U.S. Treasury Secretary visits Billings; warns
of prospective troubles
By JAN FALSTAD Of The Gazette
Staff
When U.S. Treasury Secretary Henry Paulson Jr. visited
Billings Tuesday, he mentioned the many fishing and hiking trips
he's taken to Montana during his 30-year career as an investment
banker.
But he said this was his first official visit,
courtesy of an invitation from Democratic U.S. Sen. Max Baucus, who
chairs the Senate Finance Committee.
In plain English,
Paulson handles most of the money policies for President George W.
Bush. Baucus is expected to run for a sixth term next year and is in
charge of spending in the U.S. Senate.
Paulson toured a
Billings company, MRL Equipment Co. Inc., which makes road striping
equipment for sale in the U.S. and other countries, and spoke during
a community forum at Montana State University Billings.
Two decades of an economic boom, tax cuts and open trade have
helped all economies prosper, including Montana's, he
said.
"In the five years between 2002 and 2006, total exports
from Montana more than doubled to $1.4 billion," he
said.
Paulson also said he was happy that federal tax
revenues are flowing in faster than expected and said not to worry
too much about the federal deficit now approaching 9 percent of
gross domestic product.
However, in a recent interview with
Fortune magazine, Paulson did warn about a potential end to a
20-year economic boom because of risky monetary instruments,
including derivatives that haven't been tested in a down market. A
derivative is a fancy financial product where an investor doesn't
buy property directly, but is paid, or loses money, based on the
future value of underlying assets.
And two weeks ago, the
Treasury Secretary said that Congress needs to raise the federal
debt ceiling again to nearly $9 trillion. If that doesn't happen,
the government may not be able to pay its bills in the remaining two
months of the fiscal year, he said.
Deeper in
debt
The level of U.S. debt is a big deal to one Montana
economist.
Dr. Larry Swanson, who directs the O'Connor Center
for the Rocky Mountain West at the University of Montana, said the
federal spending binge and huge deficits scare him.
"Let's
say we're doing everything right at the state level and in our
communities and have a growing economy," Swanson said. "If we get
into difficult fiscal troubles at the national level and credit
tightens and interest rates rise, that throws a monkey wrench into
the state economy."
Real estate and construction, which are
slowing down nationally, are two of Montanan's fastest growth
industries, he said.
"We don't have to panic yet, but there's
reason for concern, and there's a growing need to get the federal
deficit situation in order," he said.
As high as it sounds,
the federal debt number is seriously understated, Swanson said,
because major expenses aren't counted.
For instance, to make
the debt seem smaller, the federal government "borrows" the surplus
from the Social Security fund and "pays" the money back with IOUs.
That's a long-term fiscal train wreck, Swanson said, because all the
baby boomers at the peak of their earning power are making
record-high contributions. Yet, the retirement money needed for
these soon-to-retire workers is being spent today.
"We're
going to need all of that when this big bubble of baby boomers
retires. Then Social Security will go into a deficit," Swanson said.
"And they can't rely on past surpluses because they are
spent."
More IOUs
When Social Security goes
into a deficit mode, the feds will toss in more IOUs, he
said.
"We're spending it all as if it is operating cash and
still running very high deficits," he said.
"People say,
'Don't worry, don't worry.' I've been worried for years about where
we're with the national debt."
By the end of trading
Thursday, widening troubles in U.S. subprime mortgage markets and
credit markets erased 367 or nearly 3 percent from the Dow Jones
Industrial Average, which tracks the top 30 stocks. This adjustment
is about half of the so-called textbook correction of 10
percent.
Since the Dow closed at a record of 14,000 on July
19, there have been triple-digit gains or losses two-thirds of the
trading days.
Also last week, the Federal Reserve Bank had to
pump in $24 billion Thursday and $38 billion Friday to avoid a
credit crunch. Some central banks in other countries did the
same.
The Dow closed the week Friday on a steadier note off
31 points to 13,239.
Before Paulson was Treasury Secretary,
he was the top executive at Goldman Sachs - including the years when
the investment bank advised Montana Power Co. to break up its
century-old utility and embrace telecommunications.
At the
MSUB forum, Ralph Bruce Swanson, a retiree from Laurel, asked three
unrelated questions starting with Paulson's role in Montana Power's
failure.
But Paulson neatly sidestepped the question by
substituting another topic and never mentioned Montana
Power.
Local shop visit
The Treasury
Secretary's visit was a public relations bonanza for MRL, which saw
its reputation praised in worldwide news media, including Bloomberg,
Dow Jones and Voice of America.
While no orders have rolled
in yet, Chief Executive John Gonitzke and President Jim Spielman
said the employees got pumped up by the visit arranged by Baucus'
office.
"We're happy we have a clean facility, and it was
nice to see them be recognized at that level of government,"
Spielman said.
Meanwhile, the Billings manufacturer, also
called Mark Rite Lines, is keeping a sense of humor about highway
striping.
Check out the Web site: www.markritelines.com link
to "Amazing Striping Bloopers."
You'll see how to paint
highway lines over cattle guards or stripe a busy street in Karachi,
Pakistan.
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problems with the new Talk Back! system, please email us.
The 63 Billion in cash
dumped by the Fed will have to cause a weak dollar to get weaker!
Which means that our money will buy less. Will a barrel of oil cost
100 of this devauled dollars soon? $5.00 a gallon gas won't affect
our millionaire politicians, how will it affect you:-(?
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