A new alliance for economic recovery in Oregon

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The economic problems Oregon and other states are facing today seem daunting, and there is no guarantee that we will get out of this recession for years to come.

The only hope we have is swift and cooperative action at the federal and state level. A new alliance is needed to deal with the short-term consequences of the recession and the long-run social investments required for sustainable economic growth.

Over the past decade we have witnessed the devolution of many fiscal responsibilities from federal to state and local governments, particularly in the areas of health care and education. This is an unsustainable and inefficient model, and it needs to be replaced by a new and fresh partnership.

Shifting health care, energy and education costs from the federal ledgers to the state and local levels is like moving deck chairs around on the Titanic — it will not stop the boat from sinking. We need a new direction and cooperation that will quicken our economic recovery and keep it afloat over time. What should be done?

The first step is obvious. President Obama and Congress need to provide state and local help for health care and education and provide adequate unemployment and food stamp benefits. This is also the time for both federal and state governments to start thinking about the future and recognizing that both have different but necessary roles to play in addressing four important long-term economic issues:

Health care. There needs to be a new partnership between federal and state governments to come up with a comprehensive and sustainable health-care plan for the American people. Every time we have a recession we should not be faced with whether the sick and elderly are going to be kicked out into the streets.

The debate on health care in Oregon usually focuses on access, but out-of-control costs and waste are just as important to solving the health-care problem. States cannot do this by themselves. But as I have advocated for years now, after the recovery (not now) Oregon legislators need to put into place an adequate rainy day fund to protect the sick and elderly when a downturn occurs.

• Energy. We need to move Oregon's economy toward renewable energy a lot faster so we won't continue to be a contributor to global warming. Is global warming a state issue? You bet it is — just look at the costs of hurricanes Ike and Katrina to particular states. Working with the federal government, we can establish a renewable energy policy that will provide new industries and opportunities for businesses in Oregon.
• Education and opportunity. Opportunity requires widespread access to quality education at all levels, including pre-school, K-12, higher education and vocational education. Also required is equal access to entry-level jobs for high school and college graduates that provide on-the-job training for future advancement. That requires access to continuing education at the vocational and professional levels.

In today's economy people lacking basic skills don't have the options of casual labor. Our economy has changed in fundamental ways that make formal education and "people skills" increasingly important. Even low-skilled jobs in retail and services often require a good voice and demeanor. A janitor today needs not only to read and write but must be able to accurately complete things like an EPA hazardous waste form. Workers without basic language and social skills are restricted to a limited number of low-wage jobs.

Economic development. We need to go beyond the "rising tide lifts all boats" assumption to examining how the benefits of economic growth affect people at different income levels. This requires an economic development plan that "percolates up" rather than "trickles down" with the focus on investment in human capital and opportunity that raises the income for those at the bottom.

This in turn will generate new markets and more retail spending and a broader tax base for the community. It also will reduce pressure on budgets from social service, crime and at-risk education spending, freeing up tax revenues for other priorities or for lowering the tax rate and contributing to higher community quality of life.

We need to get Oregonians working in the short run and increasing their skills and opportunities in the long run. This will happen only when a new alliance between federal and state governments provides businesses and workers the social investments they need to be successful.

Richard Holt is professor of economics at Southern Oregon University. His latest book is "European Economics at a Crossroad."

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