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Noozhawk: Economist Offers Rosy Outlook Despite Gloomy National Mood

At Radius Economic Forecast in Santa Barbara, Christopher Thornberg says country continues to have bright near-term economic future

Santa Barbara, California – Published 10/25/2016
By Sam Goldman
Economist Christopher Thornberg
Christopher Thornberg speaks during Tuesday’s Radius Real Estate and Economic Forecast in Santa Barbara. (Sam Goldman / Noozhawk photo)

“Miserabilism” — having or promoting a miserable or overly negative view of things — was the way economist Christopher Thornbergdiagnosed the country’s mood on Tuesday at the Radius Real Estate and Economic Forecast in Santa Barbara.

Economic conditions in the United States, California and locally are overall much better than one may think, Thornberg said — if only the right issues were discussed and the right statistics examined.

Thornberg was the keynote speaker at the ninth-annual forecast, put on by Radius Commercial Real Estate & Investmentsat the Fess Parker, a Doubletree by Hilton Resort.

The frequent media commentator and former advisor to the state’s Controllerand Treasuryoffices is a founding partner of Los Angeles-based research and consulting firm Beacon Economics, and an adjunct professor at UC Riverside, where he directs the university’s Center for Economic Forecasting and Development.

Nationally, he said, economic growth has slowed a little, but remains strong.

“Reality: GDP’s growing a little slower than we like, but it’s growing,” he said. “More importantly, the fundamentals are very strong right now. There’s no chance of a recession any time in the near future because the fundamentals are relatively good.”

Demand for workers is high, though it is becoming harder to find the right employee for the right opening, Thornberg told attendees, who included local business owners, elected officials, landlords and tenants.

Income inequality is not as much of a problem facing the country as many people paint it to be, Thornberg said.

The real issue is wealth inequality, which he said has been worsening nationwide for years, and is making it harder for people lower on the socioeconomic ladder to handle personal financial crises and prepare for retirement.

The decline the country has seen in labor market participation rates, Thornberg said, has been going on since around 2000 — before the Great Recession— and is symptomatic of the country’s aging population.

Baby Boomers are still the defining generation of the nation’s economy, he said, because the impending waves of retirement will place considerable strain on programs like Medicare and Social Security— setting up a fiscal crisis for the United States in the coming 20 years if not addressed.

“The silence is deafening,” Thornberg said. “Nobody is even talking about it. How pathetic is that?”

He added that the “glut” of domestic oil production is ultimately beneficial to the U.S. from both a geopolitical and an environmental standpoint, and that now is a great time to buy a home.

“Housing is more affordable now than not only what it was in 2005, it’s more affordable than it was in 1999,” he said.

The common belief that California is bad for business, Thornberg said, is “so preposterously out of tune with the data.”

To many attendees’ surprise, Thornberg explained that in a state that actually has one of the fastest growing economies in the country, the southern Central Valley is, economically, the most rapidly growing area of California, with the tech-oriented Bay Area noticeably behind several other regions of the state.

Santa Barbara, he said, is “doing OK,” while Ventura is toward the bottom.

“As hard as Sacramento’s trying, they’re yet to screw it up,” he said.

One of the morals of the story, Thornberg said, is that “bodies” are the key to long-term economic growth — and that bodies require housing.

“From here on out, if you want California to keep growing rapidly, if you want Santa Barbara and Ventura to start moving towards the top of that growth chart, you have to start with housing.”

The California Environmental Quality Act, which provides ample opportunity to contest proposed urban development, and Proposition 13, which limits property taxes in the state and thus the resulting revenue, have been key obstacles to creating more housing, he said.

Without more housing, only wealthier people will come into the state, which would further drive up the costs of existing housing, he said.

Though California’s business climate isn’t driving out business, Thornberg said, lawmakers still have room to make life for businesses easier.

Tax levels in the state aren’t onerous, he added, but the structure of the tax system puts the state at risk for a bad economic downturn.

Proposition 55, the state ballot initiative that would extend tax increases on incomes over $250,000, is a poster child for the current structure, he said.

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