Welcome to the June Tourism issue of NorthBay biz magazine. Ready for some good news? Tourism is flourishing locally and throughout the state of California. Beginning in the second half of last year, tourism revenues exceeded pre-9/11 levels, and forecasts for this year say this trend is here to stay. Hotels and local B&Bs are filling up as both business and leisure travelers return to the North Bay and Wine Country. As the crowds swell this summer, remember to keep smiling despite the added congestion—the billions of dollars these tourists spend isn’t only great for the local economy, it also translates into millions of tax dollars that help fund local services.
This issue has an appealing mix of local stories, columns, and special features focusing on business related to the tourism industry. Also in this issue, we introduce our newest columnist, local attorney Brandon Blevans. Brandon is a partner in the Santa Rosa office of Dickenson, Peatman & Fogarty that has offices in both Napa and Sonoma Counties. Brandon has been practicing law for more than nine years and has advised hundreds of local employers on issues ranging from drafting employee handbooks to defending complex litigation matters and fending off governmental agencies. His monthly column will be called “Simply Legal” and will offer insights to employers of all sizes on all facets of labor and employment law. Please join me in welcoming Brandon, a noteworthy addition to our already fine coterie of columnists. Next month, we’ll be introducing another new monthly feature designed to inform and entertain—until then, please enjoy this month’s issue of the North Bay’s only locally owned business publication, NorthBay biz.
Think government is big now? Prepare yourself. In the next few years, a confluence of circumstances driven primarily by the baby boomer generation will, in all probability, double Uncle Sam’s portion of the economy. The Federal government spent about $2.7 trillion in 2006. That’s around 20 percent of the slightly more than $13 trillion GDP. Surprisingly, that spending percentage has been fairly stable over the past 5 decades or so, as government spending increased incrementally as the GDP grew. But that relationship is destined to change as entitlement spending explodes to coincide with the boomers’ retirement. Most economists predict Federal government spending alone will hit a minimum of 33 percent by the middle of this century, and when you include state and local government spending, the number will easily exceed 50 percent of GDP. Now we’re talking a huge, lumbering welfare economy rivaling the declining, lethargic and beleaguered economies of Europe.
Add to this mix the fact that many of our elected officials, both in Washington and here in California, embrace the growth of big government to take in money and redistribute it to perpetuate their power and create a population dependant on the government dole. As we move into the future, this vision of America will continue to increasingly battle those in government whose vision of a vibrant and strong society is based more on control of your own assets and the ability to make choices free from government mandates. Left to existing policy, while driven by demographic forces, the welfare state must continue to expand, raising taxes to economy-crushing levels.
Here’s why I believe we’re up against a staggering challenge if we want to change this course and maintain a vibrant economy: 80 million. That’s the size of the boomer generation, representing almost one-quarter of the U.S. population. It’s the biggest demographic bubble in our history. To make matters worse, about 20 million of these people, on the cusp of retirement, have total net worths of less than $50,000. Given longer life expectancy, it’s easy to see they can’t get too far on such a small nest egg. According to David Galland, managing director of Casey Research, “In 1930, the total share of the U.S. economy directly controlled by or dependent on government was about 11 percent, leaving the balance of 89 percent firmly in the hands of private enterprise. Today, by the late Milton Friedman’s calculations, the government share of the U.S. economy—including the time and resources required to comply with all the regulations—has ballooned to more than 50 percent, reducing the wealth-creating machinery of free enterprise to an auxiliary engine for government.”
U.S. government debt exceeds $9 trillion before you include the unfunded obligations for Social Security and Medicare. When you add it all up, our debt is more than $60 trillion. There’s an old quote from an Illinois senator uttered during a budget debate in Congress, that went something like this, “A couple million here, a couple million there, pretty soon you’re talking real money.” That was back in the 1950s. Anybody can be a millionaire these days. So let’s try to quantify what a trillion dollars represents—let alone our $60 trillion in debt. A trillion is 1,000 x 1,000 x 1,000 x 1,000, or a million millions. President Reagan once pointed out a stack of $1,000 bills four inches high makes you a millionaire. If you want to be a trillionaire, the stack of bills needs to be 67 miles high!
So with millions of boomers chronologically—but not financially—prepared to retire, the pressure will be on the government to ratchet up additional spending programs. Millions of folks worked a lifetime to reach their golden years only to find it’s a mirage. Now they must depend on handouts from the government to barely eke out subsistence. This is a devastating scenario. No wonder, increasingly around the world, governments are encouraging people to build their own nest eggs and, in fact, are subsidizing asset accumulation of its citizens. Maybe President Bush’s plan for personal retirement funds wasn’t such a bad idea after all as a way for younger workers to plan for their financial future and help relieve the government of future monetary obligations. In the past, Americans have embraced every plan that helped them control their own destiny by controlling their own assets. What’s needed now is obvious. Unfortunately, entitlement reform is a hard sell, and it’s too easy to continue down the path of tying to spend our way out of every problem instead of making the necessary sacrifices now to ensure a brighter future.
That’s it for now. Enjoy this month’s magazine.
