Guiding Montana through an economic storm: interview with Governor Brian Schweitzer.

• Author: Barkey, Patrick
• Position: Interview - Cover story

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...