|King Corn. Forecasters missed the effect of the '10-'11 run-up|
and the '13-'14 selloff.
(graph from www.agriculture.com)
That last nod to commodity prices was actually a pro-forma, if unquantified by analysis, hedge by Goss. I believe he realizes that his team completely missed the impact of the grain markets in its way overly optimistic report last Spring. As I scan that set of current indicators I wonder how Goss and his team could be relegating the obvious, namely the price of commodities, to an afterthought. To my "informed layman's" eyes, it seems to me that the economic fortunes of an agriculturally saturated economy like South Dakota's all start, literally, from the ground up. The numbers relied upon by the Creighton team look like indicators that I would expect to find in analyses of economies that are manufacturing- and service-oriented, not those in which commodity production is at the core. I think Goss's work doesn't put enough weight on the effect that grain prices have on South Dakota's economy, a conclusion I come to after having spent a couple of decades successfully trading grain and livestock, both at the exchanges in Chicago and right here in South Dakota. It was especially clear to me when I visited our office in Brookings, where the corn and bean markets virtually defined the economic conditions of the region.
I recall being dismayed in early '11 by Governor Daugaard's slashing of his first state budget because of grim economic forecasts (I'm guessing created by the Goss team). It seemed nuts to me at the time because grain and livestock markets were clearly running up to their best prices ever, an economic boost that I was certain would result in better than forecast conditions for growth and render Daugaard's strapped-for-cash scenario overly miserly. As it turned out, taxable sales in '11 were up a stunning 9.2%, the surest indicator of how our state's economy is getting along.
|Economist Dr. Ernie Goss, Clairvoyant In Good Standing|
(photo from nebraskaradionetwork.com)
None too surprisingly, Governor Dennis Daugaard probably used the Goss team's overly optimistic numbers from early 2014 to paint a politically advantageous picture of South Dakota's rosy outlook. Certainly Daugaard and his staff did nothing to distance themselves from the unjustifiably bright outlook prepared at Creighton. Note Goss's conclusion: "Based on our survey results, I expect the rate of growth to quicken in the months ahead." In fact, growth slowed dramatically following the report. More relevant to state policy, it's reasonable to conclude that Goss's scenario was the basis for Daugaard's perky outlook for South Dakota's economy last January, which turned into a badly missed set of projections that were laid out during Daugaard's grim recitation of one slashed forecast after another during the Governor's budget address a month ago. Both Goss and Daugaard just plain got it wrong.
|Me, Wooing Dr. Christina Romer, Former Chair Of The|
President's Council Of Economic Advisors.
See? I Like Economists. I Really, Really Do
(Photo taken at UC Berkeley by Emily Tsitrian)
And now for an afterthought of my own: why doesn't Daugaard reach out to home-grown and -nurtured analysts who have a better feel for economic conditions in South Dakota? Probably because our state's university system can't provide them. The USD Economics Department stresses teaching. The SDSU Econ Dept stresses applied research, mainly in connection with agricultural industry needs, which covers plenty of micro- territory and does it very well, I'm sure. But when it comes to macro research and analysis for use by public policy makers? That's a missing component from both departments. A glaringly missing component.