Issues
Ask candidates: ‘Do you support skydiving?’
By Jacob Daniels
As an attorney, I’ve made some general observations: First, attorneys are expensive, and second, prolonged litigation benefits nobody but the attorneys involved.
The City of Creswell is currently fighting a legal battle with Eugene Skydivers on two fronts. First, we are defending a Part 16 Complaint filed with the Federal Aviation Administration. At this point, the City has spent over $100,000.00 of your money to defend this action. Further, at the September City Council meeting we were notified that the Eugene Skydivers have filed a separate lawsuit against the City of Creswell alleging Breach of Contract and demanding $735,000.00 in damages.
You probably already know what this fight is about, but I will break it down for the rest of you.
Basically, Eugene Skydivers want to drop (land) at the airport. On the other hand, the City believes that skydiving at Creswell Airport isn’t safe. Because of the City’s belief that skydiving isn’t safe, the Eugene Skydivers aren’t allowed to drop at the Creswell Airport.
I admit that the thought of skydiving terrifies me and that’s why I’m not a participant.
Nonetheless, skydiving has been carried out in a safe manner at the Creswell Municipal Airport for many years. The skydiving activity is something fun to watch and was a selling point for many who have chosen to move to Creswell.
Further, amidst these tough economic times, I believe that the City of Creswell should be sending a pro-business message rather than an anti-business message. In this case, the City is creating significant roadblocks for a once-profitable small business. After Eugene Skydivers, who is next?
It is my goal for the City to enter discussions with Eugene Skydivers to find common ground and settle this case. I believe that the settlement should contain a provision allowing skydiving activity to resume at the Creswell Airport. But first, we need to elect City leaders willing to support skydiving.
Those who disagree with me will quickly cite the City’s potential liability if somebody were to get hurt skydiving.
Like any other person, I would hate to see an injury and we certainly don’t need another lawsuit. Nonetheless, skydivers sign a waiver before diving and I believe it would be difficult to find the City financially liable if an injury were to occur. Even if the City were found liable the Eugene Skydivers’ Lease Agreement requires them to indemnify the City for any lawsuit.
In my mind we have two options: (1) continue spending tax dollars on lawyers to fight something that most people in Creswell enjoy; or (2) enter a settlement that includes certain safety provisions. So here is my advice to you… the next time a candidate comes to your doorstep ask him/her: “Do you support skydiving at the airport?”
Jacob Daniels is a member of the Creswell City Council. The opinions expressed here are his own and do not represent the views of any other City Councilor, City Employee, or the City of Creswell.
Reprinted with permission from the Creswell Chronicle
Union Pacific Coal Trains in the Pacific Northwest
Thirty Plus Years Later, Local Governments Suffering From Environmental Decisions
By Larry Huss
Last Saturday’s Oregonian carried a story about another “blue ribbon panel” to be appointed by Gov. John Kitzhaber:
“Gov. John Kitzhaber said he’ll convene a panel of timber industry executives, conservation groups and hard-hit county representatives to figure out how to allow more logging on 2.6 million acres of federal land while protecting key environmental features.”
Mr. Kitzhaber has a long history of appointing blue ribbon panels and then ignoring their advice. It is one of those political gimmicks that makes it look like you are all action when, in fact, you are just all talk.
But that’s not the real story here. The real story is about real economic consequences of a federal government that over reaches “in the name of the greater good.”
“If ultimately approved by Congress, a deal on the O&C [Oregon and California Railroad timber] lands could be the first step in resolving a problem that has bedeviled rural Oregon for decades. The federal government owns 60 percent of the forestland in Oregon but accounts for only 12 percent of the state’s timber harvest each year – a harvest that generations of Oregonians depended on for jobs and funding for schools and county services. [Bracketed words supplied]
The various pieces of environmental legislation adopted by Congress are best described as “target legislation” that define goals and then turns the details over to an army of bureaucrats. And therein lies the problem. The broad authority granted to the bureaucrats allows virtually unlimited actions in furtherance of the goals without regard to consequences in other areas. And the federal courts validated this myopic view of bureaucratic action.
The result has been decades of increasingly intrusive rules, endless studies and consumptive litigation. In each instance, environmental activists recognize that each step involves a delay – and not just a short delay but rather delays that stretch into years – and that such delays result in victory even when the merits would result in defeat. A visible reminder of the effects of delay is the 2002 Biscuit fire in Southern Oregon.
Let’s make sure that we understand the size of the problem. The Biscuit Fire consumed 400,000 acres in the Siskiyou National Forest – an area dominated by conifers and hardwoods. Forty-two percent of the trees were killed by the fire and another eight percent were so damaged as to put them at immediate risk of destruction by insect infestation. The trees killed and damaged represented five billion board feed of timber. That is an amount that is roughly 10 times the total amount of timber harvested on public lands in Oregon in the same year, 2002.
In the immediate aftermath of the fire, it was estimated that half of the timber was salvageable. Of that 2.5 billion board feet of salvageable lumber, less than one per cent was actually be harvested. The remainder will stand like blackened sentinels testifying to the ability of environmental extremists to use the courts to thwart common sense and modern technology. The environmental extremists know that there is a limited time within which you can harvest marketable burned timber and their lawsuits and appeals can run out the clock before the timber can be harvested and the fire-damaged forests replanted. Even in an instance when nature has been ultimately destructive and the intrusion of man will be more beneficial than harmful.
The Biscuit fire is representative a whole series of actions that basically devastated the timber industry in Oregon beginning in the 1980’s. Thousand of good family wage jobs were lost and long time family businesses were forced to close as the ability to harvest timber dried up. Three decades have passed without any significant relief from the effects of these environmental laws and regulations. Twenty-six years of Democrat administrations in Oregon have passed without so much as a peep regarding the economic damage caused by these acts.
But now there is concern. Why at this late date? Because now the economic reality of the collapse of the timber industry is being visited upon government. While the timber industry was devastated from the outset, government was immunized through a series of federal acts that provided “replacement funds” for tax revenues lost from the now quiescent timber industry. As the Oregonian – ever late to the party – noted:
“The decline of logging due to policy changes, endangered species protection, lawsuits, recessions and other forces has greatly reduced timber revenues to a number of Oregon counties.
“Congress supplied replacement funding with the Secure Rural Schools and Community Self-Determination Act, beginning in 2000. The county timber payments were extended twice, and a last round of emergency checks was delivered this year. In several counties, the payments provided 60 percent or more of total operating budgets.”
Fast forward to the economic collapse in 2008 and four years of record deficits. A federal government, strapped for cash, has ended the federal payments and local governments now feel the same deprivation as the industry upon which they once relied. As the Oregonian noted:
“Some Counties have already reduced sheriff’s patrols, let prisoners out of short-staffed jails and closed departments.”
But then here is Mr. Kitzhaber attempting to redefine the problem for the Oregonian:
“’We can’t ignore what’s going on our there in our rural communities’, the governor said. ‘They want the dignity of being able to bring home a paycheck and take care of their families. That’s the part I’m really concerned about’”
Please governor, give us a break. If you really gave a damn about the dignity of people being able to bring home a paycheck you would have done something about it during your first two terms. But back then the federal dollars were flowing, the fly-fishing was magnificent and all was good in your little world. It is solely and only because government now faces a funding crisis that you are moved to even speak about the issue let alone do anything.
And these are not the only “social engineering” projects that are about to go under because a lack of funding. Wind and solar projects dependent largely on past and future government subsidies are about to crash given the likelihood that federal subsidies, including tax credits, will end. As much as the left loves the electric car, it too is about to end as subsidies are withdrawn. We have learned lately that it costs General Motors $89,000 to produce a Chevy Volt that sells for $47,000. (It was bad enough when we learned that the Chevy Volt was simply a modified Chevy Cruz that sells for $17,000 and will get only 30 miles on an overnight charge.) There is significant chatter in the auto industry that the reason General Motors is pressing for the federal government to sell its remaining 26 percent of the company and that the federal government is resisting is because General Motors wants to dump the Volt along with other government mandates. And finally, the light rail projects loved by Portland’s liberal establishment face future headwinds as transportation funds are scaled back.
And therein lies the point. Uneconomical decisions fail over the long run. Either because the market place moves beyond those decisions or, as in the case of the environmental curtailment of the forest industry the burdens imposed on private industry eventually adversely effect the finances of government.
But before the liberals who dominate Oregon politics go apoplectic over the prospect that an additional tree will be cut in Oregon, or that – God forbid – someone should make a profit from cutting a tree, please remember that Mr. Kitzhaber has a long record of appointing blue ribbon panels and then ignoring their advice. One should expect that the solution to a lack of government funding in Oregon’s timber counties and schools will not be found in producing something but rather in another form of government subsidy. For those of you forced to endure an education in Portland public schools, that means that the state legislature will be asked to subsidize these counties. And that means an additional burden spread across all of the taxpayers in Oregon – or at least that declining percentage of Oregonians who actually pay taxes.
Reprinted with permission from Oregon Catalyst
A Pragmatist Decides How to Vote
By Thomas Michael Stewart
“Pragmatist” has become a negative word in politics. These days, when people say that a politician is a pragmatist, they usually mean someone who has no strong principles and will say or do anything that seems expedient at the time.
The corruption of this word is unfortunate. As originally defined by American philosopher William James (1842-1910), pragmatism meant nothing more than that the worth of every new idea must be measured against the way that idea performs in practice.
I’m about to graduate from college, and I want to know that there’s a job waiting for me when I do. So, come November, I’m not going to vote Democrat or Republican. I’m going to vote for the presidential candidate whom I regard as the closest to being a true pragmatist.
Our most successful presidents have been pragmatists. In recent memory, we can point to Ronald Reagan and Bill Clinton. Both were pragmatists. Reagan was a committed tax-cutter who was willing to raise taxes when circumstances warranted it. Bill Clinton was a liberal who wanted to expand government, but was willing to turn 180 degrees and proclaim that “The era of big government is over” when the mood of the country changed.
What about Barack Obama and Mitt Romney? Mr. Obama came into office facing the worst economic crisis since the Great Depression – a crisis that, admittedly, was not his fault. To stop the free fall, Mr. Obama pumped $800 billion into the economy. Not all of that money was spent wisely, but I believe that catastrophe was averted. Nevertheless, economic growth remains sluggish.
The pragmatic thing to do, once the results of massive government intervention had proved disappointing, would have been to look for alternatives. Instead, Mr. Obama chose to believe that government could reinvent the American economy and return it to prosperity. So he gave us Obamacare, Solyndra and the Chevy Volt – along with near record-high gasoline prices.
Has Mr. Obama learned from experience? His campaign rhetoric to date suggests that he has not. He’s presided over the weakest economic recovery since World War II, but it’s clear that if he gets another term he intends to continue the same kind of policies that he has pursued so far.
But would Mitt Romney be any better? If Mr. Obama has a mystical faith that federal spending and government regulation will bring prosperity, Mr. Romney seems to be no less devout in his conviction that tax cuts and laissez-faire capitalism will do the same.
So which of the two candidates is closest to being a pragmatist? It’s a tough call, but I’d give Mr. Romney the edge. First, because Mr. Romney’s faith in tax cuts is tempered with reason. He wants to lower tax rates while at the same time eliminating many tax breaks. If he’s sincere in this, the result will be not only lower rates, but a tax code that is closer to being neutral. In other words, he is trying to create a tax code that doesn’t try to manipulate the economy through tax incentives. Why? So that taxpayers will base their investment decisions on their best judgment instead of how much they expect to save at tax time. More neutrality in the tax code has got to be good for the economy.
Second, Mr. Romney was a successful business executive. He knows how the market works and what motivates other executives to make significant capital investments and thereby create jobs. As an intellectual, Mr. Obama lacks this real-world expertise. So he is forced to rely on government solutions because he really doesn’t know what else to do.
Third, Mr. Romney is offering himself to the American people as a practical problem-solver. For example, he’s produced an economic recovery plan that has been endorsed by 400 leading economists, including four Nobel Prize winners. So there’s good reason to believe that a Romney administration would pursue sound, market-tested solutions to the nation’s economic problems.
I doubt that William James would wholly approve of either of our two major candidates for President. But to me, at least, Mitt Romney seems the more pragmatic of the two. That’s why he will get my vote.
Thomas Michael Stewart, a resident of Eugene and former student at Marist and Sheldon High Schools, is currently a senior at Princeton University. He has contributed to Lane Solutions in the past.
Increased Taxes on America’s Small Businesses?
Washington, D.C. – U.S. Senator Rob Portman (R-Ohio) recently released a statement responding to President Barack Obama’s call for increased taxes on America’s small businesses.
Senator Portman introduced his statement with these observations:
While President Obama calls for higher taxes on jobs (sic) creators, two new government reports undercut his class warfare argument and the basis for calls for higher taxes…. As the nation careens toward a fiscal cliff, real leadership not more rhetoric and finger pointing, is necessary to reform our tax code and address Washington’s out of control spending.
Analysis of the Congressional Budget Office’s (CBO) final report on what caused the January 2001 projection of a $5.6 trillion 10-year surplus to turn into an actual $6.1 trillion deficit over that 10-year period (ed. note: a $11.75 trillion dollar swing) shows that:
- Tax policies enacted a decade ago are responsible for just 16% of the swing from surplus to deficit, or $1.9 trillion;
- Given that only about one-fourth of the tax cuts went to upper-income earners (indicative of the reality that there are very few of these), just 4% of the decline from surpluses to deficits resulted from upper-income tax cuts, or $490 billion
- Since CBO ignores any of the positive impact of tax cuts on the economy (this is known as “static analysis,” as opposed to “dynamic analysis,” which estimates growth attributable to tax cuts), savings and economic growth, the percentage was actually even smaller than the 4% estimate (above).
Additional analysis of the factors behind this massive $11.75 trillion swing reveals that new spending, (much of which was due to debt incurred because of the new spending and interest) were responsible for almost half (48%) of the increase in spending.
To sum it up, the $11.75 trillion swing from surplus to deficit was comprised of a $6.1 trillion decrease in revenue (52% of the total swing) caused by tax policies, new spending and interest and a $5.6 trillion increase in spending (48% of the total swing).
Of the total spending and revenue lost over the 10 year period, an astounding 34% ($4 trillion) was due to Obama/Pelosi legislation over the last three years!
Senator Portman concluded:
In a second report, the CBO said that in both 2008 and 2009, the highest-earning 20% of taxpayers paid 94% of the total income tax burden – up from 86 %in 2007, and 81% before the 2001 tax cuts. In other words, higher-income Americans have been paying a bigger and bigger part of the total tax burden under the so-called “Bush tax cuts.”
Editors’ note: Due to rounding, the percentages above may not agree with the dollar amounts. For clarity’s sake the editors decided to round dollar amounts to two decimal points and percentages to just one.
The author is a concerned Lane County resident and business owner.
Re: Why I Am Suing PERS
By Daniel C. Re
On May 13, 2011, I filed a lawsuit against PERS in the Oregon Court of Appeals. The lawsuit challenges the constitutionality of three PERS administrative rules that are based on the 1996 Oregon Supreme Court decision that invalidated Ballot Measure 8. Oral argument in the case has been set for August 23, 2012. The primary issue is whether judges who are PERS members can decide PERS cases.
PERS was created in 1945. For the first 38 years that PERS existed, Oregon judges had their own independent retirement plan and were not PERS members. During that period, Oregon judges were neutral when they decided PERS cases. But in 1983, the Oregon legislature passed a new law that required the judges to join PERS.
That law took away the judges’ neutrality in PERS cases and deprived Oregonians of their right to independent judges when PERS cases are decided. By making all judges PERS members, the legislature stacked the deck totally in favor of PERS members every time a PERS case goes to court. The invalidation of Ballot Measure 8 in 1996 has required hundreds of millions of dollars every year to go to PERS to make sure most PERS members will never have to pay one cent in PERS contributions. If Ballot Measure 8 had been upheld, the hundreds of millions of dollars that are now going to PERS members each year would be available to provide vital services, such as education and public safety, to all Oregonians. But it’s not, it’s just going to PERS members.
Independent judges protect us from governmental abuse. That is a fundamental right. I do not believe the government can take that right away from us. This is a battle that must be fought. And that is why I am suing PERS.
Daniel C. Re, www.inrethepeople.wordpress.com.
Daniel C. Re is an attorney in Bend, Oregon. He will address the Rubicon Society in Eugene on Thursday, August 2 at noon. The meeting is open to the public and there is no charge. Click here for more information: http://www.rubiconsociety.org/events/dan-re-pers/
Death Tax Discussion
Editors’ Note: The following is a message from Common Sense For Oregon.
Healthy Communities Initiative has not taken a position on this issue.
Lane Solutions welcomes readers’ comments and opinions on this or any issue presented in Lane Solutions.
Is It Time to End Oregon’s Death Tax?
Many agriculture, business organizations and citizen activist groups have united in a mission to end Oregon’s death tax. These groups are working to get Initiative Petition 15, the Death Tax Phase-Out Act, on the November 2012 ballot. A little more than 87,000 signatures are required to qualify for the ballot, but to ensure the success of this initiative supporters are preparing to collect 125,000 signatures by the end of June.
Oregon’s estate tax ranges from 10%-16%, with a $1 million deduction. This is separate from and in addition to the federal estate tax. Oregon is one of only three states west of the Mississippi to still have an estate tax; the other two are Washington and Hawaii. Since 2001, 29 states have repealed their death taxes, and the Governor of Indiana recently signed a bill into law to phase out Indiana’s death tax.
We all know this is a burden on family farms, ranches, and businesses. In a family business, where you might be land and equipment rich, but have limited cash at hand, it can be nearly impossible to pay the tax without selling the property or taking out a loan. These taxes also come at the worst time— at the death of a beloved family member.
The Death Tax Phase-Out Act phases out the current Oregon estate tax over the course of three years. Starting January 1, 2013, the current tax would be decreased in 25% increments each year until January 1, 2016, when the tax would be eliminated. Oregon death taxes by any unit of government would be prohibited.
The Death Tax Phase-Out Act would also protect families who are transferring property. Currently, Oregon families are subject to pay the capital gains tax on intra-family property transfers. This tax would also be phased out on the same schedule as Oregon’s death tax.
If you would like to sign the petition, you can go to endoregondeathtax.com, download the e-petition, sign the petition, and mail it in. If you would like to receive a volunteer circulation packet, or volunteer in other ways, please send an email to [email protected], or call 503.480.0523.
Creating Jobs in Oregon – The Role Of Business
By Christopher Gergen
In the last installment of this series we discussed specific steps that Oregon and Lane County governments can take to improve the climate for job creation in Oregon. They are:
- Restructure PERS. As it is currently structured, the funding demanded for fueling PERS is pushing Oregon toward the financial abyss that awaits somewhere between 20 and 31 other states in the not too distant future.
- Lower (or, preferably, eliminate) government spending for non-essential programs and projects and redirect these funds to essential functions such as public safety and education. Sending Public Utility Commissioners on junkets to Armenia and spending $900,000 on unnecessary bike path signs are not a formula for economic growth.
- Repeal Measures 66 & 67. Besides missing their revenue targets by about 50%, these measures have encouraged businesses and tax-payers to either locate elsewhere or leave Oregon.
To read the entire article which is summarized above, follow this link.
Today we’ll continue our discussion on job creation in Oregon by recommending steps that businesses can take to improve the economic climate.
- Enact Right to Work Laws. Right to work laws, governed by the 1947 Taft Hartley Act, prohibit unions and employers from agreeing that a union can require that the employees of a business join that union or pay union dues as a condition of employment. They have been enacted in 23 states.
In a paper published by the Cato Institute on the subject of the effects of unions on economic freedom and prosperity the authors note, “Right-to-work laws also appear to help economic development, as Palomba and Palomba (1971) and Moore and Thomas (1974) note, which can factor into the debate. Calzonetti and Walker (1991) present survey data showing that firms do consider right-to-work laws in their location decisions.”
Currently, Oregon is not a right to work state and as such is subject to the increased labor costs that inevitably coincide with the use of Union labor. If businesses in Oregon are serious about bending the cost curve of labor downward, they must make a serious push to enact Right to Work laws for Oregon workers.
- Achieve profitability that will justify paying wages that are in line with the local cost of living and that attract high quality employees. In times of economic downturn workers are forced to work in jobs for which they are underpaid and overqualified. This is a reality of supply and demand—when the supply of workers far outpaces demand for workers, wages decline or hold steady.
It’s important to note here that businesses can only pay wages that are justified by their profitability. It is my belief that, given the achievement of healthy profits, Oregon businesses will direct an appropriate portion of these funds toward paying competitive wages that will attract the best employees.
Obviously I am not advocating that anyone overpay labor in some feckless attempt at income redistribution. I am advocating that businesses pay competitive wages because, given the profitability that allows it, it is in their best interest to do so.
First and foremost, when businesses can afford to pay what it takes to attract highly productive employees they have a better chance of getting…and keeping them.
A “knock-on effect” is that when workers have more money to spend in the economy it naturally increases demand. And an increase in demand spurs economic growth and increases business revenues.
Again, I am not advocating that businesses forego funding expansion in an effort to “be nice” to employees. Business is not charity. It exists to return profits to its investors. But I am advocating that, given sufficient profits, business pay what is necessary (no more, no less) to attract and hold productive employees. The vast majority of businesses already do just that.
The net effect of increased productivity due to high quality employees and lower turnover is higher profitability. Higher profitability leads to business growth and increased employment…and higher wages.
I have now presented some ideas on the roles that both government and business can (and should) play in order to create job growth in Oregon. I’d love to hear your thoughts on this crucial issue.
In the next issue of “Lane Solutions” I’ll summarize the points I’ve made in this five part series and share some final thoughts on job creation in the Great State of Oregon. Be sure to come back and join the discussion.
1. http://www.cato.org/pubs/journal/cj30n1/cj30n1-1.pdf (p. 14)
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at [email protected].
More Demand = More Jobs; How Do We Get It in Oregon?
By Christopher Gergen
In this fourth installment of our five part series on job creation we are going to look at a few specific steps local and state governments must take in order to create more demand and begin the economic healing process in our state and county economies.
First, a brief summary of how we arrived at this point.
Both public and private sectors have significant roles to play in creating an environment that increases consumer demand, which is essential to the creation of permanent jobs. Though many would tilt the level of responsibility toward one or the other of these sectors, the burden of creating demand rests on both.
While both sectors are key players in job creation, ultimately it is you, the consumer, who through the mechanism of demand creates jobs. Therefore it is you who possess the ultimate power to create economic demand in Lane County and in Oregon at large.
Creating permanent jobs in Oregon and Lane County depends upon Oregonians spending money. While it is preferable to make these expenditures at locally owned businesses, we must also acknowledge that job creation occurs when an out of state company creates jobs in Oregon to satisfy increased local demand.
Local and state governmental bodies (the public sector) participate in local job creation by, when costs are equal, employing Oregon businesses and Oregon citizens to perform Oregon’s public business. So the government should spend Oregon’s tax revenue in Oregon’s economy whenever possible and prudent.
There is not room enough here to list all of the many issues state and local governments in Oregon need to address to aid in the creation of a healthy economy. However, here are three key issues that need to be addressed immediately:
1. Restructure PERS
The issues directly related to the huge shortfalls created by runaway PERS expenses are so complicated that I doubt there is a way to fix the system as it exists today. Thus I would not presume to offer a comprehensive solution for this issue at this time.
But I will assert that both Republican and Democratic leadership in Salem must muster the moral and political courage required to make tough decisions about PERS reform. Some might argue that there is an effort to get this done on both sides of the aisle, but at the end of the day, Oregonians understand that effort is nice—but results matter.
If Oregon’s Legislature and Governor do not address the PERS challenge meaningfully, Oregon will careen into a financial abyss with bankruptcy at the bottom. Already, many states are, thanks to their legislatures’ inability to make meaningful changes to their pension plans, staring into this abyss.
According to a paper published by the Nation Bureau of Economic Research, “Seven states (will) run out of money before the end of 2020, including Illinois (2018), New Jersey (2019), and Connecticut (2019). 20 states will run out by the end of 2025, and 31 states by the end of 2030.” The same research shows Oregon will run out of money in 2039—a mere 27 years from now (1). Unfunded pension liabilities are major contributors to these states’ predicaments. Clearly, the current PERS system isn’t sustainable for Oregon.
For more on the challenges Oregon faces from an unreformed PERS go back to the Healthy Communities Initiative home page, click on “Issues” and then click on “PERS.”
2. Lower (or eliminate) government spending for non-essential budgetary items and redirect this funding to essential budgetary items such as public safety and education
Examples of wasteful government spending in Oregon are legion.
Back in 2000, while Oregon was suffering the effects of an energy shortage, State government decided that the best use of several Public Utility Commissioners’ time, energy and salaries was to send them to seven countries, including Armenia and Zambia, to promote Oregon’s model utility system (2).
More recently, Oregon spent $900,000 of Federal stimulus money to erect, alongside existing bike signs, nearly duplicate signs, the only difference being that “…(they) include arrows, distance, and travel times to key destinations.” (3)
For every year (day?) between “The Utility Commissioners’ Excellent Adventure” and “Why Buy Just One Bike Sign When Two Will Do Nicely?” examples of laughable government spending abound.
3. Repeal Measures 66 and 67
According to Kiplinger, because of Measure 66’s increase of personal income tax rates and Measure 67’s increase in corporate taxes, Oregon is the fourth most unfriendly state for retirees, earning it a not-so-envied place on its “Do not live here in your second act” list (4).
Both measures discourage outside money from coming to Oregon and circulating in our economy. Measure 66 is, in reality, an incentive to people to move somewhere other than Oregon. This is especially true of high earners such as doctors, dentists, lawyers and others who, because their businesses are “Subchapter S” entities, have their business income taxed at personal income rates. Remember: high earners tend to be high spenders and investors – just the kind of people Oregon most needs.
Measure 67, with its tax on Oregon sales (irrespective of profits), discourages businesses from forming in or moving to Oregon.
Prior to the vote, the Tax Foundation predicted that, with passage of both measures, Oregon would drop six places in its ranking of states based upon business climate (5). Subsequent passage of these measures signaled to large and small employers alike that Oregon is not serious about creating an environment friendly to economic growth. The root of many of these damaging policies is Keynsian economics.
Many in Salem, agreeing with English economist John Maynard Keynes, believe that, in a stagnant economy, the government must inject money into the economy to drive economic growth. But the catch is that in order for state and local governments to do this, they must first extract this money from the economy through taxation—thus the rationale for Measures 66 and 67.
Somehow, the fact that this never works seems irrelevant to them.
It’s worth noting that these measures have utterly failed to produce their intended results. Besides damaging both supply and demand climates, Measures 66 & 67 have missed their revenue projections by a staggering 50% (6) and fallen victim to the economic certainty that when tax rates rise above a specific point, total revenue actually declines. The “cure” for Oregon’s budgetary woes has left the State with continuing, huge budgetary challenges.
In this installment of our series we’ve discussed what government actions do and do not create the demand that sustains a healthy economy. In the next issue of Lane Solutions we’ll look at the proper role of business in creating permanent jobs which lead to the demand we so desperately need in Oregon. Be sure to come back and join the discussion.
- http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1596679 (reference found on pages 14 and 27. You must download the paper)
- http://www.chicagotribune.com/features/tribu/sns-pgc-wastebook-2010-pg,0,4199163.photogallery
- www.cagw.org/assets/state-piglet-books/2002/2002-oregon.pdf – 2009-03-10. Open the first link on the page, scroll to “2002 Piglet Book” and scroll to “Travel Woes.”
- http://www.kiplinger.com/slideshow/TaxUnfriendlyStatesRetirees/5.html#top (10 Tax- Unfriendly States For Retirees 2011)
- http://www.taxfoundation.org/news/show/25680.html
- http://www.oregonlive.com/news/index.ssf/2010/08/measure_66_tax_revenue_coming.html
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at [email protected].
Creating Jobs in Oregon
By Christopher Gergen
“We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein
Solving the grave economic challenges facing Lane County and the State of Oregon cannot be accomplished by mouthing the same tired rhetoric based upon faulty assumptions about the economy. We need fresh, original solutions based in reality.
Over the course of the last two installments (Part 1, Part 2) in this four part series we discovered why the usual suspects of job creation—government, “stimulus spending,” entrepreneurs and small business—do not by themselves create permanent jobs:
- Government does not create jobs by legislating, taxing, and regulating businesses to the point they leave the state or decide not to move their companies to Oregon in the first place.
- “Stimulus spending” on infrastructure projects only creates temporary jobs while the project is in progress. Once it ends, the jobs end with it. Also, “stimulus spending” forces governments to raise taxes on everyone, which in turn drags down consumer spending, further depressing job creation.
- Entrepreneurs and small businesses can’t create permanent jobs absent demand for their products.
- When companies and small business owners invest capital into the marketplace they hire under the assumption that demand will be sufficient to sustain the new jobs. Should demand fail to support the venture, the jobs created are lost—and thus were temporary.
In this installment we’re going to discuss where sustainable jobs really come from. Then in our final installment we’ll examine the proper roles of government, small business, and consumers in creating a healthy economic environment.
Understanding demand is key to understanding how consumers behave and how market forces work. Today we’re going to focus on two types of demand: market demand and consumer demand.
The macro solutions for Oregon’s and Lane County’s economic ills are found in creating market demand for goods and services, which, in turn, is created by consumer demand. To accomplish this, the Oregon Legislature needs to create a healthy economic environment by slashing a burdensome regulation regime.
A 2009 study by Cal State Sacramento economists on the effects of the State Legislature’s over-regulation of the Californian economy (1) found “…that the total cost of regulation to the State of California is $492.994 billion, which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The cost of regulation results in an employment loss of 3.8 million jobs, which is a tenth of the State’s population.” Oregon faces a similar challenge.
Regulation kills businesses and collaterally kills consumer demand in Oregon because the consumer cannot demand an Oregon product from a producer that does not exist in Oregon. He or she may still demand the product, but it now must come from a more business friendly state.
The Oregon Legislature has the power to erode or even destroy Oregon’s market demand. That destroys existing jobs and discourages creation of new ones. It’s as simple as that. If the market demand for Oregon goods and services is artificially low or non-existent for goods and services in demand elsewhere, it’s most likely because the business environment in Oregon is not advantageous to the producer of that good or service operating profitably. That fact alone means that while demand could potentially be high for a particular good or service, it makes no difference to our economy because Oregon doesn’t produce or offer it—which means these jobs don’t get created.
Market demand, which creates and sustains jobs, is driven by individual (i.e. consumer) demand. A group of consumers all buying the same thing creates market demand. At its optimum, this demand can even shield a company against a severe recession. Apple is a great example.
In January, 2012 Apple posted enormous earnings and revenue for the fourth quarter of 2011. To put into perspective how well Apple performed, the consumer demand for its products and services created more profits ($46.33B) for Apple than Google had in total revenue ($10.8B) (2) (3). It’s worth noting that Apple not only isn’t laying people off; it’s hiring—but not in Oregon.
At the other end of the spectrum is General Motors. In early March, GM announced it was suspending production of its Chevy Volt for five weeks (4). Chris Lee, GM spokesman, cited the reason for the suspension of production was “matching (its) production levels with demand and building to market.” This “matching…production levels with (consumer) demand and building to market (demand)” caused 1,300 people to temporarily lose their jobs. The Chevy Volt has continuously missed its sales (demand) targets because consumers just don’t like the product —resulting in job losses.
Public and private sectors both have a role to play in creating an environment that increases consumer demand. In our last installment we will look at specific things the public and private sectors in Lane County and Oregon can do to increase demand for Oregon goods and services. Specifically, we’ll look at how permanently lowering and reallocating public spending can bring Oregon’s economy out of stagnation. Well also look at the role wages play in this process.
Be sure to join me for this discussion in the next issue of “Lane Solutions.”
Note: For further study on the subject of economics, please click here for a good primer: http://www.investopedia.com/university/economics/default.asp#axzz1rwn7hGc4
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at [email protected].
(1) http://hotair.com/archives/2009/09/25/study-regulation-costs-california-economy-almost-500-billion/
(3) http://investor.google.com/earnings/2011/Q4_google_earnings.html
(4) http://www.mlive.com/auto/index.ssf/2012/03/gm_to_stop_chevy_volt_producti.html