Federal spending and overseas uncertainty are factors to watch

By MATTHEW WEAVER

Capital Press

SPOKANE -- Economist John Mitchell says the farm sector is in good shape for the coming year, as the nation continues to climb out of the recession.

Agriculture has a solid base at a time when debt is going down, Mitchell said. If farmers aren't taking on debt and getting highly leveraged, they won't be as exposed to future price drops or slower income growth.

"You have the capacity to take on debt, but maybe not the willingness," he said. "That bodes well over time for the stability of the ag sector."

Mitchell said factors to watch include the slowly increasing spending by Americans, consumers working to reduce their debt, slowly growing employment, weak state and local government spending and a slowdown of the European economy.

Housing affordability is soaring due to low prices and interest rates, with the housing sector also showing slow growth.

Mitchell said 2012 will likely see continued growth in the United States, subject to global risks and policy risks.

Federal spending is going to be under pressure for a long time, Mitchell said. If nothing changes by Jan. 1 Mitchell expects a significant tightening of fiscal policy. Federal policy is on autopilot, Mitchell said.

There will be weakness overseas, particularly with political and economic uncertainty in Europe and the Middle East, which Mitchell said is a wild card.

"I get very uneasy when I see heavily armed people posture, and that's what we're looking at," Mitchell said. "All it takes is one person screwing up and pulling the trigger and everything I've said, forget it -- you're looking at a spike in oil prices ... and the possibility of an Israeli strike on Iranian nuclear facilities."

After Mitchell talked, farmers agreed that they need to keep the future in focus.

"Steady as it goes -- these last few years have been very good years, and we're just trying to hang on to the gains we've made," Davenport, Wash., farmer Courtney Morse said following Mitchell's Feb. 8 presentation at the Spokane Ag Expo and Pacific Northwest Farm Forum. "Most of us do have a good solid financial base right now. Just don't get wild with that, get yourself in trouble 10 years down the road, like a lot of people did in the 1980s."