What’s Happening to Central Oregon’s Economy?

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med_Pamelas_Mug_copy55Legislators Miss the Boat on Creating Jobs

A recent commentary from Steve Buckstein, founder and senior policy analyst for Cascade Policy Institute (and Oregon public policy research organization) declared Oregon’s Economic Outlook Continues to Slip. Buckstein laments the results of the 2011 legislative session that began with a call to create jobs but when it ended little had been done to encourage job growth in the state. And virtually nothing was done to address the major factors that determine the state’s economic outlook, as identified by the national organization of fiscally conservative state legislators, American Legislative Exchange Council (ALEC).

ALEC has compiled 15 policy variables influenced by state legislatures that signal the economic outlook of the states including top marginal personal income and corporate tax rates, property, sales and other tax burdens, estate/inheritance tax levied, number of public employees, state liability system, minimum wage, average workers’ compensation costs and whether or not the state is a right-to-work state.

Buckstein says Oregon now ranks number 30 out of 50 states in its actual economic performance over the last ten years. Even worse, looking forward, Oregon has slipped from number 35 in 2008 to number 43 in 2011. Rich States, Poor States authors Arthur Laffer and Stephen Moore published an article in The Wall Street Journal in which they identified the two policies that “have consistently stood out as the most important in predicting where jobs will be created and incomes will rise. First, states with no income tax generally outperform high income tax states. Second, states that have right-to-work laws grow faster than states with forced unionism.”

How does Oregon rate on those two most important variables? The authors spent almost a full page of this year’s report discussing how damaging Oregon’s 2010 retroactive income tax increases on wealthy individuals and corporations are to the state’s economic outlook. Oregon is tied with Hawaii now with the highest state income tax rate in the nation, a fact likely to deter entrepreneurs and other high-income individuals from coming to Oregon and to cause some who are here already to leave.

At a recent forum Central Oregon’s legislators Representatives Gene Whisnant and Jason Conger and Senator Chris Telfer shared similar sentiments about the state and the results of this year’s legislation. Senator Telfer pointed to some bills that would help improve the economy such as expediting permits for industrial sites, adding cookies to the list of things bakeries can make (true, bakeries could not legally make and sell cookies), improving the estate tax limits for farmers, extending enterprise zones, killing the plastic bag bill, increasing bad check charges and, most importantly, securing funding for the OSU-Cascade building.

But all in all Telfer said the best thing they did do was block a lot of bad bills. But they did absolutely nothing on PERS reform.

Our legislators and Buckstein all express concern about the 66/67 tax measures which, “generated far less revenue than voters were led to believe, and the state had some 8,000 fewer high-income tax-filers in the first year of these measures than the state predicted.”

THE TROUBLE WITH ECONOMIC PREDICTIONS
National television has been talking about the economy, stating that the nation’s unemployment rate has only gone down to 9.2 percent and that far fewer jobs have been created than expected. And yet private-sector employment increased by 157,000 from May to June, according to the latest Automatic Data Processing, Inc. (ADP)National Employment Report.  Payroll employment growth at this pace usually implies a steady unemployment rate, perhaps even a modest decline.  June’s figures suggest that the economic recovery, which slipped in the spring, might have found new traction in early summer.

Although there have been many negative comments on Oregon’s economy there are signs of growth. Over the last six months Oregon added 16,000 jobs in the past six months, the state’s unemployment rate dropped a full percentage point and now….Oregon ranks No. 7 for job growth. In addition, a recent report from the U.S. Department of Commerce’s Bureau of Economic Analysis showed GDP in Oregon grew 3.4 percent in 2010, tied for sixth-fastest rate in the nation. Business Oregon economist Michael Meyers attributed the impressive increase to Oregon’s strong durable goods manufacturing sector.

One of the driving forces behind Oregon’s brightening economic picture is the growth of exports by Oregon companies, bringing new dollars into the economy. In particular, Oregon’s exports to China are booming.

Oregon Business magazine recently declared: Bend’s economy is coming back to life, in an in-depth story on our region. The article was in the most recent issue of the Portland-based magazine and well worth the read: www.oregonbusiness.com.

Writer Ben Jacklet, gathering information from Roger Lee at Economic Development for Central Oregon, reported, “For Bend to recover from its three-year slide into the abyss, it will need more than companies holding their own. It will need companies capable of thriving independently, without dubious loans or short-lived subsidies. It will need savvy opportunists who understand how to develop new technologies, capitalize on trends, build on strengths and create jobs. It will need businesses that bring money into the region rather than relying on local spending.”

Lee painted an optimistic outlook of Central Oregon for the magazine writer saying that a lot of early-stage companies are interested in the region. It’s hard not to be enthusiastic about what is happening to this entrepreneurial community when you read about the numerous small companies in Central Oregon that are innovative and bold in expanding their products and services while increasing employment. Some of the companies profiled in the Oregon Business magazine profile include StreamIt, 10 Barrel Brewing, Proxense, Bendbroadband’s Vault, Play Outdoors, G5 Search Marketing, Ruff Wear, GL Solutions, TeamUnify and Bend Research.

There’s a lot going on in this region and companies are eager to establish roots here. We suggest picking up on that optimism and ignore the naysayer economists.

It will be interesting to see what California Lutheran University Economic Forecast Director Bill Watkins has to say when he presents the third quarter forecast for the state at Brasada on July 22.  To register: http://oregon.clucerf.org/events/. PHA

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