A Recession Tale of Two Cities

When you talk to an American today, you cant escape from talking about three things. Recession, India and China. Americans are hit hard by the recession and the sub-prime crisis is still a fresh wound. Though many of the people whom I had spoken to, are hopeful that the market would eventually pick up and roll, they are not sure how long it would take. “Atleast a couple of years before things would be back to normal” says Al Pollock, my present host at Anthem. I nodded my head in agreement and thought back on a few conversations I had back in Lake Havasu with Wes Brownfield about the recession.

Wes Brownfield, is the Director of Educational Services, Lake Havasu Unified School District No.1. When we spoke about the recession, he was more specific to Lake Havasu area, but the insights that we can gain from this can be applied to other areas as well. We began talking about the housing market, and Wes pointed to me that the housing boom built up a large construction industry. When the market went bust, the first industry to get hit badly was the construction industry. A lot of builders who were building casinos, hotels, homes for people to stay, etc., stopped their construction in the middle as they were not sure that they could complete it. Owners of such properties became involved in looking at their mortgage repayments and no longer could afford to complete the construction. As a result a lot of jobs were lost. A lot of families would have to suffer. Wes also informed me that as the housing market went down, it created a ripple effect in the city. The first people who were affected were the small and medium service providers to housing. People who were helping clean swimming pools, landscaping service providers to homes, etc., were the people who were hit hard. I guess that if some of these people had borrowed money from banks and bought a home, they were really doomed.

A big business domain in Lake Havasu City is the boating industry. Lake Havasu City, is the second largest pleasure boat manufacturing location in the USA. “The Desert Storm” is an annual speed boat racing event organized by the City for entertainment. This brings a large number of people who bring their boats to the Colorado river and race it. We went kayaking on the river on the same day when the “Desert Storm” boats were racing the river. Its an amazing event and the boats are very expensive and attractive. The boat owners come from long distances to participate. They come atleast a week before the event, and camp out in the area. They require boarding, lodging and boat repair and maintenance services. They need places to park their boats, to clean them up and take them to the boating ramp.

Even otherwise, several people would like to get their boats here or hire some boats locally and race in Lake Havasu. People from states like California, Idaho, Nevada, etc., come to Lake Havasu and spend time on the river during the summer time. Its a relaxing time for them and money making time for the city. As the economy went bad the boating industry got hit, because people could not afford the prices. The crisis of the city reached its apex, as one of the biggest boat manufacturers in the area closed. Lot of jobs were lost and lot of families had to suffer. If those families had mortgages on their homes, they were out of their homes too. Many families had to move elsewhere to find a job.

But wait, what did these people do with their homes? Obviously, they didn't have enough money or income to pay their mortgages. They also didnt have jobs that were available for them to stay in the city and pay their mortgages. The banks wouldn't allow them to move without closing their mortgage. The solution is “foreclosure”. The bank acquires the property and gets whatever it can from the client and allows him/her to move. The problem is that the bank has this property and has to sell it in order to make money on it. Or it has to rent it, lease it or do something with it so that the property acquired gives some value to the mortgage that has been “foreclosed”. Many banks face this problem with foreclosure. Brian, who was our tour guide for our trip in Prescott, works with a bank and he was the one who first mentioned to us about the problems of foreclosure. When I asked him what the banks would do, he said “They simply wait for a good deal!” That might be the best thing to do, after all.

Further to this a few social problems add up. Wes mentions about some families, who had learnt to live from paycheck to paycheck without caring to save or invest it in some way. If one of the partners in these families loses a job, and their mortgages are dependent on these salaries, these families would be hit hard. Again, the foreclosure becomes the only option. Such life-styles not only create financial issues but also social issues. We all know that the Government is encouraging spending in order to pull the market up. But, many people are spending money and are unable to pay their taxes, which is creating a shortage of funds for many government supported projects. The little consolation that is being seen in the form of increased consumer spending is being washed away because of tax shortages.

For instance, States are now cutting funding for schools. Schools are now trimming their ends as they negotiate their budgets. The mediocre performers are getting the pink slips. Wherever we went, principals, headmasters, deans and other important professionals managing the schools, are involved in some budget meeting or the other. Apart from facing social challenges in schooling and educating children, schools now also have to deal with job cuts. Most people who are dependent on schools for their paychecks, would have to move out from their locations in search of jobs. And the market has no jobs for them at the present moment. Its not only that, but schools are now combining classes and making the class size bigger. This would pose a challenge to the teacher, who has to now struggle with larger class sizes, and instruction strategies have to differ. In a conversation with Dr. Nicolas T. Sanchez, Campus Dean, and his colleagues at the Mohave Community College, we discovered the strength of parenting in education.

While explaining to them how our class sizes are usually large and how our schools expect parents to involve with the child's education, we discovered that parents spend time with the kids at home and give the needed personal attention that the teacher in the school might not be able to give because of the larger class size. Since, it is a common cultural trait in our society that children are cared for throughout their life time by the parents, they make it a point that the child's education is customized and proper attention is paid for. We also got reminded how schools demand that parents be involved in better performance of the child, and how peer pressure works in schools. Dr. Sanchez and his colleagues were expressing a bit of grief that the US family system doesnt work that way. Another social issue of single parents and work shifts also came up in the conversation.

A lot of parents in Lake Havasu City work in different shifts. This makes it difficult for them to find time to spend with their children. If the parent is a single parent, then to sustain life in these difficult times, he/she would be working over hours and hence to make time for the child itself would become tough. These two problems make parents to expect the school to take care of the child's education more seriously. Therefore, the burden of paying personal attention would fall on the teacher. The State Government's slashing down the funding for the school therefore indirectly accentuates the problem in the long run as quality of education gets affected. This means unavailability of work force with a sound educational background, which means jobs might get shifted to those places where workforce is available. That is to say, if India and China can get their people to have the skills needed in the USA, there will be more jobs in India and China and less in the US.

Bullhead City also faces similar challenges. We spoke to Paul, who has a newspaper “Mohave Valley Daily News”. He was also our city guide and accompanied us to Las Vegas. An accomplished professional, compassionate human being and an extra ordinary Rotarian. We had a good time talking to him and knowing things from him. Paul was explaining to us the challenges of the Bullhead City and how the recession is affecting their growth and development. Bullhead City, Arizona and Laughlin, Nevada or on opposite banks of the Colorado River. Laughlin is a place known for Casinos and Entertainment. Bullhead City on the other hand is a shopping center for Laughlin. That is to say, people come to Laughlin for getting entertainment and get to Bullhead City for shopping for their regular needs. Thus, these two cities are interdependent on each other for their economic development.

Bullhead City has a limited population. But it needs big retailers such as Kohl's or Wal Mart or Macy's to setup shop because people in Laughlin can then consider the city as a center for shopping opportunity. But, because of the population's limitation, these retailers hesitate to come over. Further, the economic downturn has reduced spending on entertainment, which means less people in Laughlin, which further means less people to shop in Bullhead City. This also has lead to delays in starting big retail outlets, which is further pulling the city's economic development down. Another major challenge to both Laughlin and Bullhead City is to get Air Carriers to operate in their Airports. With a lot of flights being cancelled and with big operators cutting costs heavily, though the airports have permission to operate International flights, they are unable to convince the carriers to come through.

Its tough times for these people. But, they will survive that. They will come back and make their lives as comfortable as they used to be. For sure, things will not be the same ever again. But they will be better than now. The best part of the story is that Americans are aware of their challenges. They are in search of a solution which would make things better. They are working on it and they are critical of mistakes made by people in the past. “How did we do such a dumb thing?” many people ask in a funny way, but that reflects of their acceptance of the mistakes done. Now, that is the wisest thing on planet earth. To be critical of our mistakes and to have determination not to repeat that again. We wish our fellow planet dwellers the best in their endeavors. If we could do anything to help you be better, it would be our pleasure to do so. Just Ask!!