Oregon’s Fading Economy: Putting Lipstick on a Pig

The latest revenue forecast figures are out from the Oregon Office of Economic Analysis and isn’t good news. Revenue collections are down another $377 Million from the last quarterly forecast. That’s in addition to the $577 Million from the last quarterly forecast. That’s a total of $1.2 Billion since adoption of the state budget a short fourteen months ago.

The sad part of this is that the forecast is still wrong, still overly optimistic, and still using a flawed formula for estimating revenue. The state economists still rely on a program that assumes growth in revenue from any point in time despite the reality that Oregon’s economy, Oregon’s employment and Oregon’s tax revenues have been steadily declining for at least nine quarters.

As the Oregonian noted on Friday:

“It is hard to square the Democrats’ don’t worry, be happy political message with the grim revenue forecast showing how Oregon’s stuttering economy and meager job growth have opened yet another hole in the state budget.”

But the real tragedy, however, is that the continued trickle of federal funds is delaying the obvious need for Oregon’s political class to face economic reality. Oregon, not Oregon government, is sinking. The downturn in tax revenues is merely a symptom of the problem – not the problem itself.

It is quite possible to cover the revenue shortfall for state government by additional federal funds, or tax increases (the preferred solution by Oregon’s Democrats). But covering the revenue shortfall does nothing to address the underlying problem – Oregon’s business is stagnant at best and declining in all probability. Oregonians have lost over 160,000 jobs. More than 40,000 additional Oregonians have newly entered the job market with little or no prospect of finding employment. Unemployment roles have grown to over 208,000 and that includes only those who are drawing benefits. It does not include those who have run out of benefits or given up looking for work. It also does not include those who are underemployed or, because of self-employment, were ineligible for benefits.

A recent study being touted by Oregon Democrats and a handful of their supporters in the Portland business crowd purports to demonstrate that Oregon has a great business climate. Their claim is that no business has closed or left Oregon because of the passage of Measures 66 and 67. They argue that Nevada (well Reno, Nevada) is worse off than Oregon and it doesn’t have any business income tax. And that even conservative Arizona raised taxes, so Oregon can’t be all that bad. It is that kind of reasoning that is similarly reflected in Oregon’s government class and is just dead wrong.

Nevada is a poor comparison to Oregon in that Nevada – all of Nevada – is primarily, almost singularly, dependent on gambling and tourism. As gambling and tourism go, so goes Nevada and in an era of deep recession and no recovery, discretionary spending on gambling and tourism have fallen dramatically. The fact that Nevada does not have a business income tax is irrelevant – it doesn’t have any significant amount of business beyond gambling and tourism.

Arizona is also a poor choice for comparison about the effects of raising taxes. Arizona struggled for months and eliminated billions in state government spending before turning to a tax increase. The Arizona state legislature specifically rebuked the Democrats attempt to raise income taxes on business and, instead, raised the sales tax – a tax that everyone pays, not just those who create jobs.

And finally, the argument that no one can point to a business that specifically left Oregon because of Measure 66 and 67 is as spurious as the claim of President Obama about the number of jobs that his stimulus program saved. It is impossible to prove a negative and the Democrats have become expert in posturing claims in that fashion.

More importantly it is not the singular event of Measure 66 and 67 that drives a business to decide to close or relocate – or more likely to not expand – it is the accumulation of events that force those decisions. It is the cost of permits, the cost of licensing, the delays in licensing, the changing codes, the imposition of new regulations, the lack of law enforcement for petty crimes, the continued increase in utility fees occasioned by increase in government fees and regulatory requirements, the demands of bureaucrats more concerned about their own power than the effects on business, and the studied ignorance of the policymakers regarding any aspect of the needs of business. Can you point to any one act as being the cause? No, but you can point to the common denominator in all of these areas – a government class that believes that government is the prime reason for being and that business exists to fund government.

A better measure is the fact that neighboring states are now actively recruiting Oregon businesses, to relocate or grow in their states. Like most things political, perception is more important than reality and the perception of Oregon remains that of state in the full control of its public employees unions and excessively consumed by environmental and political correctness – consumed without the slightest hint of moderation or the slightest concern about impact, particularly to business.

Governor Kulongoski, after having championed big, intrusive and expensive government for virtually all of his political life and most certainly the last seven and one-half years as governor, now has given lip service to the reality that government must fundamentally change. But Kulongoski is the most economically illiterate person to ever occupy the governor’s office in modern times. His only concrete proposal for fundamental change, thus far, is to eliminate the “kicker” – you know, raise taxes – the same solution that he has had for government forever.

You cannot fundamentally change state government by returning the same people who caused the problem.

You simply cannot continue to return to office people who singularly and collectively believe in the supremacy of government and who lack the fundamental understanding that every dollar that Oregon government extracts from business is a dollar lost for purposes of growth, expansion and job creation.

Should voters return a Democrat to the governor’s office and return Democrat majorities to the state legislature, Oregon will continue to wallow in an economic third world state as the rest of the nation begins its recovery – a recovery that will begin in November, shortly after Pres. Obama loses his Democrat majorities in the House and perhaps the Senate.