Mobile Edition
Print
Get the Mag
Weekly Updates[ILLUSTRATION OMITTED]
MBQ: The economy seems to have pushed everything else off the front page. What are your biggest concerns and what are the biggest sources of strength for the Montana economy in the year ahead?
Governor: The Continental Divide is one of the highest places in Montana and one of the highest places in the world. And this is a global tsunami as near as I can tell. This is a crisis in confidence. That's the best way of describing what's happening here, and it's a trickle-down effect. We're pretty well insulated being high up here in the Rocky Mountains and being in the businesses that we are, but not completely. I was listening to some economists describing the scenarios. And one of the scenarios is if we do all of these infrastructure projects, and we start pumping things out there, ultimately we'll have to pay that back. [The National Governor's Association is asking for $136 billion for states to use in infrastructure projects such as road and bridge repairs.] That creates inflation and a deflated dollar, and then we could have accelerated inflation or maybe even in a bad case scenario, hyperinflation. So if you can't protect the dollar, you have to continue to pump. And then the conversation was going on about deflation ... I listened for a while, and I said, "Deflation, huh? You mean like virtually every house in America decreasing in value by 25 to 30 percent? Platinum dropping from $2,200 to $860; copper dropping from $4.60 to $1.80; wheat making it to $20 and dropping back to $5; nobody wanting to buy a car because they know that they can buy a better car for less money six months from now? You mean like that?..."
Right now maybe up to 45 states have budgets that are structurally imbalanced. Thank God Montana's got money in the bank, but you know, at the rate things are slowing, i don't know if it's enough. We have the largest cash position, by actual dollars and by percentage, in the history of Montana. But is it enough? ... i don't know if we are back to '33 or whether we're just back to '74 or we're back to '87, or where we are on the continuum .... We've had four extraordinarily good years.... We've got $287 million dollars in the bank, and I don't feel that rich.
MBQ: Though Montana's unemployment rate is well below the national average, it is rising. Recent layoffs in mining, forest products, and manufacturing have caused hundreds of job losses. What are your plans to help mitigate some of these negative impacts?
Governor: First off, let's understand that I don't have the ability to deficit spend. I can't prime the pump like the federal government. I can't create countercyclical payments like the federal government.
We governors had a conversation last week with Obama and Biden and their team. Some of the newspapers said, "Oh, the governors are back here with hat in hand, begging the administration for bailout for their misguided management." Whoa, whoa, whoa! Most of what they were talking about is Medicaid. Medicaid is a program that was created by Congress to provide some kind of health care for the last and the least--the ones who fall through all the safety nets. Congress passed this on to the states where we actually deliver programs, and they said, "We'll be your partner, we'll pay for 80 percent of the cost of this Medicaid program, you pay for 20 percent, and you administer it." Okay. That was a partnership. But the problem with that partnership is that it was once again the federal government trying to put a round peg in a square hole. What happens is that when states are faced with recessions and people are laid off and they lose their insurance, then they displace someone else that is a little lower on the totem pole. Pretty soon the demand for health and human services (re: Medicaid) goes up, and our revenues are going down. We don't have the ability to countercyclically spend like the federal government does. And so in the past, during recessions, the federal government says, "Alright, here are some countercyclical dollars so that you can take care of your Medicaid program so people aren't thrown into the street." But, that's what we were talking about, we were hat in hand. This is a partnership, and it was a partnership created by them. I mean that's a little bit like somebody lighting your barn on fire and then showing up and saying, "Hey, hey, how come you don't take care of your horses?" Well, please.
The other thing the governors talked to the administration about was their philosophy that to prime this pump there needs to be a confluence of events. We have a slowdown in our economy, and we have deferred infrastructure needs in this country. This administration has said during the campaign, and continues to say, that they believe in infrastructure. I believe in energy infrastructure, energy designed by American engineers and built by American workers. Some people see that the price of gasoline is down to $1.60 or something and wonder if there is still an appetite to build an infrastructure for a new energy economy. I could answer that question by saying that if we had full employment and health and wealth and prosperity, and we weren't at war, you might be right [to question it]. Let's see, we don't have health, we don't have wealth, we don't have prosperity, and we are at war. And it has a great part to do with war. So, you've got a confluence of events, or maybe a nexus. Unemployment is increasing at maybe the fastest rate ever, we have an energy dependence, and the administration says we've got to prime the pump. So here's an opportunity to spend a hundred billion dollars in an electricity transmission system that will be the equivalent of the interstate highway.
When President Eisenbower proposed to build the interstate highway,... people said that we already have a system that does that. The president said, "No, no, no. I don't think you understand. I want to build a system on top of the other system. There will still be a system within, but this system will be much more efficient. It will be faster, it will require less energy, there will be no stop lights and stop signs. It will be continuous. If you had enough fuel, you'd never have to stop to go from coast to coast. It's a completely new system...." Well, in fact it was an infrastructure system that we needed in this country, and who could complain today?
The infrastructure of this transmission grid that will be built over top of an existing transmission system is not going to be any different. Our transmission system we have right now is very inefficient--there is a lot of line loss. Virtually any place along the line, you can plug your extension cord into the system and there is on and off, and you stop and go, and there are at least four different kinds of electricity. If you're in eastern Montana and shipping electricity to the Midwest, you've got to have big, expensive equipment to switch it to a different hertz because they are in the Midwest grid. They are not in the Western grid, they don't plug into each other. Well, that's a little silly. So, this is a new DC line with very little line loss that would be built over top ... and run from south central Montana, with the first stop probably Las Vegas and the next one Los Angeles. And, so, that's the deal we've been talking about for the last couple of years--about a hundred billion dollars.
[ILLUSTRATION OMITTED]
[ILLUSTRATION OMITTED]
Well, that sounds like a lot of money, right? That's a lot of money for me, a lot of money in Montana. But let's see, we're importing 4.5 billion barrels, and even at $50 a barrel ... you do the math. I think that's $200 billion a year that's leaving our economy. And when it was $100 a barrel, well, that was some real money--$450 billion, $500 billion--and we Rot nothing: out of that, except for possibly another dictator mad at us. We're giving them money to fight us, and we have the technology in this country. Virtually 80 to 85 percent of all the miles that we drive can be run on electricity with plug-in hybrids. So then that means wind power, it means solar power, it means coal gasification. And none of those are imported from dictators. But you've got to invest in that infrastructure, and that is part of what they are talking about.
The second part of this infrastructure I think that we need to build and invest in is in energy conservation. I mean, the most important barrel is the one you don't use. I initiated what I call the "20 x 10." You've probably heard about this by now. Some grumbling, I presume. But the idea is that we would change the way we consume at state government and we would change some of the physical structure, some of the devices that we have, some of the boilers, weatherize windows, doors, etc., use more insulation, make our buildings smarter. We believe that we can decrease our energy consumption by 20 percent in state-owned buildings.
MBQ: The Legislature is meeting, and obviously we are moving into a period of uncertainty. But still we're planning for the next two years. Could you outline what you see as some of the priorities for the next couple of years?
Governor: Well, there is a term that almost none of Montana understands, and it's called present law adjustment. You just can't imagine that something like this could exist. The law is such that, when I prepare a budget, my budget must contain enough money to deliver the services that have already been passed in the previous Legislature. And you have to assume there is a level of inflation to deliver that program. So, automatically government grows, even before you get a chance to make any decisions. You don't get to decide, "Well, I'm going to put a little more here, and a little...." Nope. You show up and you put that much in the budget and that's just to maintain government. And it's a little frustrating when you have projected declining revenue, and yet decisions are already made for you that this amount of money goes into the budget. I mean, people say, "It looks like the budget overall has decreased because we have less money for one-time spending." That's true, but it continued to increase for ongoing spending. That's true also, but for the most part, it's out of my control. You put it in the budget to maintain the services at status quo. It takes the Legislature to come in and say, "No, no, no. We're going to pass a law that says we are no longer going to deliver that service." And then they can take money out of the budget. But the budget that I've prepared is effectively delivering the services at the same level as we have in the past, with slight increases for K-12. The times of reforms in government ... it's going to be pretty tough this time because we don't have additional money.
FEED