Mainebiz

V o l . X X I N o. I Ja N ua r y 1 2 , 2 0 1 5 16 C o m p i l e d b y d y l a n m a r t i n I t's that time of year again. Like we do every January, Mainebiz has asked five prominent Maine economists what they think the New Year will bring for the Pine Tree State. Maine's economy is expected to gain momentum in 2015, but slowly and modestly. The largest challenges? Count Maine's aging population, rising electricity prices and the attracting and retaining of job talent among them. What's in store for Maine's economy in 2015? Rector: Maine's economy should continue to grow in 2015. e national economy is gaining momen- tum, and those improving conditions will be reflected in Maine as well. Energy prices are one of the big factors this year — oil prices are currently at their lowest levels in years, but electricity prices are ris- ing. Depending on how those two play out, Maine's economy could see bigger or smaller gains. Global economic conditions will have an effect as well. Lawton: e continuing national recovery will slowly add to Maine's job growth, though the rate of growth will be less than the national average. e growth will be concentrated in the urban business services and consumption sectors and thus further exacerbating the urban rural divisions within the state. Growth will be concentrated in the Portland, Lewiston-Auburn and Bangor metropolitan areas, leaving rural areas to suffer the continuing pressure of maintaining schools, roads, small hospitals and other public infrastructure and services on an ever- shrinking and ever-aging population. is economic trend will be exacerbated by the fiscal pressures in Augusta to limit spending on 'welfare' and [munici- pal] revenue sharing. Declining oil prices will continue to relieve pressure on consumers, but also slow whatever incentive remains to pursue 'alterna- tive' energy production such as wind, solar, tidal etc. Startup-and-create types of entrepreneurial activity will continue to bubble. e much higher rate of population growth coming from immigrant and minority cultural groups will provide lots of oppor- tunities for new types of economic growth. Colgan: Economic growth has picked up in 2014 and 2015 may be the best for employment growth since before 2007. As long as the national economy holds up, which it should do, Maine should get another year of modest growth. Reisman: Maine will continue to shadow but lag the national economy with modest job and income growth. Structural unemployment as a consequence of mill closures will loom large. e con game masquer- ading as efforts to combat climate change will further damage Maine's business climate while promoting crony capitalism and the green road to serfdom. Johnson: Lower prices for gasoline and heating oil will have a positive impact for households and some businesses through the first quarter of 2015. Otherwise, we will continue along the long-term trend of slow and unbalanced growth, with little real improvement in living standards for the median household or worker in Maine. Unemployment will not get low enough to drive wage growth for most low- and middle-income workers. Economic growth in the Portland area will continue to out- pace the rest of the state, reflecting a national trend of urban service-based economies growing faster than rural areas that aren't mining oil and gas. What are the chances — in a percentage — of another recession in 2015? Rector: Too low to attach a figure to. e largest risk factor right now is with global economies: if other countries, especially those with strong ties to the U.S. economy, slide into recession, it could have a dampening effect on domestic economic growth. e recent situation with Russia's economic down- turn is cause for some concern. Lawton: 10%. Colgan: Less than 10% at this point, but unforeseen events could change that at any time. Reisman: 20%. Weakness in Europe, China and India could trigger a recession, but low oil prices, borne of weakening international demand, fracking, oil sands and efforts to contain Russia and Iran will buoy consumption spending. Johnson: Between 5% and 10%. Will the most recent election have an impact on Maine's economy? Rector: It typically takes a long time for the policy changes brought about by elections to have an impact on the economy. We have started seeing the effects of policies implemented during the first LePage admin- istration, such as regulatory reforms and income tax reductions. We can expect the administration to con- tinue focusing on policies to improve the economy, including tax reform, lowering energy costs and reducing the size of government. Lawton: [Gov. Paul LePage] will set the tone for fiscal policy — welfare reform, tax reform, budget- ary priorities, especially regarding education — both K-12 and higher education. If the Democrats can respond with imaginative new ideas that fit the governor's ideas — more ways to get job experience and educational credits in high school, inventive use of broadband for K-12 education that enhances the offerings of small schools, ways to capture the energy and money wasted in fighting forced school consolidation — then state government might become productive rather than simply confrontational. Colgan: Not in 2015. e longer term will depend on what the governor and Legislature decide to do. Reisman: Yes. LePage and the GOP Senate major- ity will push for less expensive energy and more economic freedom, while the progressives and envi- ronmental left mutter about sustainability and try to protect the regulatory nanny state. More economic freedom means more economic growth and a more robust economy. Less economic freedom means happy progressives and environmentalists. Johnson: Maine's economy is heavily influenced by global market forces, changes in technology, trade policy and federal fiscal and monetary policy. But state policy still matters. We can't cut our way to prosperity. Cutting income taxes for high-income and wealthy folks while giving big corporations costly subsidies paid for by wage-earning Mainers and small business owners is the wrong prescrip- tion. We must invest in Maine people and commu- nities in ways that build a better-educated, healthier and more productive workforce; a fairer tax system that demands accountability and puts more money in the pockets of middle-class Mainers; and top- notch infrastructure that helps Maine businesses and entrepreneurs compete. With LePage in office for four more years, expect continued underinvest- ment in these areas, which will jeopardize current and future prospects for growth. This year's panel of experts includes: Amanda Rector Maine state economist Charles Lawton Chief economist, Planning Decisions Inc. We must invest in Maine people and communities in ways that build a better- educated, healthier and more productive workforce. — Joel Johnson, Maine Center for Economic Policy

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