severe cuts in public services and bringing
federal dollars into the state, the revenue
measures save jobs, pure and simple.
SAVE FOR THE
ECONOMIC WINTERS
Beyond the context of the current
recession, how should Oregon address
the structural factors that affect its
unemployment rate?
Instead of wishing for a different
economic structure, we should acknowledge
our strengths and weaknesses and plan
accordingly. Or as economist Cortright puts
it, “We have to play the hand we’re dealt.”
And to play the hand we’re dealt smartly,
Oregon must live up to its nickname and
act like a beaver.
Beavers work their fl at tails off during
the bountiful summers, building their
lodges and storing branches and twigs.
Those reserves see them through the scarce
winters. That forethought is what Oregon
needs to mimic.
Oregon tends to do quite well during
the upturns in the business cycle — our
economic beaver-summers. During the
economic expansion that preceded the
current recession, Oregon’s economy grew
at an annual rate of 5.3 percent, outpacing
the nation’s 2.8 percent growth rate.
But Oregon’s Legislature cannot repeal
the business cycle, so bountiful times will
always be followed by lean times. Oregon’s
economic structure — which makes the
good times very good for the economy
as a whole — has also made the current
recession particularly deep here.
We would have been in a better position
to limit the damage from the recession
had we acted beaver-like and stocked up
adequate reserves during the bountiful
times, but we didn’t. The legislature took
a step in that direction in 2007 when it
set up the Oregon Rainy Day Fund to
complement the previously established
Education Stability Fund. Unfortunately,
we simply didn’t save enough in our reserve
funds to help see us through the winter of
our discontent. And the reason is painfully
obvious.
Oregon’s insane “kicker” policy is the
main impediment to saving during good
times for the inevitable downturns. The
state’s most recent experience shows the
sheer folly of the kicker law. Taxpayers
received kicker checks totaling some
$1.1 billion of unanticipated revenue in
December 2007 — the same month that
the recession descended upon our state and
nation.
Adding insult to injury, most of the
kicker dollars went to people best able to
weather the recession. The wealthiest 1
percent of taxpayers, those with incomes
over about $360,000 and averaging about
$862,000, received slightly more than 22
percent of the total. Their average kicker
was about 45 times the amount that the
typical taxpayer received. The top fi fth of
taxpayers garnered nearly two-thirds of the
kicker, averaging about six times what the
typical taxpayer got.
That money certainly would come in
handy now, sparing ordinary Oregonians
and our economy some of the pain of
deep budget cuts and lost federal dollars.
Surely no self-respecting beaver would be
so foolish as to toss into the river’s waters
some of its branches and twigs just as
winter arrived.
Instead of lamenting the nature of our
economy that causes unemployment to
spike during recessions, Oregon needs
to implement level-headed, fi scally
responsible policies. We need to back the
Legislature’s revenue measures that ensure
we have fi nancial resources to maintain
and create jobs while avoiding severe cuts
to public services. And we need to start
saving unanticipated revenues so that we
have adequate reserves to help us through
the inevitable lean times.
With all due respect for Duck fans, only
then will we truly deserve to be called the
Beaver State.
ew
Joy Margheim is a policy analyst with the Oregon Center
for Public Policy. Juan Carlos Ordóñez is OCPP’s
communications director.
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EUGENE WEEKLY AUGUST 6, 2009 13