Economist: Political uncertainty could impact economic future

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DENVER — Colorado’s economy stands on a knife edge between good times and another recession, and Congress can push it one way or the other, a state economist said Thursday.

Both the state and national economies are losing momentum, said Natalie Mullis, chief economist for the Legislature. But fundamentals are good: housing prices are recovering, banks have improved their balance sheets, and people are carrying less debt.

“All of these things seem to point to an economy that’s ready to move forward, but it isn’t yet, and the reason it isn’t is that economic and political uncertainty is high,” Mullis said.

She cited the risk of economic collapse in Europe and the upcoming debates of a number of budget issues in Washington. The last time Congress had an extended and dramatic budget debate, the economy slowed nearly to a halt, Mullis said.

Despite the dire warnings, Colorado’s budget appears to be ready to handle bad news.

The state finished its budget year in June with a $582 million surplus — its largest in a decade and a dramatic change from recent years, when legislators talked about scraping nickels out of the couch cushions to keep the books in balance.

Henry Sobanet, head of Gov. John Hickenlooper’s budget office, said the governor is still preparing his budget, but it looks like the state will have more money to handle growth in school enrollment next year. Since Hickenlooper took office, his budgets have cut or frozen school spending.

Sobanet credited an increase in capital gains taxes from an increase in the stock market, plus more jobs at oil and gas companies.

“It’s always good to get positive news with the state revenue forecast,” Hickenlooper said in a news release. “But we know many households are still struggling and different sectors of the economy are still fragile. We remain committed to supporting business and local communities, promoting innovation and helping the state’s most vulnerable residents.”

Hickenlooper is scheduled to release his budget in early November, shortly before Congress returns to try to reach a grand bargain on federal spending.