to do some things that maybe everybody isn’t going to like.
Lytle: About your comments about Scott’s jobs plan: on the other hand, Alex Sink who is running for governor as a Democrat is no slouch.
Lytle: I mean, she has run a large chain of very successful banks, and she has a clue what it’s all about too.
Fishkind: Yes, she does, and her program is to invest more in tourism and in trade; and in the short run that would be very stimulative to the economy, and she’s correct about that.
And I think that would be great and pretty bold. Not as bold as Scott, but pretty bold.
Again, though, my same problem with her is where is the money to come from? There’s nothing in "the plan" that explains where the money would come from to expand tourism promotion or to provide export credit, both of which would be great things.
But I do think those are good examples of bold thinking, but that also perhaps emblematic of, you know, it’s got to add up too.
Lytle: What impact will the oil situation have on Florida in the long run, and in Southwest Florida in the short run?
Fishkind: Well, I should make sure that we tell our listeners that I am a consultant to BP. We’ve been retained by them. I have been an advocate of oil drilling in our coastal waters.
That said, I don’t think there’s going to be much of any effect. It’s not like a nuclear bomb was dropped on the beaches and they’re going to unusable for a thousand years.
It was an oil spill. It was terrible. It was the worst ecological disaster that we’ve have in this country in a long, long time.
That said, the damages to the reputation to the state I think are going to be very short-lived. And I don’t think there’s going to be any permanent impact at all.
Lytle:: A nuclear bomb was dropped on wildlife.
Fishkind: A nuclear bomb was said to be dropped on wildlife. We saw pictures of some wildlife that was dreadfully affected. It is unclear where all the oil has gone.
Lytle: Ah! So maybe it’s really too soon to say that the impact on wildlife is not as bad as we feared, because there could still be a lot of damage out there. And also the plant life.
Fishkind: Or worse, or worse. Nobody knows about that yet.
What we do know is that oil that spills up on a sandy beach, as ugly as it is, is relatively easy to clean up. Oil that gets in marshes creates long-term damage.
Lytle: What will you be doing for BP?
Fishkind: We’ll be evaluating the claims. We evaluate all of the government claims. The private claims flow through the Feinberg Panel, the Gulf Coast Compensation Fund. And so there’ll be some restitutions or decisions about that.
Then parties that don’t like those decisions can go to court. We’ll also act as the expert witnesses for some of the court cases that are pending in New Orleans.
Lytle: What about property owners who will say, hey look, I own a home near the water, prospective buyers heard there’s oil in Florida; Naples is part of Florida; my property value took an indirect negative hit?
Fishkind: Well, I think it’s pretty much of a stretch. People will argue that. People will argue every single think that happened bad in their business was due to BP. Some of it is true. Some of it is a stretch.
Lytle: So you’re ready to argue that it’s a stretch.
Fishkind: I think it’s a pretty long stretch.
Lytle:A little example, where we had the local Conservancy rehabilitate some animals who were injured by oil, should they be reimbursed for their efforts? Nonprofit organizations?
Fishkind: Absolutely, they have a valid claim for costs.
Lytle: But restaurants that took a hit, like on Fort Myers Beach, for example, economy what it is, but still there had to be a reason why business was done so sharply this year as opposed to last year.
Do they have a case?
Fishkind: Perhaps, even though the oil wasn’t proximate on the beaches. It’s going to be very fact driven. People who have oil on their beaches have a better case obviously than people who don’t.
These are fascinating questions.