That R Word is Back

"The prospect of a double-dip recession prompted Governor Kitzhaber to direct state agencies to look for another 10 percent to trim from their budgets."The R word — recession — is back on the lips of economists again, both nationally and in Oregon. The prospect of a double-dip recession prompted Governor Kitzhaber to direct state agencies to look for another 10 percent to trim from their budgets.

Unless the economy suddenly turns on a dime, that means the 2012 legislative session may be staring at more spending cuts — not exactly what legislators want to focus on right before their re-election campaigns. It opens the door to political challengers who can criticize failed efforts by the state to stimulate job creation. The cuts also will evince political squeals.

First, the health care reform measure, House Bill 3650, passed in the 2011 session, calls for saving $240 million in low-income health care under Medicaid. Many observers believe this "savings" will amount to a just another cut.

Second, several state agency budgets passed by the 2011 session will be good essentially only for the first year of the biennium. In the case of the budget for to serve senior citizens and persons with disabilities, for instance, there is already not enough money to continue current services for 2012-13. Legislators could face the uncomfortable reality of having to cut programs for those who are the most dependent on state services.

There is a substantial disagreement in Salem over whether a state such as Oregon can pull itself out of the depths of a stubborn recession. No less a figure than Senate Minority Leader Ted Ferrioli, R-John Day, believes in the prospects of a "jobs agenda." There are always differing political views on what the agenda should look like, but with split control in the House and possibly in the Senate next February, there may be a greater willingness to take ideas from both sides of the aisle.

The Oregonian editorialized earlier this month: "...There are positive signs. Oregon's initial unemployment claims fell in August. Hiring by temp agencies increased while manufacturing orders grew nationally." And Intel says it is contemplating a major new investment in Washington County.

While trying to maintain a dose of optimism, most economists find more negative than positive. UofO's Tim Duy says a saving grace is that Oregon, having fallen so far since the last recession, couldn't crash much harder. Former state economist Tom Potiowsky, now a Portland State University professor, agrees: "We don't have any sector that's at some lofty perch to fall from."

So it is ironic that as the U.S. stock market moves up this week, the economic jitters on Main Street continue, causing the R word to return to the lips of economists.

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[The writer, CFM partner Dave Fiskum, has worked in public policy in Oregon for more than 30 years. Included were stints in a governor's office, as well as in the Economic Development Department, where he tracked economic trends in past recessions.]