A key takeaway from the latest Oregon Economic and Revenue Forecast, presented to Oregon lawmakers yesterday, is this: Additional federal aid is crucial to avoid a deeper, longer recession.
No doubt, Oregon remains mired in recession. The lives of many Oregonians, especially low-wage workers, have been upended by the sudden economic downturn triggered by COVID-19.
Nevertheless, the economic projections look much better than they did back in May, at the time of the last forecast. While the extent of job losses has been historic, they have not reached the depths initially envisioned, state economists explained. They expect the job market to fully recover about three-and-a-half years from the start of the recession this spring — about one year less than initially projected . Also, revenue collections have been coming in much stronger than initially estimated, though the state still faces a treacherous fiscal situation going forward. The forecast for the upcoming budget period is still billions lower, compared to what state economists estimated at the end of the last budget period .
What accounts for the better-than-expected news? The “main, fundamental reason is federal policy,” said the state economists. In response to the pandemic, Congress quickly pumped about $2 trillion into the economy, including more than $14 billion into Oregon. Federal aid arrived in various forms, from individual stimulus checks, to enhanced unemployment insurance, to assistance to states and local governments in dealing with the direct impact of the pandemic, among others. “This unprecedented infusion of federal money kept firms and households’ heads above water, at least during the past six months.”
But here’s the rub: Federal aid has mostly gone away. The stimulus checks have mostly been cashed. Enhanced unemployment insurance expired at the end of July.
The improved forecast going forward assumes that Congress will enact additional, significant stimulus. Without additional federal aid, the risk rises that we will see more businesses closing down and permanent job losses, triggering a “double-dip” recession.
So the takeaway is clear: Congress must step up and provide more stimulus.
It’s also important to note that not all forms of stimulus are equal — some are effective, and some are not. The non-partisan Congressional Budget Office released a study this week examining the effectiveness of the different emergency programs enacted by Congress early on in the pandemic. Its conclusion: The most cost-effective measures were direct public spending and aid to states and local governments, followed by enhanced unemployment insurance. The least effective were the several tax breaks Congress lavished mainly on the rich and corporations, which we have criticized in detail.
Every elected leader in Oregon — from local government officials, to state leaders, to our congressional delegation — ought to heed the message from the latest economic forecast. In unison, they ought to demand renewed action from Congress.