Big economic outlook both good, bad
GRAND FORKS, N.D. — If you're interested in big-picture economics — and everyone involved in Upper Midwest agriculture has a stake in the macroeconomic outlook — there are good reasons to be positive, said Bryon Parman, North Dakota State University Extension ag finance specialist.
But he also sees a longstanding and growing reason to be apprehensive: the huge and expanding federal deficit.
Parman spoke Oct. 28 in Grand Forks to about 90 agricultural bankers from northeast North Dakota and northwest Minnesota who attended the annual NDSU Extension Outlook Conference for Agricultural Lenders. Parman and other Extension specialists shared their insights into important ag and financial topics.
One of Parman's sessions looked at macroeconomics, or large-scale, general economic conditions. In contrast, microeconomics studies the behavior of individuals and companies.
Among the reasons for optimism about the macroeconomic outlook: the U.S. economy continues to expand, inflation and interest rates remain relatively low, the percentage of U.S. residents living in poverty is falling and civilian labor force participation is rising, Parman said.
Those factors should increase consumers' ability to buy food or improve financial conditions for U.S. farmers, or both.
But the federal government's debt and budget deficit are troublesome, Parman said.
A few statistics from Parman help to make the point:
• The current U.S. debt is $22.9 trillion dollars. That's $69,604 per capita of the U.S. population and $139,634 for each person in the labor force.
• In 2018, the federal government spent $4.11 trillion, with a deficit of $779 billion. Government revenue brought in only 81% of what was spent.
• To balance the budget, taxes on each working person in the nation would need to rise an average of $4,740 per person or spending would need to be cut by 22.4%.
A tax increase or spending cuts of that magnitude, or a combination of the two, obviously would not be palatable to most Americans, he said.
A more realistic option is "to grow ourselves out of debt," with the U.S. economy expanding sufficiently to minimize the negative impact of the debt, Parman said.
He used this analogy: a $10,000 personal debt would have been crippling to him when he was in high school, but one that he could handle today.
Interest rates will need to stay low and the budget will need to balance eventually to make the grow-ourselves-out-of-debt approach successful, Parman said.
Another macroeconomic concern is U.S. trade policy, which has affected U.S. ag exports, Parman said.
Though ag hasn't been a major focus of Trump administration trade policies, ag "has taken collateral damage," he said.