National news isn’t our state’s boogeyman

The governor would rather you not watch the nightly news.

It isn’t that Chris Gregoire is one of those anti-mainstream media people who populate the political right and left (at least I don’t think she is). It’s just that the governor thinks our suddenly cooling economy might be caused by bad news from afar.

“If the people of the state of Washington weren’t listening to the national news, I would feel very comfortable about the economy,” Gregoire said last week while unveiling her supplemental budget proposal. “I think people in the state of Washington are being impacted by what they see happening elsewhere in the country.”

Specifically, Gregoire said all the national coverage of the subprime lending crisis and resulting home foreclosures and corporate financial failures is spooking folks here. Washington has seen an increase in foreclosures, but we’re not in nearly as deep as other parts of the nation.

The governor’s comments echo those coming from residential real estate people who think everything would be just fine if the dang press would stop writing about it.

“There’s no real reason for it to slow in our state, but for the fact that people are watching what’s happening around the national economy,” Gregoire said.

“So people here get left with the impression, ‘Well, it must be happening here. I can’t buy a house here,’” she said. “It’s not true.”

Well, not totally true. The governor went on to list other reasons why people are being cautious about spending. There’s the price of a gallon of gasoline. There are the wars in Iraq and Afghanistan.

Population growth is slowing as well, which affects housing demand.

It also isn’t true that the slowing regional housing market is due only or even primarily to a psychological fear of commitment brought on by too much ABC, NPR and MSNBC. It’s also harder to borrow money.

“Higher mortgage rates and tighter lending standards are expected to depress the single-family market during the next three years,” the staff of the state Office of the Forecast Council wrote last month.

Yet the Washington economy continues to grow. No one is predicting a recession, and state tax collections will continue to increase. They just won’t increase as much as they did during the housing bubble.

Is that necessarily a bad thing? For several years Washington’s economy and state budgets were fueled by consumer spending driven largely by another impression – that we were wealthier because our houses were climbing in value.

We cashed in our equity whether it was real or not, we jumped into home-ownership whether we were financially qualified or not, we paid more for houses than they were worth, we spent more than we earned, we increased our debt.

We also ignored the downside. Ridiculous prices made homeownership impossible for many people, even with subprime loans. Property taxes jumped and spawned a fledgling property tax revolt. Sales tax collections ballooned state and local budgets that we now know aren’t sustainable.

That it was all good news worth celebrating was an impression perpetuated by national news coverage. But I don’t recall anyone suggesting back then that people here stop listening, reading and watching.

Economics is as much about human behavior as numbers. But rather than say Washington consumers are acting out of an irrational response to an external media message, it seems to me they’re acting rationally.

They’re spending a bit less, they’re refusing to overpay for houses, they’re being cautious about big financial commitments, they’re watching and waiting to see what will happen next.

All are actions that make a lot of sense. They don’t damage the underlying economy in the long run, they strengthen it.

So go ahead and watch the news if you want. Katie Couric will thank you.

Peter Callaghan: 253-597-8657

peter.callaghan@thenewstribune.com

blogs.thenewstribune.com/politics