I have told this story a few times to illustrate the unintended consequences of government interventions in markets and also to illustrate the hazards of carrying debt.
I started practice in Louisiana in 1974, just in time for the Arab Oil Embargo. That actually produced an economic boom in Louisiana as the country demanded domestic supplies so we would not again be as vulnerable to an OPEC embargo. My practice boomed along with the region. But after a cold winter in the Northeast in 1977 and shortages of natural gas for heating in the region, President Carter, by executive order, followed by the Fuel Use Act, banned the use of natural gas as a boiler fuel and for electric generation, in an attempt to force gas supplies to the Northeast by limiting its use at its source.
It didn’t work, the controlled price of natural gas was just too low to justify building pipeline capacity. But it was the first nail in the coffin for the Louisiana economy. Natural gas production dropped, but the price of oil had more than doubled (from $14/bl to $40/bl) and that kept things going. Then when OPEC collapsed and the price of oil fell, the oil patch economy collapsed with it.
While the rest of the country was doing pretty well in the mid 80’s, SE Louisiana suffered a collapse that made the housing bubble implosion seem insignificant. Unemployment in Louisiana was over 40%. Banks repossessed 1/3 of the homes and business property in my home town of Thibodaux, and the population of the city fell from 18,000 to 12,000 in 6 months. In neighboring Morgan City, the mayor, in a display of dark humor common to Cajuns, put up a billboard saying “Last one out, turn off the lights.”
It was a devastating collapse, affecting all of SE Louisiana, not just me. But I might have been able to tough it out and remain had I not made the mistake of going into debt during the boom to build a new office. While the payments were easy enough to make while times were good, they became impossible when my patients were unemployed or had moved away. Other dentists with paid-for offices were able to hang on living on savings until the economy recovered years later, but debt made me vulnerable. Though I had only borrowed half the cost of the new office, property values dropped so much that I was underwater. It took me three years in Virginia to pay off all the debt and sell the property at a huge loss.
So, an important lesson to learn is to not take on debt in a boom unless you can be absolutely sure there will be no bust before you can pay it off.
I’m not sure I would have stayed in Louisiana even if I could have. Had I not moved away, it is likely my children would have had to move away from me to find opportunity, and living someplace where there was opportunity for them was an important part of the choice to relocate.
So, here I am, but I am leery of politicians who seem to be on the road to do the same thing the the whole country that Carter did to Louisiana.