Bob McTeer

By CRAIG KAPITAN
Bryan/College Station Eagle

The U.S. economy will be similar to a sea turtle suffering from a steroids hangover in the coming year.

That was the assessment of Texas A&M University economist Mark Dotzour, one of several financial forecasters who spoke Wednesday at the 2005 Economic Outlook Conference.

The event, held by the Bryan-College Station Chamber of Commerce, also included speeches by Texas Workforce Commission official Rich Froeschle and new Texas A&M University System Chancellor Robert McTeer.

“I have never seen the federal government intervening in the economy more than they did in 2003 and 2004,” Dotzour, who heads the university’s Real Estate Center, explained of the steroids analogy.

Texas A&M University System Chancellor Robert McTeer was the keynote speaker of the 2005 Economic Outlook Conference.

If Americans wanted their economy in 2002 to behave like a fast-moving greyhound, what they got instead was the slow sea turtle. So in 2003, the government put the economy on a “steroid booster program” of sorts, cutting interest rates to the lowest in 50 years, expanding the supply of money and awarding a $400 tax credit for each child.

While the moves had some great short-term results, once the tax credits were spent and other moves were expended the economy was back to its slow pace — leaving only a $350 billion deficit as evidence of the effort, Dotzour told the group.

“Even Uncle Sam can’t afford steroids forever,” he explained.

But sea turtles have one thing going for them — they keep a slow but steady pace — Dotzour and other economists agreed Wednesday.

While the economy isn’t projected to burst from its seams in the coming year as it did in the late 1990s, all in attendance Wednesday agreed that some growth is likely to continue.

Corporate profits are up, and both small businesses and corporate America are expecting to hire more people, Dotzour told the group of about 300 entrepreneurs and local officials. Consumer spending also is on the rise, he said.

“Americans go to the mall and spend all their money, year in and year out,” he said, adding that the average American credit card is smoking these days. “You ought to be singing the National Anthem when you walk into the mall.”

Such spending habits cause a Catch-22 for the economy, explained McTeer later in the afternoon. Before taking the helm of the A&M System two month ago, McTeer served as president and CEO of the Federal Reserve Bank of Dallas.

Consumer spending is needed to push the economy forward, but spending all one’s money without enough regard for retirement is not good for the individual, he explained.

“But if we all get religion and all do the right thing, that means less consumption spending and the economy will tank,” he explained.

While there’s no harm now from the deficit spending, “we don’t know when the reckoning will come,” he said.

Another Catch-22, he said, has to do with the nation’s increased productivity. While productivity has helped the economy continue to grow, it also has prevented employment from rebounding with the economy — leading to a not-very-satisfying recovery.

The fact that American businesses are being forced to figure out how to create more with less employees is a “mixed blessing,” agreed Froeschle, who serves as director of labor market and career information at the Texas Workforce Commission in Austin.

The increased efficiencies have allowed American businesses to compete with the emerging global economy, he explained.

The number of jobs that have disappeared overseas actually is dwarfed by the number of jobs that have been erased due to increased productivity, he said.

“We are seeing growth in the United States,” Froeschle said. “Most sectors are very vibrant — they are just not necessarily looking at the same job growth as they’ve had in the past.”

But the Bryan-College Station area long has been an anomaly when it comes to unemployment and job growth, economists agreed Wednesday.

The area has had the second highest job growth rate in Texas over the past 12 months, as well as the lowest unemployment rate.

While high-tech areas such as Austin and North Dallas are now feeling the worst of the bust, the Bryan-College Station area has remained pretty steady, McTeer pointed out.

“Bryan-College Station never quite boomed, therefore it never had a bust,” he said. “That steady-as-you-go [mentality] usually wins the race.”

Reprinted with permission of The Bryan/College Station Eagle