Drought Conditions
Through the years, Texas has received numerous special recognitions of which it could justifiably be proud. Now, however, a unique distinction has been bestowed on the state which it undoubtedly would rather not have received.
A prolonged heat wave and record low rainfall have combined to make Texas the most drought-stricken state in the nation. Although many other states are also suffering similar circumstances, none has counties labeled worse than “severe.” Some 77 of Texas’ 254 counties have been classified by the US Department of Agriculture as being in the most severe drought categories—“extreme” and “exceptional.” The counties in the worst stages of the drought account for approximately 40% of the state’s cow herd and about 6% of the US beef animals.
As a result of the bone-drying spell, approximately 230 public water systems across the state (including those in and around Austin, Dallas, Houston, and San Antonio) are under mandatory water restrictions, and an additional 60 have called for voluntary cutbacks. Many other locales are in the process of considering such moves. In at least one major metro area, off-duty police officers are on the lookout for people illegally watering their lawns and gardens and, in some areas, residents are being urged to report water abusers.
Texas has faced droughts throughout its history, all the way back to the days of the Spanish exploration. In 1756, the San Gabriel River dried up and forced the abandonment of a settlement of missionaries and Indians. Toward the end of the 19th century, one of the worst droughts in the state forced farmers in Texas to relocate to the East. In 1980, large portions of the state suffered significantly because of the blistering heat which started a severe drought that lasted for several years.
While the current drought is not the longest Texas has endured (that record occurred over a seven-year timeframe in the 1950s, though some local areas have experienced longer periods), weather officials suggest that it is historically notable for its intensity. In fact, the current drought is probably the worst Texas has experienced in some 50 years.
Extremely low levels in lakes, rivers, and reservoirs have hampered normal boating, swimming, and fishing activities and greatly reduced tourism travel. Furthermore, substantial damage has been done to the agricultural industry, which remains a vital part of the Texas economy (and second only to California among all US states in terms of size).
Texas agriculture officials estimate that since November, crop and livestock losses have reached nearly $3.6 billion, primarily from reduced crop yields and the added cost of supplemental feed to ranchers with blistered pastures. Moreover, many cattlemen have been forced to sell their calves sooner than usual and for much less money because of the animals’ lighter weights. If the lack of rainfall continues at its present pace, by the end of the year, some officials estimate that losses to the Texas economy could exceed $4.1 billion.
The results of these drastic conditions will probably not be felt immediately because of on-hand supplies, but higher prices in grocery stories are certainly a distinct possibility over the next couple of years. Likewise, although Texas is the nation’s leading producer of cotton and the drought will cause this crop to be less than in previous years, US and world supplies are sufficient to limit any immediate price increases in cotton products.
Attempts have been made to improve moisture conservation and utilization. In addition, on occasion, both public and private organizations have sought ways to make it rain artificially. In other parts of the world, exotic appeals to the gods of rain have been invoked. To date, the results have not been encouraging, irrespective of the strategy employed.
Over recent days, there have been smatterings of rain in various parts of the state, but nothing close to the amount required to make any substantial difference in the drought conditions. It seems, however, that the cavalry may be on its way. The National Weather Service has indicated that an El Niño system is developing in the eastern Pacific Ocean and the rainfall in Texas is expected to significantly increase, though not until September. While losses will continue to mount until that time, hopefully, this will happen early enough to give at least some farmers and ranchers relief and provide a needed boost to our economy.
posted @ 08:05 AM CST [link]
Friday, July 24, 2009
One Giant Leap
Earlier this week marked the 40th anniversary of mankind’s first steps on the moon. In response to President Kennedy’s 1961 challenge for the US to put a man on the moon before the end of the decade, America not only put footprints on the lunar dust on July 20, 1969, but again a few months later in November. While a notable achievement by any standard, reaching the moon also changed the economy in enduring ways.
The Apollo missions, which ran from 1967 to 1972 and cost approximately $25 billion in 1969 dollars, became the inspiration and motivation for massive research endeavors. In addition, due to the intense interest in the first moon walk, the study of science as a career became “cool,” and substantial federal funding support became something to bank on.
The groundswell in interest and funding for science eventually led to the forging of new footpaths in technologies varying from aeronautics to robotics. It also generated giant leaps in new computer software and hardware to finesse intricate processes required not only for space travel, but also for industries ranging from nanotechnology to transportation to health care.
The spinoffs from the technologies used in the space program were foundational to discoveries in civil, electrical, and engineering sciences and became the core for the ongoing advancements in technologies that impact almost all aspects of life. In fact, according to some authorities, approximately $7 to $8 in goods and services are still being produced today for every $1 the government invests in NASA.
There is no doubt the late 1960s and early ’70s were exciting times as they enabled the US to leapfrog the Soviet Union’s space achievements and firmly take the lead in space exploration and scientific advancements. Technology became a driving force for new directions in almost all economic endeavors—from race car techniques to freeze-dried food to the emergence of Silicon Valley. Ironically, today’s average laptop, which had its birth in the minds of scientists involved in the space race, is more powerful that the computers involved in sending men to the moon.
Because of the technologies created in space study and exploration, humans now know more about themselves and the universe than ever before. Instant communication to the furthermost places is easily achieved, and controlling robots and vehicles on distant orbiting masses across the solar system can be accomplished with precision.
By the mid-1970s, following the US’s nonpareil space achievements, American mathematics, science, and technological activities became the envy of the world. Over the next generation or so, however, the gap between the US and the world in these areas began to narrow. By 2003, students in several countries were showing much more prowess in math and science than American high schoolers. A 2006 Program for International Student Assessment showed that US 15-year-olds had average science scores that ranked lower than those in 16 of 30 industrialized countries; in math US students trailed their counterparts in 23 countries.
To alleviate this situation and to put America in a better leadership role in space technology, which impacts all of life, President George W. Bush established initiatives that defined space exploration as more of a long-term journey than a short-term race, certainly not one that could be accomplished over one or two four-year election cycles. Unfortunately, budget expenditures have not supported such an approach in the fashion originally conceived, and the vision may be in danger of fading.
Currently, groundwork is being set for a plan to embark the US on an ambitious and broad space exploration program, sparking interest in new technologies akin to that which followed Neil Armstrong’s historic steps on earth’s only satellite 40 years ago. The importance of the US strengthening its leadership role in all types of technology cannot be overestimated. It is only through our capacity to generate “the next big thing” that we have maintained global economic leadership. ”The final frontier” is but one of many areas where our initiative is vital to improving our lives and sustaining our prosperity, but a very important one indeed.
posted @ 08:08 AM CST [link]
Friday, July 17, 2009
A Port in the Storm
The past 18 months have been hailed as an unprecedented time for the nation’s financial system. However, July 10 marked the anniversary of an event even more dramatic than recent action, at least from some perspectives. On that date in 1832, President Andrew Jackson essentially put the nail in the coffin of the Second Bank of the United States, the closest thing to a central banking system in existence at the time. (Yes, there was a “First Bank,” but many Americans disliked the resulting concentration of power and that bank’s charter expired after only 20 years.)
The Second Bank of the United States was chartered in 1816 in answer to the near bankruptcy of the federal government during the War of 1812. The Second Bank was a predominantly private entity and opened in the midst of a postwar boom. While there were problems with speculation and other issues in the early days, strong leadership turned the situation around, and by the end of the 1820s, many Americans viewed the Bank as crucial to the functioning of the national economy. Its imposing edifice remains one of the finest architectural achievements in Philadelphia. (Jackson’s home outside of Nashville is also worth a visit.)
Even so, President Jackson disliked the Bank’s political and economic power and felt that it exhibited a bias toward the industrialized urban areas and northern states. He also noted the lack of oversight, favoritism, and potential for corruption. In essence, Jackson believed that the Bank was dangerous to liberty (or shrewdly saw an opportunity to ignite populist sentiment in his favor), and it became a flashpoint for heated debate and inflammatory rhetoric.
In 1832, Congress passed a bill to extend the Second Bank’s charter just months before the presidential election, an act which Jackson denounced as politically motivated. When the bill reached his desk, he vetoed it, claiming the Bank’s monopoly was contributing to exclusivity and worse abuses.
The end of the Second Bank marked the beginning of an era of growth in state-chartered and “free” banks which began offering demand deposits and issuing their own notes (one of which featured Santa Claus on its three dollar bill). They also contributed to a speculative bubble through excessive lending. When the bubble burst, financial panics ensued, and in 1893, the US entered the worst depression it had seen. There is little doubt that the American Industrial Revolution, impressive as it was, was constrained by the lack of a national currency and cohesive monetary policy.
Intervention by a private citizen, J. P. Morgan, was necessary to prevent a total meltdown, and momentum began to build for the establishment of a central banking authority. Another meltdown in the early part of the 20th century was the last straw. By 1913, the roots of today’s Federal Reserve System (the Fed) had been established.
The importance of the Fed was soon demonstrated as the US entered World War I, when emergency currency was issued and banks continued to function normally. In the 1920s, the Fed began to use monetary policy tools (such as purchasing government securities to inject money into the system) to improve the performance of the national economy. Since that time, a number of important enhancements and refinements to the Fed and its operations have been implemented.
During the most recent crisis, the Fed has been crucial to maintaining stability, serving as a source of liquidity when credit dried up and pushing interest rates down to encourage investment. It has also intervened in new and innovative ways and coordinated global responses, exhibiting the flexibility and independence that are crucial in times of crisis and missing in many segments of the public sector. Without a strong central bank, there is little doubt that the current situation would be even worse, with a lack of confidence causing problems ranging from currency issues to panic conditions.
Hindsight reveals that the end of the Second Bank was likely a bad idea in that it contributed to a speculative bubble which subsequently burst. In 1834, Congress even censured Jackson for what they called his abuse of Presidential power in relation to his actions in destroying the Second Bank.
In the decades to come, we may well look back on the current crisis and see things the Fed should have done differently. Perhaps time will reveal that various actions and decisions were less than ideal. However, there is no doubt that the presence of a strong central bank and its ability to move quickly and decisively are essential to weathering the current economic storm and all of those that will follow.
posted @ 07:59 AM CST [link]
Friday, July 10, 2009
Beginning of the End
For quite some time, the US has been facing myriad challenges associated with a falling economy. Indeed, since December 2007, the difficulties have been of such sufficient proportions that the National Bureau of Economic Research has deemed the US to be in a recession. Subsequent statistics have shown it to be the worst period for the economy in many decades.
Toward the end of the first year of this debacle, I wrote a column in which I quoted former British Prime Minister Winston Churchill’s famous words of 1942 when he was discussing a British victory after numerous crushing defeats at the hands of Nazi Germany. He recognized that there were many tremendous challenges ahead if the Allies were to be successful in their goal of defeating Hitler, but he also realized that the momentum had shifted, hope had been restored, and that a new day was approaching. Through the dark clouds of despair and suffering, he saw the times ahead in a different light. To him it was the “end of the beginning” of the bitter struggle. From that time forward, his nation’s march would be forward and positive. I saw a similar point in the economic malaise as credit markets finally showed signs of thawing.
It is now appropriate to move a step closer to recovery and declare that we have reached the “beginning of the end.” The direction leading toward economic recovery has been defined, and the initial signs along our odyssey are proving to be positive ones.
Does that mean we will no longer see any surprises or that our economic problems will suddenly diminish significantly? Far from it. Just as Churchill believed it would take time to achieve the allies’ goals for successfully concluding the war, we must realize that the recovery of our economy will not be accomplished immediately or even in a few months. Even so, the path is becoming clearer as we see the emergence of the colors that have been painted in broad strokes on the nation’s economic canvas.
While the full impact of the various government plans put forth over the past several months to cure our economic ills is not yet wholly evident, we can be assured that the momentum is changing. The worst is not over yet, of course, but there has been a substantial decrease in the pace of the bad news. Moreover, the spread between LIBOR and US Treasury rates, the single most important barometer of progress, has noticeably narrowed. Problems are being solved, loopholes in practices are being closed, and credit is once again beginning to flow in a reasonable manner.
Headlines still plague us with unemployment data and foreclosure notices. Retraining for future opportunities is still being required and the uncertain fluctuation of oil prices and the equity markets continue. Still, the innovative spirit that spawns new ideas and technologies and brings them to the marketplace remains alive and healthy. Furthermore, the level of human ingenuity is moving perpetually upward.
As Churchill suggested in his famous comment in which he perceived that the momentum had shifted and a new day was ahead, we can have faith that we are now at the “beginning of the end” with the anticipation that while it will still be a bumpy ride for some time and hardships will occur, the end is coming into view and we can be confident that we are headed in the right direction. Unfortunately, this phenomenon is most commonly manifested in things getting worse at a slower pace, but even that is progress. As a result, we have every reason to be encouraged.
posted @ 08:05 AM CST [link]
Friday, July 3, 2009
Greener Grass
Despite the recent lack of rain, a malady currently affecting many parts of the country, the “grass” in Texas is much greener than in most states. At least that’s the picture according to the US Census Bureau and recent rankings by Forbes and Business Week.
The combination of rising unemployment, rapid market undulations, stingy credit, diminished home values, and consumer restraint in regard to major purchases has left many Americans finding that the careers and communities with which they have identified themselves for lengthy periods are no longer as economically dependable as they once assumed.
All states have been affected by the national economic downturn, but a handful of states, especially Texas, remain relatively healthy and inviting for those seeking greener pastures. Geographic mobility has become the password for job-seekers with flexibility in terms of skills, family responsibilities, and the marketing of their homes.
According to the online moving-services company, Relocation.com, although the economy has placed a strain on migration to some extent and is causing fewer people than normal to move from place to place, for those able to relocate, Texas is the most popular draw among all states.
Forbes reports that of the top five cities to which Americans are resettling, two are in the Lone Star State—Austin, number two nationally, and Dallas, in fifth place. The most distinctive characteristic of these locales, as well as the others on the list—Raleigh, Charlotte, and Phoenix—is the prevalence of varied business opportunities. Other qualities shared by those on the list include generally pleasing climate and affordable housing.
Based on a recent study published by Business Week, three Texas metro areas are among the 20 best places in which to start a new career or a new life. They include Amarillo at number 9, followed by Beaumont-Port Arthur and Waco, at 12 and 14, respectively. The rankings were based on the percentages of companies which anticipated increasing their employment roles during the third quarter of this year.
There are many other reasons why people want to come to Texas. According to a survey of CEOs by Chief Executive Magazine, for the fourth year in a row, Texas is the top state in terms of job growth and business development. This ranking is due in part to the Texas Enterprise Fund that was created by the 78th Legislature in 2003 to provide financial resources to help strengthen the state’s economy. The Texas Emerging Technology Fund (ETF) has also played an important role in enabling the Lone Star State to gain the number one status by encouraging much sought-after research talent to make Texas home and by helping spur the creation of several technology companies. This effort has greatly enhanced our global competitiveness, and Texas is among the leading states in businesses seeking to expand or relocate. It has also been the top exporting state for seven straight years.
Specific characteristics pertaining to the attraction of Texas include diversity of industries, educated workforce availability, opportunities for entrepreneurial endeavors, cultural programs, and quality-of-life enrichment activities. Furthermore, Texas never had a major housing bubble or bust on a par with other large states, and its job market has remained relatively strong (even the substantial losses of the past few months leave the state well ahead of the US in overall employment performance). In addition, the underlying strength of the state’s economy is quite good, its infrastructure in many arenas is sound, its economic development framework is solid, its cost structure is favorable, and its export capabilities remain strong. These distinctions are projected to continue over the next several years and thus, the grass is expected to remain greener in Texas for the foreseeable future.
posted @ 08:30 AM CST [link]