- Five months ago, the National Bureau of Economic Research declared that the US was officially in a recession.

And what a weird recession it's been, according to Amelia Thomson-DeVeaux of fivethirtyeight.com and COVID is the culprit.

Oil prices have suffered, jobs have been lost, tax revenues are down.

But there is reason for optimism, hope not too far ahead with news of reliable vaccines.

Of course we have challenges ahead.

We'd like to know how those challenges might unfold.

So tonight we ask what's ahead for our economy?

I'm Becky Ferguson, and this is "One Question."

(bright music) Tonight we have the full attention of an expert in the field of economics, Dr. Ray Perryman.

Dr. Perryman is president and CEO of the Perryman Group, an economic research and analysis firm based in Waco.

He lives in Odessa.

He holds a BS in mathematics from Baylor University and a PhD in economics from Rice University.

Dr. Perryman has held numerous academic positions in his career including 10 years as the Herman Brown professor of economics and five years as the university professor and economist in residence at Baylor University, as well as five years as business economist in residence at Southern Methodist University.

He has authored several books and more than 400 academic papers.

Dr. Perryman has been called a genius by the "Wall Street Journal", a world-class scholar by "Business Week", the unofficial state economist by the "New York Times" and the most quoted man in Texas by "Texas Monthly".

All this to say we have a real expert to answer tonight's question, what's ahead for our economy?

Welcome Dr. Perryman.

- Glad to be here.

- Thank you so much for joining us.

We really appreciate it.

About a year ago, maybe a little bit over a year ago, you did a report for Priority Midland, and you talked about where we were at that moment and forecast for the future on population, on the economy, on oil prices and looked at the report and we were projecting like $73 a barrel in 2020 and 92 in 2025.

Now we have COVID.

- That's right.

- So it's changed the landscape.

So tell me what you're thinking in terms of the Permian Basin with our new circumstance.

- Sure.

Well, obviously some things have changed, there's no question.

And the way I like to think about it is, we put a giant pause button on the economy, and obviously the demand for oil literally dropped to over 25% in 30 days in the world.

I mean, we've never seen anything like that before and never nothing that rapid.

And obviously that changed of a lot of things.

We went through the day, which I actually told some of my clients two or three weeks ahead you may see this when the price went negative for a day, when people didn't have a place to put it in, I had to take the, but right now it's a range, usually staying around the low $40 per barrel range, which actually for some parts of the basin is actually a profitable place to be right now, which is amazing given where we were seven or eight years ago.

But, it's not going to pick up dramatically until the demand for oil picks up in the world more and it's done well.

It dropped down well below 80 million barrels a day It's back up in the nineties again, it was about 101 before this started.

So that's gonna take a little bit of time to get it back- - To absorb that.

- to where you can absorb that.

Long-term though, just quickly, one thing I like to tell folks here, because the things that drove our long-term forecast before were the demographics of the world, the cost and trade patterns of the world and the emerging technologies of the world, these big, huge things.

They haven't changed, they've been paused, but they haven't changed all the things that drove the demand for energy and the longterm future of the Basin before are still here.

And I want to make sure that people know that because I think that's a very important thing to keep in mind.

Obviously, some deck chairs get rearranged.

Some companies get bought by other companies and things like that change.

But as far as the production in the future of the area, that oil is still gonna be very much needed in the world for many decades to come.

- Well.

I liked the way you talk about a pause.

That's much more positive, and now we have some vaccines on the horizon that look extremely promising.

What do you think the effect will be going forward when the vaccines come on line?

- Well, obviously that vaccines are outside my area, but the very first speech I gave back in March after this happened, the very first thing I said, which now eight months later, a lot of people are saying is unlike any downturn we've had in the last 60 years or so, this downturn was caused by a big outside force, a health crisis.

It wasn't something wrong with the mortgages or something wrong with .com stocks or our savings and loans or any of that stuff, it was something, just a big force in the outside that drove this.

We don't solve the economic crisis until we solve the health crisis.

The people in the election, they kept asking, "Which is most important?"

Well, it's the same thing.

You really can't separate them.

The vaccine seemed promising.

I think it'd be a combination of vaccines and therapeutics and behavior changes because it will come to peacefully coexist with this virus over time.

Like we peacefully coexist with the flu, we certainly haven't eradicated it, but I think that can happen and obviously the sooner, the better.

The other important thing in this mix is we really need the federal government send some more money to people.

- Talk more about that.

I was going to ask you about an incentive package.

- Well, the cares act, which was passed early was it was a good bill.

It wasn't perfect, I mean, Washington doesn't do things perfectly, they subjected dead people and it took a while to write the regulations, it wasn't perfect by any means, but it did what it needed to do.

It got the money in the hands of small of individuals who were suffering and that sort of thing.

The problem was that bill sort of assumed, and I think most of us did that- - Wouldn't go away.

- it would be dislocated for two, three months and then go back to some semblance of normal and we're now eight or nine months into it.

And so we basically need to do that again because you have individuals, even a family that's saved their money and manage their money well, you can't go six or eight months without income or your income cut in half a small business, it's very well run and very well managed.

They exhausted liquidity in this amount of time.

And so we really need to get something else done and that would really help to keep the structure of the economy together.

Because if there's nothing good about this situation, obviously, but the one good thing about the economy to some extent was when this happened, the structure wasn't broken, we were in the 11th year of a recovery and expansion and we had legs still left on it.

So it wasn't broken.

It wasn't something like the mortgage process where you had to go fix something, unfortunately we don't do something quickly, we're gonna break it and that's what we don't wanna do.

- I know you don't have a crystal ball, but do you anticipate that we will have a package before the end of the year?

Or do you think it will happen under the new president?

- I would like to say, we're gonna have it for the of year.

I'm not optimistic at this point, primarily because of the Senate.

I think the administration would like to get something done.

I think the house would like to get something done.

We seem to have a lot of problem right now with the Senate in terms of getting enough votes together to get something meaningful done, because it needs to be big and I I've been one people who've heard me speak over the years, after year said, "We should get control of the deficits and the debt."

- But not now.

- But not now exactly a very prominent economist back in the 1930s, who was very wise, as he was talking about ways to get out of the great depression, they said, "well, in the long run, markets will take care of this."

And he said, "In the long run, we're all dead."

And that's kind of the situation we find ourselves in now.

It was the 10 years of economic growth we should have been something about the deficit, not right now.

And so hopefully with the election over cooler heads can come in, we can get something done.

I would like to see it sooner, but I'm afraid it may well be January.

- You mentioned a minute ago that we didn't have any sort of structural or fundamental problems.

So maybe the election won't make any difference, but I'm still gonna ask you with a new administration.

What sort of effects do you think that will have on the economy going forward?

- Normally presidential election will have much effect on the economy, normally they don't, if you look historically and of course we've studied it, other people have studied it.

The company has done a little bit better under democratic administrations, not much but a little bit.

And it is statistically significant, it matters, it's more than random thing, but by the same token, you still can't say that it was a causal factor.

But there hasn't been that much difference, primarily because as I mentioned earlier, it's the big demographic trends in the world of trade the technology, those are the things that drive the economy.

We may see some difference here.

I doubt that a lot of the agenda that president elect Biden put into place is likely to happen just given the makeup of Congress and the way the world works up there.

Daniel Patrick Moynihan, once famously said, "We campaign in portrait and govern in prose."

And I think we're going to see that happen again.

But I think a couple of things where you may see some, a little bit of change, it may be beneficial.

One is this administration does seem to be more focused on the virus, and that sort of thing.

And the big problem we're going to have once we get a vaccine in place, you have to manufacture enough doses.

You have to manufacture enough viles.

You have to be able to ship it at low temperatures and stored at low temperatures.

It's a massive logistics problem.

And they seem to be more focused on that.

And Alan Ron Klain has been through this before.

He was gonna be the chief of staff and he was very competent.

- 'Cause he was the Ebolazar - He was the Ebolazar.

He's a very competent individual.

And so I think there's something there.

The other thing that may change a little bit, that may help the economy is one thing that economies hate worse than anything else is uncertainty.

They do not like uncertainty.

They can take good news and process it and move on and they can take bad news and process it and go on.

But that's much like us as individuals.

- I was gonna say, I feel that pain.

- Exactly we all do, when you're uncertain about something, you tend not to do anything.

Just kind of sit back and wait.

And we have an economy that's based on people doing things.

And I think you'll get a little more predictability out of this administration.

It's gonna be a much more traditional administration in that sense and that you may not like everything they do, but it's going to be pretty predictable what's gonna happen in markets like that.

Markets can adjust- - Knowing what to expect.

- investors can make decisions based on that and that's what you need to keep things going.

So I think those two things may make some difference.

Generally speaking, presidential elections have not moved the needle much in history.

You have to go back to 1932 to find one that really moved the needle significantly.

- Interesting, we've had 250,000 deaths from COVID and I read a paper that you had written about the effect of the deaths on the economy going forward.

Can you talk a little bit about that?

- We just want to try to quantify that at the time we were trying to do what it looked like for 2021.

I'm sorry, for 2020, at that point, the projection was about 280,000 deaths, by the end of the year I'm afraid we're gonna go beyond that now.

But basically, we just looked at it from a standpoint of looking at the age, the education level, the ethnicity, the unemployment rates and labor force participation rates of all the people who have died.

What would be the impact that those people that lived out their normal lifespans and basically the country would have gained an additional roughly two and a half million.

What we call job years that is years of work in the economy, which has an enormous amount of productivity and billions of dollars and output.

So in addition to the horrible human cost, which has to be our first concern, the families that are displaced, all the horrible things that happen, the economic effect itself, when you take that much of a resource of people who are working in creating and doing things, when you take that out of our society and in some cases for decades to come, many of the people were olders and that wasn't the case, but for some for decades to come, you begin to see, just the kind of long-term effects this has, that will linger with us beyond once we get past all of this, the kind of things you can't recover that, you can't, you're not gonna get those folks back.

- Let's talk a little bit about Texas.

I know when the legislature goes into session in January, that they are looking at a huge deficit.

Huge, huge, huge.

Can you talk a little bit about that and what we can expect?

- Well, it's gonna be a very difficult session.

There's no question about that.

There's going to be their deficit as I'm sure all of us know, Texas gets most of its money, that it gets from taxes from a sales tax, and many things were shut down part of the year and simply nothing was collected.

Others are well below the pace that they normally set.

And so the sales tax is down the big source of some by revenue and particularly our reserve revenue, as we well know out here is the severance tax and that's been adversely affected as well.

The franchise tax is based on profitability and that's been affected.

So everything in our tax structure has taken quite a hit this year.

And so we are facing a very difficult situation from that perspective, at the same time, the needs have gone up, more people lost their jobs.

So they don't have health insurance.

So they show up and ended up in indigent healthcare and things like that.

And so Texas has an enormous increase in needs and a shortage in money, worst possible combination for government.

We also have a proclivity that says, "We're probably not gonna do anything with the tax structure."

So therefore, that comes to two questions, number one, How much do you cut and number two, how much do you take out of our rainy day fund or economic stabilization fund?

And I think there will be some of that.

It's difficult to say what all the priorities will be.

We're certainly advocating for some things we'd like to see happen that would improve the budget, improve health care and some things like that.

One thing I really hope they do is we made some progress last session in funding public education.

But we didn't create a permanent source of funding for it.

And we really need to keep that momentum going.

The most important thing we can do for Texas is we look at the demographic shifts of the future, the population growth and the way the economy is evolving into more and more sophisticated work skills.

Even for folks who are working at some of the lower ends of the workforce matter, we desperately need to keep our education system improving and going forward, so I hope we were able to do that.

Something always gets cut when there's a difficult time as higher end and research and that sort of thing.

That's a terrible thing to cut, it really is.

But if you look at our state budget, if you look at infrastructure, which we have a lot of needs in, certainly out here we do.

If you look at healthcare and you look at education, you've taken care of about 85% of the budget.

So there's all three of those things are going to be under close scrutiny.

And so you just hope you kind of do as little harm as possible in the process and that they realize if it was ever a time to use the rainy day fund, this is it.

- It's raining.

- Yeah, I used to joke with them after Harvey, I said, "That's literally the biggest rain in history.

What does it take?"

- What does it take?

I also noticed that you had written an open letter to elected officials in Texas about Medicaid funds.

- Several people noticed that letter.

- I want you to explain the issue because Texas is one of the States that decided not to expand Medicaid.

So explain that and what the consequences have been and what your open letter said.

- When the affordable care act first came out, it had some good things and bad things about it so it wasn't perfect.

The way it went about handling healthcare for the indigent was basically making everyone that's below 130% of the poverty level eligible for Medicaid.

And now insured in Texas, only the children and those that are blind or disabled.

It's a very small group of people that are eligible for intakes.

We have over a million of people who would normally be eligible in most States.

For the first three years the federal government paid a hundred percent of that, the match is now 90%, and that's a permanent level.

So basically the state puts in $1, the feds put in $9.

So we took a look this at a very, and we're gonna do more of this later, but right now I corral some academic friends from Rice and in various places that are really great nationally recognized authorities on health care and said, "We've all got to do this.

We've got to get this out there."

And we looked at just straight from the budget, forget any of the dynamic stuff that happens from higher incomes and more people working in less absenteeism and less stress on county health system forget all that.

Let's just look directly at the budget.

If we put our $1 and we get that $9 back, and then all the other things that we can do within the budget, for example, there's a lot of people that the state now pays for healthcare for that suddenly we could get 90% reimbursed.

There's others that are on traditional Medicare that can move, which takes us from about 65% to 90% looking at those kinds of things, literally the state can get all the money back it would put in plus about $125 million over by annum and not counting any of the very positive dynamic effects.

And so the state would actually be better off financially, and we would put a million more people on healthcare, which takes stress off your County hospitals.

There are rural hospitals.

I mean the ones out here and elsewhere, I mean, you have rural hospitals that really depend on Medicaid money and that's what they have.

A lot of uncompensated care will all of a sudden all the people in those areas, when they came to the hospital, they would be insured.

And that just makes a huge difference in the sustainability of our state, the quality of life, our rural areas our inner city, urban areas.

I mean, many parts of the state.

And it's something that is very, very important.

I think in the longterm in 38 States have now done it, and there's an increasing minority and several more have voted to do it, it'll referendum the last election.

So we're very quickly getting into a point where only a handful of States will have not done it.

I'm hoping the legislature will try to take a step back, they didn't like it at first because everybody called it Obamacare and it was a lot of politics involved.

And hopefully, that was over 10 years ago.

I'm hoping we can take a step back, look at the situation this time and take a good, hard look at it in the way we should.

- I would think it would also take some stress off of like Midland and Odessa because don't we as taxpayers pay a huge amount for indigent care at our three hospitals.

- The thing about it is in today in Texas, if you're in that situation, if you have a sick family member, you don't have insurance, the one place you can be assured of getting healthcare, the one place to require to take care of you is the emergency room door.

That is the most expensive door and the most expensive building in the healthcare system.

And then when they come in that combat the hospitals don't get paid for it becomes uncompensated care and the only way we funded is through our County taxes.

And that's part of the study we're gonna come out within the next week or two is gonna look at, okay, how much did the counties get back in it, all those things.

But at first, we just wanted to say the legislature, just look at your budget today and don't worry about any of the fancy stuff that happens outside of that just to get a direct focus.

The next phase will be, let's look at this from a holistic standpoint, what does it mean to County gums, your insurance premiums?

Because again, when your local hospital goes to negotiate with blue cross or Aetna or whoever then to go, part of the negotiation is, we have all of a sudden compensated care.

You have to make up for it a little bit for us.

You have to help us out to keep us viable.

And so that translates into our insurance premiums for folks that have insurance.

So there's, a lot of tentacles to this thing and people who have insurance go to work more, they're healthier, they're more productive when they're at work.

There's just a lot... - Of different benefits.

- And that's the of things we're exploring in the new study that will come out in a couple weeks.

- So interesting.

I noticed that you have also written a paper about the fiscal benefits of UTPB.

- Yeah, absolutely.

- Tell us a little bit about that.

- That was a very exciting project for us.

We've analyzed universities all over the country.

We've probably done two or 300 of them over the years, but it was especially nice to do UTPB because it is our local university.

And that it's so important to the future of our area.

And as I look at the future of this area, obviously we talk about diversifying from petroleum and we need to do some of that obviously, but I look at how we can diversify within petroleum and it's things like somebody has got to solve the water problem.

And petroleum is a big aspect of that.

There's a lot of renewable energy in this region that, we have to figure out how to burn oil cleaner as we tried to address climate issues going forward.

And we have probably have more intellectual capital about oil and gas and knowledge of energy, just sheer brain power, forget what's under the ground for a minute, just brain power, about energy within a 50 mile radius of where you and I are sitting than any place in the world and university is how you harness all that and bring it together.

So it was a look at both the synergies of the long-term, as well as just what it brings today in terms of our health system, our school teachers, the engineering programs that help us with the petroleum industry.

And it was a really exciting project to do.

And it was a pleasure to work with everyone over there and try to really quantify for people to understand that it's also something that I think the local economic development groups and the various communities can use as a recruiting device, because as we go forward from this pandemic companies are now looking at things beyond what they used to look at.

They really wanna know what kind of education system you have, what kind of healthcare system you have, what kind of broadband access you have.

There's a number of issues like that, that become very, very important.

- I noticed that on your website, you have something called the pyramid top 10, and it seems to be CMAs that are projected to be the fastest growing and number two was Odessa and I assume that's Odessa and Midland 'cause aren't we the same?

- No, we're not.

- We're not?

Okay.

So it's Odessa.

- We're separate, and it depends, we change it every week, but a different indicator up there.

Some week is service industry, some weeks it's overall output, some weeks it's wages we keep that just as something just for people to go look at just for curiosity's sake.

In fact, I think now, but I know this my young programmers now have it, where you can even pick something and it'll pop up the top 10 and you can pick your indicator will pop up the top 10 for that and we ranked very high in some things, and we ranked lower than others, obviously when it comes to energy, when we ranked very high and you could do a worldwide ranking, would be up there in same place.

Other sectors we lag behind in but we have a very interesting dynamic economy and really a linchpin to what the world is gonna need going forward.

If you look at the world and elections again, they're obviously a very useful, important part of democracy.

They also create a lot of noise and during this election, you heard a lot of people say, "Let's get rid of oil and gas and just get rid of it."

You had a lot of other people say, "climate change is a hoax.

It doesn't exist."

Those two things are both absurd, ridiculous statements.

The truth is, if you look at all, we could possibly do with renewables and all we could possibly do with nuclear and better storage through batteries and hydrogen, and even a black Swan, let's invent something new we'd never even thought about.

If you do all of that, and you look at the growth in the emerging countries of the world that are manufacturing and using more and more energy, 25, 30 years from today, we're gonna be twice as much energy in the world as we have right now.

- So we need all comers.

- We need all comers and if we did everything, I just mentioned to the maximum extent, somewhere between 60 and 70% of that energy is gonna be hydrocarbons.

So what that says is, "We're gonna need these hydrocarbons, but we're gonna have to figure out ways to burn them cleaner, not to let as much carbon in the atmosphere."

And the big companies realize that they're doing research right now on ways to accomplish that, but people get all tied up and we wanted to not exist completely or we wanna say, get rid of everything, that's not productive.

Unfortunately, elections kind of, I think, breathe that a lot as both sides kind of in the primary season, - Go to their corners and then try to come back to the middle of the election and we go through that process.

So it's extremely important.

The resource we have here, and I encourage the campaign some of you've probably seen the Permian Fuels America we did the research for that.

It really encouraged that to be launched.

People need to understand, because we don't have the best reputation in Washington, people do sometimes view us through a bad lens because of environmental issues and things like that.

And we need to make people understand that literally through a strange set of circumstances involves technology and changes in globalization and regulation, all sorts of things, new discoveries, because of such set of situation it takes me an hour to describe this place has suddenly become one of the most important places on the planet for the future of the earth- - You're cheering me up.

- and I want people to realize that.

- Love that, real quickly, I have watched the stock market during all of this COVID and it doesn't seem to me like it has responded as I might have anticipated, given my complete lack of expertise, but talk a little bit about what's driving the stock market.

It doesn't seem to be tethered to anything?

- It is unusual right now.

I think if you go back to the very beginning, when it was falling a thousand points, 2000 points a day, and sometimes fluctuating up and down a couple of thousand points in both directions in a day, what was happening was, as I mentioned, a moment ago, markets, don't like uncertainty and day in and day out, markets look at things and they evaluate the risk and return and decide what they want to invest in that sort of thing.

I would say they couldn't even see those curves, it was like, there was no information.

As we've gotten more information those swings have been a little less volatile.

Right now, I called it, in fact, I did my radio commentary a couple of days ago on the COVID market, because it's literally looking at this the days we get good news about a vaccine, the market does well.

The days we get a bad news about cases, the market goes down.

So right now I think it's the market is every day trying to assess when do we come out of these?

And I think they are with obviously with imperfect and incomplete information, but that's what it's trying to do.

And that's gonna drive it for the next little while here.

- Thank you so much for coming and visiting with us.

Give us lots to think about, and I think ending on a note of optimism.

- Well, my pleasure, it was pleasure to be here with you, Becky.

- Thanks.

Nobel prize, winning economist, Paul Krugman predicts that once the pandemic subsides spending will surge and we will experience a mourning in America type of recovery.

Let's hope and pray.

Our painting this evening is an untitled acrylic on canvas by Jack Roth, 1927 to 2004 Roth earned degrees in chemistry, fine art and mathematics.

He worked as a hotel night clerk, a hospital orderly, a whiter and a professor all the while, creating art until finally striking gold when his work was selected by the director of the Guggenheim Museum for a traveling exhibit young American painters, along with cocooning, Pollack and others, his work has been exhibited at the museum of modern art.

This painting can be seen at Becker Shore Fine Art Gallery in Midland.

Finally tonight, thank you for watching "One Question."

We will be back each Monday at five following Basin Life with Krista Escamilla where we will answer the questions you want to know from the people who know.

If you have a question, send it to us at One Question at BasinPBS.org, coming up on Basin PBS, BBC world news America with Katie Kay followed by PBS news hour.

I'm Becky Ferguson.

Goodnight.

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