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February 12, 2012

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The Economy:

Recession in Nevada: Expect it to hang on a while

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Nevada Appeal file

Guy Rocha, the former Nevada archivist and historian, says Nevada’s current economic malaise will turn out to be worse than that suffered in the Great Depression.

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Saturday, Dec. 12, 2009 | 2 a.m.

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The current recession will wind up eclipsing the Depression of 80 years ago in Nevada, the state’s longtime former archivist and preeminent historian predicts.

“I believe emphatically that before the Great Recession runs its course, it will be worse than the Great Depression in Nevada,” Guy Rocha says.

Nevada fell into the Great Depression late and got out early, Rocha notes. The state didn’t get hit until 1931, two years after the stock market crash of 1929. And, helped by federal spending and legalized gambling as well as quick marriages and divorces, Nevada’s government was enjoying budget surpluses by 1935. By 1939 Nevada was well out of the Depression, Rocha says. The rest of the country didn’t get back on its feet until after the U.S.’ entry into World War II in December 1941.

Nevada started sliding early into what turned into the cratered economy of today, however, and is expected to be one of the last states to recover. The bubble of the state’s once booming housing market burst in 2007, and most analysts say Nevada will lag the rest of the nation in recovery because of its dependent on discretionary spending. The Silver State will not begin to recover until 2011, they say.

The bright side is that 21st century Nevada has more of a safety net, Rocha says. The effects of the recession do not “appear to be as stark. People were out selling pencils and apples on the street corner. You had Okies and Arkies.

“Today, we have unemployment insurance. We’re printing money. We’re finding ways to keep people at least sustaining. Those days, when people were down and out, they were down and out.”

Nationally, the recession is a far from the Great Depression. It’s estimated that unemployment then was 25 percent, although the U.S. Bureau of Labor Statistics did not track unemployment numbers until 1948, and there are no state-by-state breakdowns of unemployment numbers, according to an economist at the federal agency.

Rocha looked at Nevada governors’ State of the State speeches in his effort to assess Nevada’s situation then and now. He noted that in 1931, Gov. Fred Balzar’s message to the Legislature was upbeat.

“The expenditures proposed in connection with the Boulder Canyon Project (Hoover Dam) in Clark County, running into many millions of dollars during the ensuing decade, as well as those made at the Naval Ammunition Depot in Mineral County, are factors tending to lessen financial distress among our people, and these disbursements added to those authorized by Congress for additional highway construction give promise that Nevadans can face the future in a most optimistic frame of mind.”

Indeed, the New Deal helped pave many of Las Vegas’ roads and install its sewer system, according to Eugene Moehring, a UNLV history professor who has studied Depression-era Las Vegas. Nevada led the nation in per capita spending under the New Deal, and the Hoover Dam project employed up to 5,000 workers at a time, he notes.

Today, however, Nevada ranks among states with the lowest per capita spending.

Shortly after Balzar’s speech, the Legislature legalized gambling and shortened the residency requirement to get a divorce, moves designed to attract tourists. Later that year and into 1932, however, economic trouble hit the state’s ranching, farming and mining industries. Power broker George Wingfield saw his banks collapse and a bank holiday was declared from Nov. 1 to December 1932, Rocha wrote. In 1933 the Wingfield banks went into receivership and “livestock men and farmers were forced into bankruptcy.”

Buoyed by the new lax laws on social norms, the state saw an increase in business. By 1936 the state had a budget surplus. Gov. Richard Kirman and business leaders launched the “One Sound State” campaign, in which Nevada tried to attract millionaires by boasting “no income tax, no inheritance tax, no sales tax, no tax on intangibles, but with a balanced budget and a surplus.”

By 1937 the state surplus was so large that the property tax rate was cut by 20 percent.

But the tricks the state used to pull itself out of the Great Depression are no longer innovative.

Nevada has lost its monopoly on legalized gambling. Casinos can be found across the nation. But there is also a more fundamental difference in Nevada’s economy today. It was built largely on growth. It ratcheted way up during the boom times — and then fell far, fast and hard.

“We will not see a sustained recovery in Nevada until we have at least six months of steady job growth and rising home prices,” economist John Restrepo says. “At this point, and considering how cloudy forward visibility is today, the data and our research indicate that the earliest that this is likely to occur is sometime in 2011.”

Restrepo is a member of Nevada’s Economic Forum, which projects tax revenue for the state.

Michael Green, a historian at the College of Southern Nevada, says this recession may seem worse than the Great Depression because Nevada had so much more to lose.

We’ve had farther to fall than our Nevada ancestors. They lived in the least populated state in the country. “The fall appears steeper because we were so far above where we’d ever been before,” he says.

When the Great Depression struck Southern Nevada, former Clark County Commissioner Ralph Denton was a child living in Caliente, 151 miles north of Las Vegas. Denton’s father closed his saloon and his mother, who lost her job because of a crackdown on married female teachers (because, the argument went, married heads of households should have the jobs) took in boarders.

In Caliente, those with railroad jobs were OK, but “everyone who wasn’t working for a railroad was scratching a poor man’s ass,” Denton, 84, recalls.

Denton’s father took up mining and opened a mill. One day, in 1938, as they were waiting on a rock for 10 loads of gunpowder to explode to clear a mine, Ralph Denton turned to his father.

“For God’s sake, why didn’t you keep going west to California?” the teenager said.

“Anyone can make it in California,” the senior Denton said. “It takes a man to make it in the desert. It takes a man to make it in Nevada. It takes a man, to make it in this.”

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