North Carolina's economic dean gives an update

Mike Walden is the Dean of North Carolina economists, having studied, written and lectured on our economy for more than 40 years. When Walden speaks, we listen.

Recently, Dr. Walden spoke to the Raleigh Investors Club, and we felt his remarks worth sharing. Mike began his talk saying we are unquestionably in a time of significant challenges and uncertainty, quickly adding that uncertainty is perhaps our worst enemy.

We are in year 6 of economic growth, one of the longest periods when there was no recession since 2008. The Bureau of Economic Analysis just reported the nation’s fourth quarter economic growth was 0.7 percent and was 2.1 percent for the year, down from 2.8 percent in 2024.

Walden was highly complementary of the Federal Reserve, a board of 7 governors who help regulate the country’s monetary policies. It constantly monitors two variables - employment and inflation, two key indicators of economic stability. Using this data, the Fed can determine key interest rates. The professor said every president has wanted to intervene in the independence of this body but the nation has benefitted by its independence.  

Artificial Intelligence is top of mind for many. AI is remaking the job market, especially with cognitive work; we see its impact on fields like investments, accounting, data collection and now, the field of teaching. AI can tailor instruction to an individual’s interests and abilities. There are concerns about how far AI will reach, what controls might be required and its ultimate impact, but Walden cautions not to become too alarmed. Already there are some immediate benefits, since America’s rapidly aging workforce is not growing, we have the lowest birth rate seen in modern times and the number of immigrants who can fill vacant jobs is reduced.

Social Security is also a large concern as our nation ages. We face more money being paid out than is being taken into our Social Security Administration. Forecasters say that if Congress does not address the shortfalls by 2030, payments to recipients may have to be reduced by as much as 22 percent. You can just imagine the reaction that would produce.

Walden remembered we faced a similar situation 40 years ago. President Ronald Reagan called together a high-level panel, headed by Alan Greenspan, who studied all aspects of the issue and came back with recommendations to increase payroll taxes from workers, raise the threshold of income on which taxes must be paid, extend the retirement age from 65 to 67, delay cost of living adjustments (COLAs) and mandate that all new federal workers and employees of non-profits be subject to contributions.

Mike speculated that whoever is president in 2030 will do the same thing, likely with similar results. No politician wants to act before then, especially those who face elections.

The federal debt of $38 trillion is more serious. Politicians pontificate about it but do little about slowing or repaying the debt. Dr. Walden reminded his audience that it has been since 1990, under President Bill Clinton, that the U.S. had a balanced national budget, adding that Charlotte’s Erskine Bowles was Clinton’s Chief of Staff and played a big role in negotiating that budget 

Walden is careful not to inject political opinions but said the president’s tariffs are most definitely a tax, despite how they might be represented. Estimates were that approximately $200 billion in tariffs were last year and, while importers might have initially swallowed the tariffs as an increased cost of doing business, most are now passing them along to consumers as increased prices.

Regarding the Iran war, Walden spoke to the concern about the disruption of oil supplies from the Strait of Hormuz, but quickly reassured his audience that America is a net exporter of oil and we therefore have a supply with which we can help provide needs. He remembered the Arab Oil Embargo of 1973-74 and the resultant huge increases in the cost of gas at the pump, recalling the period when you had to buy gas on either odd or even numbered days, depending on the last digit of your vehicle license plate. The resultant recession lasted until the 1980s.

We have recently experienced some big fluctuations in the price of a barrel of oil, the benchmark that determines prices at the pump. Prices spiked up to $120 a barrel at one point but settled back down around $100.

Can we anticipate a recession today?

Walden reported that a Wells Fargo outlook estimated we would have to experience oil prices of $130 a barrel for a period of one year before we saw a serious recession.

The North Carolina economy is strong with no signs of slowing at this moment, Walden added.

It is always good to hear experienced economists catching us up on significant issues and Mike Walden doesn’t ever disappoint.

Tom Campbell is a Hall of Fame North Carolina broadcaster and columnist who has covered North Carolina public policy issues since 1965. Contact him at tomcamp@ncspin.com