September 1, 2011

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Worth the Risk?

Utah’s Economic Exceptionalism Under Threat

Natalie Gochnour

September 1, 2011

I’m mad. For 14 consecutive months I’ve watched as the Utah economy has climbed out of the worst recession in my lifetime. If you are less than 78 years old, it was the worst recession in your lifetime too. And now we have the U.S. Congress to thank for taking an already tepid recovery and making things worse. I’m speaking, of course, about the brinkmanship used in raising the U.S. debt ceiling. It was wrong to push it so far and Utah’s economy will be hurt by it. Mark my words.

The U.S. Congress has raised the debt ceiling 78 times since 1960. The United States is one of just two countries in the world with a debt ceiling. (The other is Denmark and theirs is unrealistically high.) Most countries don’t have debt ceilings because they are viewed as an unneeded formality. Control over taxing and spending is already in the hands of government. A debt ceiling just adds another layer of accounting bureaucracy. Ironically, our country instituted the debt ceiling during World War I to make borrowing easier. Congress didn’t want to authorize every new issue of debt to finance the war.

Now flash forward to 2011. The debt ceiling, which should be a formality since the tax and spending decisions have already been made, has been used to create a self-imposed crisis. That’s right. The U.S. Congress has served as an agent in rattling our economic confidence and challenging our financial credibility in the world. Congress has made it convenient for the ill-informed and mathematically challenged Standard and Poor’s to lower our long-term credit rating. Even the dollar’s role as the world’s reserve currency is being challenged.

The United States has a spending problem that must be confronted. Of this there is no doubt. I admire those in Congress who are working to correct the problem, knowing that with two wars, an aging population and a weak economy that the correction will take time.

What I don’t admire is those in Congress who contribute to the toxic political environment inside the beltway. It impairs our recovery and causes genuine economic harm to American families. Instead of economic leadership during a time of high unemployment and great uncertainty, we have political extremism that makes a tough economy much worse.

Compromise is seen as surrender, even though cooperation is what the economy needs. Division is viewed as an esteemed virtue, even when the economy needs unified leadership. The successful tactics of the Tea Party are replicated by those from the other political extreme. No one will raise revenue and no one will cut entitlements. Polarization has led to paralysis. And the American people are left wanting.

Which brings me to Utah. Through the depths of the financial crisis, I have ad-mired Utah’s economic grace and grit. We took our licks, but rebounded earlier than others and in recent months have found our stride. It’s a form of Utah exceptionalism that is seen in our job growth rate, which is more than twice the national average. We see evidence of our economic competencies all around us. One recent study, for instance, showed that if Utah were a country it would rank fifth in the world for innovation-based competitiveness (See “The Atlantic Century II,” The Information Technology & Innovation Foundation). In Utah, we’ve instituted smart economic policies and solid business leadership that serves us well.

Unfortunately, Utah’s sound economic leadership can only take us so far. We are not on an economic island, but rather deeply integrated with the larger U.S. economy and world. Federal policies have a profound impact on our ability to prosper. We may have higher job growth and lower unemployment, but our economic metrics are tied to the nation. When the country troughs, we trough. I’m not aware of a single instance when that isn’t true. There is no scenario where we will prosper alone.

So long as we have a U.S. Congress that treats the U.S. economy as a political game, Utah’s economy will suffer. It’s plain wrong, and we should all find more ways to tell Utah’s congressional delegation that it’s hurting us.

Natalie Gochnour is the chief economist at the Salt Lake Chamber. She served as a state economist for 18 years, working for three Utah governors, and was a political appointee in the Bush Administration. You can follow her on Twitter at @Gochnour.

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