We humans are strangely optimistic creatures, and it may well be an evolutionary trait. “What’s the point, we are all doomed,” is not a mindset that gets one out of the cave at the crack of dawn to hunt for edible animals. Plus, pessimism is a bad strategy for attracting a mate, which is most of what the evolutionary game is about.
Her: “So what would a life spent with you be like?”
Him: “Setbacks, mostly, and dull acceptance, spiced up by occasional bursts of unjustified hope followed by sharp agony.”
My wife would never have accepted that sales pitch. She had a tough enough time learning to accept it after we married.
But while this optimism may keep us striving, it also breeds irrational exuberance. When things are bad, we imagine they will get better. When things are good, we imagine they will get better still. We seem always to be shocked by the bad turn, even in cases when it’s inevitable.
Like economic downturns.
And now we have forgotten that what goes up must come at least partway down.
The GOP majority of the Nassau County Legislature voted Monday to balance its budget partially by simply deciding things will be better than County Executive Edward Mangano thinks. Members wanted to erase $60 million of proposed fees on traffic tickets and real estate paperwork they fear could leave residents seeing red, and voting blue.
So they “fixed” the 2018 budget in part by reducing estimates of police overtime by $5 million, increasing estimated savings from employee attrition by $8.5 million and increasing estimates of traffic and police summonses by $4.5 million.
But they also made two big changes based on the idea that the economy will keep improving. Legislators increased the estimate of fees collected by the county clerk by $4 million and increased estimated sales tax revenue by $5 million, hiking the county’s 2 percent projection of sales-tax growth to 2.5 percent.
I hope they’re right. But I know they are doing their planning in much the same way the rest of the nation is: very badly.
Tuesday, President Donald Trump tweeted “Consumer Confidence Hits Highest Level Since December 2000,” and then about 90 minutes later, “Home Prices Reach New All-Time Highs in August.” Both are true. And any president would likely trumpet them, particularly if the rest of the news were eaten up with images of their cronies doing the handcuff boogie. But these seemingly positive economic indicators may not bode well.
If consumer confidence is the highest since December 2000, it’s reasonable to ask what happened after that. By March of 2001, we were in a recession. The Dow Jones industrial average kept climbing for a few months, coming close to 11,000 in June 2001, before plummeting more than 30 percent. It did not hit 11,000 again until March 2006. Later in 2006, housing prices hit an all-time high. They then fell more than 30 percent on average, throwing the nation into a devastating recession.
The current economic expansion 100 months old, and is the third-longest such expansion in national history. That’s good news, but it does not mean more good news is on the way.
In Washington, the argument is over how much tax reform can hike our economic growth rate, already at a surprisingly robust 3 percent. In Nassau and Suffolk, and for state budgeters in Albany, the question is how much revenues will grow next year and how much they can plan to spend.
But revenues may be flat or plummet. This economic expansion will not last forever. And these governments, as well as we taxpayers, should have a plan that reflects the possibility of a worse-than-expected outcome. Things can and often end up worse than we hoped and expected.
Just ask my wife.