Facing the challenge: Local voices join economic discussion

President Bush declared "our economy is undergoing a period of uncertainty" Monday night during his final State of the Union address. More and more economists are declaring the country to be on the verge of a recession, if not already in one, thanks to the collapse of the housing industry.

According to the National Bureau of Economic Research, a private think tank that's determined the start and end dates of U.S. downturns since 1929, recession means a "significant decline in economic activity spread across the economy, lasting more than a few months."

Another definition commonly used is two straight quarters of declining gross domestic product.

There's also the description made popular by Harry Truman in 1958. Heard reiterated around the area with ironic chuckles quite a bit recently, the 33rd president's version is: "It's a recession when your neighbor loses his job; it's a depression when you lose yours."

Nine economy-wide mood swings occurred in the U.S. between 1945 and 1982.

If it hasn't already edged across the recession line, the national economy is currently in danger of sliding into its first recession since 2001. Before that, the country hadn't experienced one since 1991.

Many statistics indicate this trend is quickly becoming reality.

The Labor Department reports that consumer prices rose by 4.1 percent for all of 2007, up sharply from a 2.5 percent increase in 2006. Consumers have felt this over the past few months while filling up their gas tanks and/or shopping for groceries, as prices for both energy and food shot up by the largest amount since 1990. Falling prices for clothing and new cars, however, offset some of those gains.

Holiday sales numbers also show that frugal shoppers cut back on their spending at the nation's retailers by 0.4 percent in December -- the most since June, when sales declined by 0.8 percent. This report -- coupled with a nationally deteriorating job market (the nation's unemployment rate jumped to a two-year high from 4.7 percent in November to 5 percent in December), expensive energy bills and rising oil prices, tight credit, weakened home values and record high foreclosures (where all the trouble started), and a flat industrial output in December - have caused turmoil in U.S. and international financial markets, further fanning fears of a recession.

Although the U.S. economy grew from the middle of November through December, it did so at a slower pace than the previous survey taken during the late fall. Credit problems and housing market problems also intensified in December, throwing Wall Street into a fresh bout of turbulence.

Three interest rate cuts since September, including the Federal Reserve's slashing a key interest rate by three-fourths of a percentage point on Jan. 22 to reinvigorate the economy -- which some economists cite as the most dramatic signal the Reserve can send of its concern about a recession -- have led to fevered negotiations among federal lawmakers over a $140 - $150 billion economic stimulus package.

"Last week, my Administration reached agreement with Speaker (Nancy) Pelosi and Republican Leader (John) Boehner on a robust growth package that includes tax relief for individuals and families and incentives for business investment," Bush explained during Monday's State of the Union message. "The temptation will be to load up the bill. That would delay it or derail it, and neither option is acceptable.

"This is a good agreement that will keep our economy growing and our people working. And this Congress must pass it as soon as possible."

The White House, meantime, is planning to release its 2009 budget on Feb. 4. Bush has promised a plan that would erase the country's deficit by 2012 if his policies are followed. The 2006 deficit was $248 billion, which closed from a high of $413 billion calculated in 2004.

Local perspectives more positive about national economic tale unfolding

A majority of individuals representing a wide variety of sectors interviewed over the past two weeks, meanwhile, contend the current economic downturn, however long it may last, will not be as bad for northwest Iowa residents as the farm crisis of the 1980s was. In fact, they all assert this specific area, and its residents, should be "more insulated from problems this time around."

Even though sales of new homes may have plunged nationally by a record amount in 2007 while prices posted the weakest showing in 16 years, this is not the case in Clay County, Iowa. Spencer financiers Steve Grell and Gary Tolzmann will explain in tomorrow's article why this area is not expected to witness the magnitude of problems associated with subprime lending that other parts of the country have had to date. In addition, the two bankers will also detail a few of the lessons learned by lenders during the farm crisis.

While the 1980s rank as probably the most painful period for the country's agricultural sector since the Great Depression, with about one-third of farmers holding two-thirds of the debt, the situation has changed quite a bit since. Crop prices, for example, have skyrocketed over the last two years. But, so have input costs, land costs and cash rent prices.

Even though farmland prices have now spiked over what they were during the farm crisis years, before bottoming out in 1986, many of today's operators are not carrying as heavy a loan portfolio as farmers did in the late 1970s and early 1980s. Interest rates are also lower now, especially in contrast to the 20 percent rates seen at that time.

While Clay County farmer Jack Schoelerman offers insights into his family's farming struggles and rebounds over the last three decades, farm manager and crop consultant Dave Hessman will extend his analysis of what has occurred, as well as what he foresees in agriculture. A handful of ag economists, researchers and international trade analysts will also offer their perspectives on the recent past, as well as what they envision for the near future Friday.

As economic development specialists Kathy Evert, Bob Rose and Clark Marshall explain how learning to diversify during the farm crisis continues to benefit the area today in the form of steadily-expanding businesses, Spencer businessman Bob Graham will offer a glimpse into what companies will need to do in order to continue to survive in the current competitive, fast-paced business world.

Joan Blundall, the former director of consultation at Seasons Center for Community Mental Health in Spencer, was recognized nationally during the 1980s and early 1990s as a person who created programs for the area's farm community that were responsive to the mental health needs of individuals and families under great duress during that time. As she discusses the fear, depression, distrust and family discord uncovered during the farm crisis, Jo Ann De Young, the Northwest Iowa Alcoholism and Drug Treatment Unit CEO, and Mike Getz, its gambling project manager, will alert people to gambling and credit card debt on Tuesday. Both are among the things used -- and often abused -- by people in an attempt to deaden the pain they may be feeling.