Oregon, Following California

By February 19, 2009Economy, Regulations, Taxation

With state leaders driving California into the ground, how soon will it be before businesses pack up and move their operations? As Jennifer Rubin notes at Commentary, “As Goes California“:

Governor Schwarzenegger is trying to bully the legislature into a package which includes $14B more in new taxes. That move, if it gets through, plus the general deterioration in the quality of life is likely to increase the outflow of people, and, with it, high earners and businesses whose revenue the state needs. In short, the state is a basket case.

Those in the other 49 should take note. This is what a high tax, overregulated, union dominated economy looks like. And in the information age it is increasingly easy to relocate businesses — to another state or another country. So as we look to the federal government it might be a good idea to keep the California experience front and center.

So, north to Oregon? Oh, no, not a clement direction.

Well into 2010, Oregon’s overall economy will shrink more rapidly than the nation’s as a whole, notes UCSB forecaster Bill Watkins. He traces a sharp downturn there to many factors, including one of the toughest regulatory regimes in North America.

In tough times, companies generally expand in localities that are are friendly to commerce–say, states like Texas or nearby Idaho. Few would rate Oregon highly in that regard.

“Oregon is mostly a place that focuses on the enjoyment of its space, and that makes [it] very vulnerable in these conditions,” Watkins says.

That’s Joel Kotkin in a Forbes piece, “Oregon Fail.” He also reports that Oregon’s economy suffers from a structural imbalance, following the policy decision made in the 1980s to kill off the timber industry. (Your correspondent was a reporter and editorial page editor in Oregon and now feels safe in saying, two decades later, “Told you. The tourism sector did not replace timber as an economic pillar.”) High-tech kept things cooking for a while, but business costs and regulations and an increasingly left-leaning, green-minded polity eventually drove businesses away. Housing kept the economy going for a while, and we all know what has happened to housing.

So, two models for guaranteed economic hard times in the states, Oregon and California, both models based on creating an environment that’s hostile to business investment.

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