Page 28 - Flathead Beacon // 2.4.15

28 | FEBRUARY 4, 2015
LIKE I WAS SAYIN’ Kellyn Brown
Exchange Rate Anxiety
LAST WEEK GOV. STEVE BULLOCK DELIVERED his State of the State address and struck an upbeat tone, citing lower unemployment rates and job growth “among the fastest in our state’s history.” There is a level of optimism in Montana and plenty of indications that this year will be a good one.
A day before the speech, the Department of Labor and Industry issued a press release breaking down 2014 eco- nomic data. The agency reported that 12,663 jobs were added across the state last year and the jobless rate de- creased by a full percentage point during that time to 4.2 percent, well below the national average.
“Montana’s economy is continuing its momentum and promising a good year in 2015,” Labor Commissioner Pam Bucy said.
True, things are looking good, although potential “neg- ative impacts from falling oil prices” mentioned in the report loom larger here than any part of the state except those eastern Montana towns close to the Bakken. The Canadian dollar has fallen hard along with the price of oil, and economists are now guessing how much that might affect the local economy, which relies heavily on tourists from the north.
It’s easy to forget how far the local economy has im- proved over the last four years. Not long ago, in May 2010, Flathead County’s jobless rate hit a staggering and record- breaking 13.8 percent. In December 2014, our unemploy- ment rate was just 5.1 percent, an improvement of 1.8 per- centage points over the course of a year in which the coun- ty added 1,850 jobs, according to the Labor Department.
But as we enter 2015 with “momentum,” we also must keep an eye on plummeting oil prices that have put ex- tra cash in our pockets – the same low prices that have dragged down Canada’s currency, which is now sitting at about a six-year low compared to the U.S. dollar and mak- ing a trip across the border to the Flathead much more ex- pensive than it was even a few months ago.
Despite that, few foresee a dramatic drop in Canadian visitors, at least in the short term. That can partially be attributed to how expensive day-to-day goods are north of the border. While college tuition and health care are less expensive in Canada, just about everything else costs more. When the two currencies are on par, tourists often express their amazement at our bargain-basement prices.
Food, drinks, appliances, tires, even hockey pants are cheaper in the U.S. In fact, when the Canadian dollar was at its strongest, the Canadian government commissioned a report on the price gap and concluded that it needed to lower import tariffs to combat higher prices. But tariffs aren’t the only culprit.
Canadians are conditioned to pay more for goods, so their prices are marked up in what’s called “country pric- ing.” According to a CBC Marketplace report in 2013, man- ufacturers often charge more there because Canadians are simply willing to pay it. Consequently, while U.S. goods and services currently cost Canadians more, they’re still not exorbitantly high. And fuel prices for traveling here are far less expensive.
One area to keep an eye on is the housing market, which was buoyed by Canadian second homeowners during the economic downtown. Calgary’s housing market is already weakening, according to a Financial Post report. In Cana- da’s oil capital, sales are down 34 percent in January com- pared to a year ago, and listings are up 22 percent, accord- ing to the Calgary Real Estate Board.
Last week Bullock declared the “state of the state is strong!” He’s right. Flathead County, especially, has come a long way since the depths of the recession. But optimism for the new year may be tempered a bit by anxiety from our steadfast neighbors.
OPINION FLATHEADBEACON.COM
TWO FOR THOUGHT
Local Topics, Opposing Views
By Joe Carbonari
Mitt Romney is probably, definitely not running for president again. Good. When you are uncomfortable with yourself you tend to make bad decisions under pressure. Not a good trait in a president.
It seemed Jeb Bush would be the biggest beneficiary of Romney’s withdrawal, but Scott Walker, governor of Wisconsin, is gaining a bit of a following that would include significant bits of Jeb Bush’s presumed “establishment” base. Walker shows no sign of low self-es- teem. He may be a bit brash, but his seemingly straight-forward approach is engaging. Inter- estingly, he has spoken well of Marco Rubio more than once. There’s a pair that could de- velop some enthusiasm and draw some Latino votes.
If the eventual candidate put up in 2016 by the Republican Party is more a pragmatist than an ideologue, the country will benefit and so will the party. The same holds true for the Democrats.
This will require the attention of more of our best and our brightest to politics. Issues are complex; temptations abound. The win- ners and losers are real people and many in number. They are us. If we, together, wish to have good, effective, fair governance, we will have to give the system more of our best. Poli- tics is how we rule ourselves. It is our freedom. Help the cause; join the game.
By Tim Baldwin
Mitt Romney announced he will not be running for president in 2016, but there are other estab- lishment Republicans to replace him. If the 2014 elections were any indication, however, an estab- lishment Republican will not prevail over a well- known Democrat in 2016.
Most Republicans know they need a new face, or at least, a face lift. But the nature of the divisions in the Republican Party is philosophical, not aes- thetics. This is why Rand Paul not only threatens the power of the establishment but also represents a very different future for the Republican Party.
Paul connects well with a varied constituency. For example, Paul advocates criminal justice re- form; opposes NSA spying; prefers non-interven- tionism; and considers individual property rights in the Keystone Pipeline debate. He supports gun rights, unborn children’s rights, and Federalism. As acknowledged by Democrat strategists, Paul could realistically win a general presidential elec- tion because many democrats and libertarians will vote for him but would never vote for, say, Jeb Bush or Scott Walker.
Paul is correct when he said about Romney, he’s “yesterday’s news.” The challenge will be between Paul and the establishment candidate. Radio talk show hosts, such as Hannity, Limbaugh, and In- gram, show favor to any GOP candidate besides Paul. For many people, this is an omen that Paul is the right candidate to direct the GOP future. For now, say bye, bye to Romney.
The GOP Field
GUESTCOLUMN | PatrickBarkey
Questions We Should Ask About Oil Prices
After an election season that featured plenty of frowns about the state of the economy, a differ- ent kind of debate has broken out with the sudden plunge in crude oil prices. Will $2 per gallon gas prices be good for the economy? Less money being spent by all of us filling up our tanks has given the economy a boost, it is said, with the only squabble being over just how big that boost will be.
It’s a question that’s staring economic forecast- ers right in the face, particularly in an energy-pro- ducing state like Montana. Because the same low prices that put smiles on our faces at the pump are doing just the opposite for oil producers. And shar- ing that pain is state government, whose value- based severance taxes on crude oil production go down with every drop in market prices.
Communities such as Missoula and Bozeman that are home to large institutions significantly supported by state tax dollars should pay attention. Certainly counties and school districts – especially in eastern Montana – will be hit hard.
Will today’s low oil prices kill off the Bakken? There are plenty of opinions on that subject. Let’s try to answer it with some actual experience.
This is not the first price swoon the Bakken has seen. Crude oil prices collapsed in 2009, right at the peak of the financial panic. What happened then? The best data we have indicate that levels of invest- ment dropped by about 25 percent, with the cut- backs starting in earnest only after a six- to nine- month delay.
That’s a big drop, definitely. But the oil produc- tion business has changed enormously from the old days of striking gushers. This episode of low crude
oil prices is expected to last longer than the 2009 drop. But its impacts on the Bakken development that has fueled such rapid growth in eastern Mon- tana communities will be a question of degree. Not a question of existence.
A question more Montanans should ask is why oil prices have gone down in the first place. There are many pieces to the puzzle, but one of the big ones has implications for a lot of things other than oil. And that is weak worldwide demand.
The world’s appetite for oil has gotten weaker because, with a few exceptions, economies globally are slowing, in some cases dramatically. Only a de- cade ago, tens of millions of people were joining the middle class across the world, with once-backward countries like China suddenly sprouting more cars on the road than here in America. Those changes created booming demand for energy, of course, but also for commodities of all kinds – including Mon- tana-made wheat and cattle.
But the situation today is quite different. Europe is stagnant. Japan has experienced six recessions in the past nine years. Even Chinese growth has been cut in half. An enormous force for change that has benefited many Montana businesses – from farm- ers and ranchers to miners and even technology companies – has swung like a pendulum. And fall- ing oil prices are only the most immediate change that swing has produced.
This year’s Economic Outlook seminars (sched- uled for Feb. 13 at the Hilton Garden in Kalispell) promise to be more interesting than most.
Patrick Barkey is director of the Bureau of Business and Economic Research at the University of Montana