Still too early to celebrate fiscal recovery

Freedom New Mexico

Good news for a change, at least in California. California exports have been soaring. “The value of shipments in March totaled $13.95 billion, up 12.8 percent from $12.37 billion reported in March last year,” the Sacramento Bee reported, using figures from the U.S. Commerce Department.

“The value of the dollar is down, and the economies of our trading partners are doing well,” Esmael Adibi explained; he’s director of the A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University. He’s working on the school’s June 16 update to its 2011 economic forecast, which have been found to be highly accurate.

He said foreign countries are buying California’s best exports, especially “medical technology, food and machineries. There’s a high demand for California food in China, especially rice.”

Merchandise exports tell an interesting story, according to the numbers Adibi provided. In the first quarter of 2009 — the depths of the Great Recession — exports from California were $27.6 billion. By they fourth quarter of 2010, they had risen to $38.7 billion — a 40 percent rebound.

Just one quarter later, however, the merchandise exports declined 3 percent, to $37.5 billion, in the first quarter of 2011.

Adibi ascribed the drop largely to Japan’s earthquake-tsunami and nuclear meltdown in March. He said he expects the disruption to be only temporary.

While this is wonderful news for California, it’s not time to start downing daiquiris. The state’s unemployment rate, which averaged 12.2 percent in 2010, has dropped only to 12 percent in March. Not everyone in the Golden State is employed at such gold-plated exporters as Intel, Apple, Broadcom, Conexant, Google and Facebook. Most folks are employed in taco stands, muffler shops, banks, hospitals, schools, etc.

This is no time to get complacent. We remember how, during the late 1990s dot-com boom, some economists were saying the “New Economy” of high-tech firms was recession-proof. In editorials then, we kept warning, “The business cycle has not been repealed.”

Since then, we’ve suffered two recessions, the relatively mild dot-com bust of the early 2000s, and the Great Recession of 2007-09 — which has been followed by a “jobless recovery.” Jobs growth in America has been the slowest coming out of any recession since the Great Depression.

It is a big mistake for states to propose more spending increases.

And at the federal level, it’s clear that the wild spending has got to be controlled for any prosperity to continue. One-year budget deficits of $1.5 trillion-plus just can’t be sustained — heaped on top of $14 trillion in debt. Even Republican proposals for minor spending reductions are trifling.

The great export and other economic news should be greeted not with more spending and taxing, but with increased determination to make sure our state and national economies do not again fall into the fiscal follies of the 2000s. Prosperity is not built on government debt and spending, but on private savings and production.