Tim Duy Says Economic Situation Won't Help New Governor Make Friends

The next Oregon governor needs to keep in mind that there isn't an easy way out of this budget mess, said Tim Duy, an economist from the University of Oregon, at the October 21 Oregon Economic Forum. If Oregon makes bad budget decisions, he said it could become the next California.

The budget cuts the legislature makes now should be viewed as permanent cuts, Duy said. Governor Ted Kulongoski's Reset Cabinet predicted a decade of "recession," or very slow growth, when its report came out earlier this year. Duy agreed, and said the legislature likely won't be able to refund programs until 2020. Balanced budgets, Duy said, will require a hard look at state employee compensation.

Oregon could experience an "echo recession" in 2011-13, according to Duy. While corporations and households are finished making adjustments (lower output and spending), the efforts by the federal government may not have been momentous enough to pull the economy out of the doldrums permanently.

The recession ended four quarters ago, when the economy stopped free-falling and started growing again. But per-quarter growth has been miniscule, so it doesn't really feel like a recovery, said Duy. The economy is still far below its 2007 levels.

The second "dip" in Duy's predicted double-dip recession will be mild, but job growth is going to be slow for the next decade. Even at a normal pace of growth, Oregon's economy won't return to 2007 levels until 2020, so the next 10 years will feel like a recession.

Oregon needs to provide sustained support for industries that create high-wage jobs. Duy said policymakers need to be prepared to meet the needs of those sectors, and they shouldn't expect those industries to make changes to meet the region's needs.

View Tim Duy's slides here. (PDF)