That R Word is Back

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.

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Jobs Policy and Ivory Towers

Prominent Oregonians offered sharply different — and somewhat ironic — views last week on whether state government can affect the economy. A well known economist said the state is merely along for the ride, while the Senate's top Republican insisted state actions can dampen job growth or propel creation of small business.

Joe Cortright, a private economist known for popularizing the idea of traded-sector jobs, told a legislative committee the state is along for the ride and cannot affect the future.

Senate Republican Leader Ted Ferrioli disagreed with Cortright in an op-ed piece published by The Oregonian: "I'd like to advise these economists to install some windows into their ivory towers. I am afraid they are ignoring the living testimony of Oregon's thousands of small businesses if they help perpetuate that overregulation and excessive tax burden have nothing to do with the economic distress of businesses or our ability to recruit new employers to Oregon. A cursory look at the state's excessive minimum wage, top tax rate and regulatory creep all reveal these factors to be significant forces affecting Oregon's economic future."

Senate and House Republicans have charged there were too few job-creation proposals considered in the 2011 session. This debate is bound to continue between now and the February legislative session, as well as into the political campaign season.

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