Chief economist sees bleak news on horizon
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Washington's chief economist, Arun Raha, had hoped we'd be pulling out of our economic doldrums by now, but he says tax collections are sliding backward and he has a "sinking feeling of pessimism" about a possible new recession.
In a grim economic and revenue update released Thursday, Raha said the national outlook has "weakened significantly" in the weeks since his June forecast. He said that forecast assumed improvement would begin in July and then accelerate. But in Washington state, taxes are actually lagging about $30 million below the Forecast Council's prediction and the expected recovery isn't occurring. Estimates of national growth for the rest of this year have been lowered sharply and the state's small shortfall is expected to get worse, he said.
Governor Gregoire recently directed state agencies to prepare for another round of spending cuts, perhaps in the 5 or 10 percent range. There is talk of a special legislative session this fall to trim spending. The governor has only authority to do across-the-board cuts.
Raha's take on the economy:
"Our guarded optimism about the second half prospects of the national economy has given way to a sinking feeling of pessimism. The national economic outlook has weakened significantly since our last forecast. The European economy is in no better shape as its sovereign debt problems have now spread beyond Greece to Italy and Spain.
"To add to the mess, although Congress was able to lift the federal debt ceiling in time to avoid a default on U.S. Bonds, it was not timely enough to prevent a debt rating downgrade by Standard & Poor’s (S&P). Bond, equity and commodity markets are now all pointing to a sharp economic slowdown ahead.
"Consumer confidence is in the tank. The risk of the national economy slipping back into recession has increased significantly. The state, along with the nation, is now facing additional shocks and uncertainties from the deteriorating European sovereign debt crisis, congressional wrangling over the debt ceiling, and the S&P downgrade of U.S. debt.
"The resulting decline in consumer confidence is likely to slow growth in Washington in the second half of this year and has increased the risk of another recession in the state’s economy."
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Secretary of State
Steve Hobbs
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