Commentary on the state of the economy
by Virginia Galloway

Gas Prices: Let’s start with gas prices: how they are affected and how they affect Georgia’s economy. Obviously Hurricanes Gustav and Ike coming through Louisiana and Texas crimped the supply lines, closing down or reducing output of many refineries and temporarily stopping offshore drilling. But before Hurricane Ike even made landfall, gas prices in Georgia flew up anywhere from $.50 to $1.50 per gallon, spurred by widespread panic. Within one afternoon, metro gas stations went from business as usual, to long ‘70’s type line ups for the pumps, to “out of gas” signs.

Even now, after a tank refill or two this past week, many metro area stations are out of gas again. And metro consumers who can find gas are paying $.30 more per gallon than the national average. Convenience stores report people topping off their tanks and filling gas cans, further adding to the problem. Aside from supply issues and panic, another problem is EPA regulations that require metro Atlanta outlets to sell “boutique” gas, a special blend designed to reduce air pollution. Hence the inability of area gas stations to obtain gas from other places with abundant supply. Over the weekend the word was, "Gas would be plentiful by Monday." Monday, the word was , "later this week." Today they’re saying Oct. 1. We’ll see.

In the meantime, individuals, businesses, and government entities are all suffering to some degree. Contrary to environmentalists’ concern, most of us don’t get in the car to drive around for the fun of it. While a very small percentage of Georgians have access to reasonably convenient public transportation, a large majority do depend on cars to get them to work, school, and shopping. When middle income family budgets suffer from high gas prices, other purchases have to be dropped or deferred. For low income people already living on the edge with little room to adjust, high fuel costs are devastating. Small businesses with a need for sales or service people in order to be mobile are going under; mid-sized and larger businesses are cutting cost wherever they can, including employee lay-offs. School boards, local governments, and even state government are being forced to adjust budgets and make tough decisions to accommodate higher fuel prices.

“Drill, baby, drill was the mantra picking up steam at the Republican National Convention in August. Congress may have caught on. Americans For Prosperity has encouraged the Congress to “do nothing,” meaning let the drilling ban expire.

To protect your prosperity in spite of higher gas prices, check out this fuel efficiency website.

Foreclosure Rate: But gas prices are only a part of the gloomy picture. It’s pretty apparent who in the neighborhood got a house they couldn’t afford with one of those nifty adjustable rate mortgages; they’re the ones who moved out about three years after moving in, and just before the foreclosure sign appeared. Who’s at fault for the high foreclosure rate?

The borrowers, for not providing accurate income or expense statements and trying to live above their means.

The lenders, for aggressively marketing these adjustable rate mortgages and not investigating obvious mortgage application fraud, enabling customers to drop the noose around their own necks.

The federal government, who during the Clinton years, started forcing banks to lend money to nearly everyone, including those who had bad credit histories.

Now, there’s a revived fraud subculture that’s out there duping people by offering to help them once they’re in foreclosure, then stealing their equity, or collecting upfront fees, then disappearing.

If you have a friend who’s facing foreclosure or considering a short sale, I highly recommend this MSNBC article.

Unemployment Rate: The flood of foreclosed homes on the market has crippled the construction industry and is one factor that has fueled the highest unemployment rate since the early ‘90s. At a recent Dallas GA town hall meeting, Congressman Phil Gingrey said it best, “If you have a job right now, please keep it.” For those already facing unemployment, jobs exist out there, but there will be stiff competition. Look online for free resources to help you with everything from updating your resume to clinching the interview.

All the news seems focused on failing banks and falling markets on Wall Street. Banks who primarily invested in mortgage loans are obviously in real trouble. So are you, if you have an amount of money higher than the FDIC insures in one of those banks. Spread your money among more than one bank if you have over $100,000 in your bank; you’re insured per person, not per account. Check out your bank’s investment strategy and make sure it fits your comfort level. Don’t bring large amounts of cash home to hide under the mattress, just in case; with tough economic times, the burglary rate is up sharply and homeowners insurance usually covers only a minimal amount of cash.

Time doesn’t permit going into all the nuances of Wall Street’s troubles and our governments proposed solutions. The federal government is working on a bailout plan. If you think that’s only for the sake of the rich, remember that over 80% of Americans have investments traded on Wall Street through 401Ks, IRAs, stocks, and other types of accounts. But if your investments have lost value, remember you only take the loss when you sell. Most advice seems to favor hanging on and riding it out, but that would certainly vary from one person’s situation to the next.

Corporate Corruption: Calling on former CEO Herman Cain, WSB radio host and featured speaker at our Defending the American Dream Summit, I asked how CEOs got these huge bonuses when they ran a company onto the rocks. He explained that sometimes the bonuses are pre-negotiated as deferred salary, but many times it’s the result of the too cozy relationship of the CEO and the company’s governing board. The CEO stacks the board with compliant friends, who are so grateful they fail to compensate him in a manner consistent with his performance. Congressional oversight has been lax. It’s the good old boy system at its finest. So now you know.

So, as Reagan aptly stated, in no small part of most of our economic ills, “government is the problem.” Let’s hope they can surprise us and be part of the solution. In the meantime, hang on, we’re in for a wild ride.