A year ago, our state's business outlook appeared bright. But over the horizon, storm clouds were gathering and a malaise of Seventies-style stagflation " higher prices, falling asset prices and sluggish growth " that began on the coasts is now encroaching upon America's midsection.
Oklahoma's energy-dominant economy, bane of the Eighties, so far has shielded it from the current downturn as the "FIRE" economy " finance, insurance and real estate " self-destructs elsewhere after more than a decade of overindulgence.
"Wall Street got drunk," President Bush recently said at a Houston fund-raising event, "and now it's got a hangover." There were too many "fancy financial instruments" he said, wondering, like everyone, how long it will take Wall Street to sober up.
Indeed, Congress and the president last month administered a dose of housing bill hangover tonic that, in addition to theoretically preventing another 400,000 home foreclosures, takes a bold step toward socializing continuing losses of government mortgage enterprises Fannie Mae and Freddie Mac, the source of some of Wall Street's favorite fancy financial instruments.
A couple of decades ago, however, as Oklahoma's economy disintegrated in an energy and banking bust, no one in Washington stepped up to keep oil fields pumping, banks solvent and prevent home foreclosures.
That was then and this is now, say those who like to remind us that "this time it's different." So it goes here in the nation's middle, where food is grown, stock is grazed and energy, the lifeblood of contemporary American existence, is extracted from the ground, and where, economically, things are still OK.
The $6 billion question for Oklahoma is: "Will it stay that way?"
Last month, state Treasurer Scott Meacham reported an $83 million surplus on record general revenues of $5.95 billion for fiscal year 2008, which ended June 30. For the fourth year, Oklahoma's rainy day fund was stuffed to its statutory gills, bringing its balance to $596.6 million.
General revenue growth in FY 2008 inched ahead a meager three-tenths of a percent, far less than the robust growth rates in previous years. The surplus arose from energy production taxes, up $185 million from the previous year, reflecting the record-setting run in oil and gas prices.
Oklahoma's shoppers still are doing their part, generating higher sales taxes, but corporate and individual income tax revenues fell more than $254 million from FY 2007, and vehicle taxes fell as Oklahomans followed a national trend and put the brakes on car purchases.
Shoppers and energy prices can be fickle, however, and some now see those storm clouds sweeping toward our plains. The FIRE economy is drowning in other parts of the country. Although we are counting on Oklahoma's "FROG" economy " farming, ranching, oil and gas " to remain sheltered from the tempest, in no way are we completely immune from the effects of stagflation or recession elsewhere in the nation.
Our state leaders must not depend on commodity prices alone to weather this economic storm and chances are good the rainy day fund will be tapped in coming years if our economy slows.
Elected officials can make some luck in anticipation of likely lower tax revenues by cutting state spending before we face a budgetary crisis, because, after all, it's better to be lucky and good.
Hazelton is an economic consultant and wealth manager living in Oklahoma City.