Business and Economy Tax and Budget

Haslam Worries Lack of Confidence Will Hamper Growth

Gov. Bill Haslam predicted the state’s economic growth would not exceed 3 percent in the next two years, adding, “I hope I’m wrong.” Haslam was speaking Friday at a business breakfast at Lipscomb University in Nashville.

Gov. Bill Haslam threw the latest sobering splash of cold water on economic expectations Friday, predicting the state’s economic growth in the next two years will be no better than 3 percent as it struggles to get past the recession.

Haslam, who emphasized he is no professional economist, made the estimate at a business breakfast at Lipscomb University’s Allen Arena.

“I’d love to say something different, and I hope I’m wrong,” Haslam said.

Lipscomb President Randy Lowry set the tone early in the program, saying he and Haslam “were talking at the table just a moment ago, that neither of us as a CEO of our respective organizations may ever serve in a good economy.”

“Think about that,” Lowry said. “We may finish our terms and still be working in the context where the economy is very, very challenging.”

Haslam is in the first year of his first four-year term. If he should serve another term, he would leave office in January of 2019.

Haslam said nothing that would dispel Lowry’s worrisome summation, but he did make a persistent pitch about his plans to create job growth as governor.

“I don’t think we’ll see a double-dip recession,” Haslam said. “But I think we’re going to bump along on basically flat growth for the next few months.

“Everything I see says there’s not a whole lot of confidence out there.”

Haslam pointed to two particular factors that have had a negative effect — the new federal health care plan and the recent battle in Washington over the federal debt ceiling.

“I make a point of asking businesses, ‘How’s it going?'” Haslam said. “Up through June, it was pretty good, and our sales tax numbers up through June were good, too. And right about the first of July, it’s like somebody threw the brakes on. I heard that from retailers, distributors, manufacturers, all across the board.”

The governor pointed to the same problem he has brought up for weeks.

“I personally think it’s the fact there is a lack of confidence,” Haslam said. “People invest into confidence, and we don’t have that right now.”

The state’s most recent revenue figures, for July, showed growth of 1.7 percent over July a year ago. Finance Commissioner Mark Emkes has said the state should save a $28 million surplus in the general fund as a reserve against a possible downturn in the economy. July was the 12th consecutive month where total collections exceeded estimates.

Emkes is also concerned about maintaining the state’s position on its credit rating, which will be learned when top state officials visit bond rating agencies in New York in September. He has asked state departments to present budgets that account for potential cuts in federal funding.

The state recently announced its unemployment rate for July was 9.8 percent, the same as from June, while the national employment rate dipped from 9.2 percent to 9.1 percent in the same period.

Five counties — Houston, Obion, Overton, Smith and Weakley — showed increased unemployment in those latest figures. The lowest unemployment rate was in Lincoln County, at 6.2 percent, followed by Williamson County at 6.7 percent.

“These are very challenging economic times,” Haslam told the business crowd Friday. “But as a state we start from a real position of strength.”

The governor spoke optimistically about attracting jobs, citing advantages like a low tax rate and no income tax in the state, but even at that, he warned against larger economic dangers.

“As Washington looks at wrestling through their issues, I don’t know how that’s going to play out. But I do know this. I’m pretty confident that one way or another, the state of Tennessee will be getting fewer dollars going forward,” he said.

Haslam said he didn’t know federal cuts to be a fact, but “if I’m betting lunch, that’s what I would bet.”

The governor referred to the upcoming trip to the rating agencies and expressed satisfaction that the state had produced a responsible budget, which was approved unanimously in May.

“I think that shows that our General Assembly understands we’re going to have to make hard choices going forward,” Haslam said. “The point I will make to the rating agencies is that kind of mature, adult vision of how we deal with issues, I think, is exactly what will sustain Tennessee going forward.”

Haslam said the federal government has been spending too much money on a lot of things, and he pointed to how costly entitlement programs had become. He said he had read recently that 70 percent of Americans get more benefit from the federal government than they pay into it, surmising that that means a large percentage of people would have to vote against their self-interest to rein in spending.

“To fix that is going to involve some really, really hard decisions that I hope we have the stomach to make,” he said.

Haslam said he and others were in Chicago earlier this week for dinner with a group of business executives who are looking to expand. He said they said Tennessee was a great place to do business but that they were concerned about education in the state. But he also noted that instead of competing with states like Alabama or Ohio for those businesses that Tennessee is competing with nations like China or Brazil, which he said was a good sign.

Haslam was asked if, like many governors who have things named for them after their service, usually in the area of their expertise, what he would like to have named after him. He replied that he would be OK with nothing named for him but attempted to answer the question.

“Twenty years from now, I probably should be judged on ‘Did we really move the needle on education in Tennessee?'” he said. “It will take a long time to do that.”

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