It’s almost time to wring out the old, and ring in the new.
And in the process, let’s hope 2009 doesn’t reprise the themes of 2008 , 12 months of economic chaos, from record high gas prices in the spring to the economic meltdown in the fall.
So, what about the year ahead? Past performance is no indication of future returns, but I think we can safely say 2009 will continue the story lines of 2008 , our fears remain, at least for the next few months.
Not all will be negative, to be sure.
Defense spending, which underpins a large swath of our regional economic activity, will continue to do well in ’09 as the Defense Department spends billions of dollars on repairing and maintaining the Navy’s fleet, aircraft and related equipment, not to mention payroll.
Some of those billions will be spent on new technologies, which will benefit new startups and old companies alike. Defense contracting will have a robust year, if not a record year.
Biotech, another anchor of the economy, will remain strong, too. Big Pharma is always seeking the next big cure, and who knows, maybe that cure is awaiting discovery right here in America’s cul-de-sac.
There’ll be some not-so-good news, too.
Retail, for one, will remain in the doldrums. Expect to see more store (and retail chain) closures as consumers keep their pocketbooks closed.
Real estate, commercial and residential, will remain in the tank, though there are some stirrings of a recovery on the horizon. Bank-owned properties are getting multiple offers from potential buyers, a very positive sign.
Still, the domino effect of the mortgage meltdown will continue.
Government is next up to face a toppling. The state runs out of cash in February, unless the Legislature acts quickly.
The difference between income and outgo is $40 billion, and rising $1 billion a month.
Handling Expenses
Remember, Sacramento has increased spending 40 percent during the five years that Gov. Arnold Schwarzenegger has been in office. There is no reason to believe it won’t grow another 40 percent during the next five years.
Here in San Diego, the county and its 18 cities, as well as our educational system at all levels, will scramble to bring expenses in line with lower tax revenues. Expect to see lots of cutbacks, which were already starting to take place in late 2008.
The city of San Diego managed to balance its budget for 2009, erasing what would have been a $43 million shortfall. But what happens next year? And the year after that?
There is plenty of fat that City Hall can slice without touching the untouchables , police, fire and other essential public services , if Mayor Jerry Sanders so chooses to make those reductions.
Chula Vista is leading the way in how it can be done, and has started the painful process of trimming payroll.
The big question for ’09 is what to do about San Diego’s long-troubled employee pension system, with its unfunded liability of $2.7 billion.
Maybe ousted City Attorney Mike Aguirre was right , the city should be thinking of bankruptcy.
Some final (big) thoughts the new year could well be the year of the rapid turnaround. After all, the stage has been set for a recovery of epic proportions.
It’s not a question of if, but when. And when it happens, we’ll all be amazed how fast it occurs.
Washington flooded the system with trillions of dollars in cheap money in late 2008. What happened when this was done in the past?
Loosened Money
When the Fed eased borrowing in the ’90s recession, we had the dot-com boom. When the Fed loosened interest rates in 2001 after the post-9/11 Wall Street collapse, we had a housing boom.
Now that the Fed has cranked up the printing presses again (as well as lowering interest rates), another bubble is on tap.
We’ll soon be singing, “Happy Days Are Here Again.”
Still, I find some of it troubling.
We’ve become a consumer society, which requires us to spend and spend and spend.
But we don’t really make much anymore. We’ve shuttered our industrial plants here at home, and shipped manufacturing to China.
We’ve become “knowledge workers,” pushers of bits and bytes on a computer screen.
I say we missed an opportunity in the chaos of 2008.
We had a chance to face the pain, and restore some measure of sanity to our economy, as well as our political and social systems.
Instead, we took the coward’s way out like addicts, desperate for our next fix.
Where was that 12-step program when we needed it?
We needed sobriety, and instead, decided to binge.
Tom York is editor of the Business Journal.
