Midwest, Plains bankers worry about 'fiscal cliff'

OMAHA, Neb. (AP) -- A survey of business leaders indicated for the third month in a row that economic growth is expected in the Midwest and West, but people also are worried about how a looming federal tax hike and budget cuts will affect the region.

The business leaders expressed concern about the so-called "fiscal cliff," in which tax cuts enacted under former President George W. Bush are set to expire at the same time big federal budget cuts go into effect next year -- unless Congress acts before then.

Lawmakers are expected to try to hammer out a deal, but with Republicans controlling the House and Democrats running the Senate, it could be tough.

"The biggest issue we face soon is the fiscal crises with a locked-up Congress," said Dale Bradley, chief executive office of The Citizens State Bank in Miltonvale, Kan.

The Rural Mainstreet index is based on a survey of rural bankers in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

The overall index rose to 57.5 in November from 56.6 in October, an indication the region is "shedding the negative impacts of the 2012 drought," said Creighton University economist Ernie Goss, who oversees the survey. Any score above 50 on the 100-point scale suggests a growing economy.

But the confidence index, which reflects expectations for the economy six months out, sank to 45.6 from October's 50.7.

"The uncertainty surrounding the national economy -- including the 'fiscal cliff,' the farm bill and energy policy -- are negatively affecting the economic outlook of bankers," Goss said.

Rural bankers also were asked about extension of the wind energy tax credit and the future of the ethanol industry.

Nearly half of the bankers said the wind energy tax credit, set to end on Dec. 31, should be continued, while nearly one in 10 supported increasing the incentive. More than four in 10 supported ending the tax credit.

The credit has been a big political issue in states where the industry is growing, such as North Dakota.

Nearly 70 percent of the bankers surveyed said high corn prices would represent the biggest challenge for ethanol producers in the coming year.

The farmland price index took its biggest one-month jump since the survey began in 2005, from 71.7 in October to 83.9 in November. Land prices have been increasing with strong demand and high prices for corn and other grains.

"Farmland prices and cash rents are soaring at what I believe are unsustainable paces," Goss said.

Bankers also were asked in the latest survey how much they expected 2013 pasture cash rents to rise as a result of last summer's drought. Overall, bankers expected about a 10 percent increase, but nearly 13 percent anticipated growth of more than 21 percent next year.