Archive for the ‘Press’ Category

Bend Bulletin: Energy credit is under fire

Thursday, November 12th, 2009

578-dynamo-9393img_0236The following is based on and excerpted from the Bend Bulletin.

A number of Oregon companies, nonprofits and government agencies in Oregon have benefited from the Business Energy Tax Credit, known as BETC, or “Betsy.”

Critics of the BETC say that program is too generous and that it does not deliver on its promises of economic development.

Oregon Governor Kulongoski’s spokeswoman Anna Richter Taylor said the governor is focused on improving the program, as evidenced by new rules governing the program. “The governor agrees that it’s time to review the program and its economic benefit to the state,” she said.

For proof of that benefit, BETC supporters point to a February 2009 study done for the energy department by the Portland consulting firm ECONorthwest. Among its conclusions: that $73 million of tax credits in 2007 created 900 more jobs than if the money had been spent on other state-funded programs.

But Eric Fruits, a conservative economist who teaches at Portland State University, is not impressed. Using Oregon’s public records law earlier this year, he obtained an earlier draft of the report that did not paint the same picture of unblemished success.

Instead, the draft ECONorthwest report showed that for some types of BETC spending, the money would have produced more jobs if invested in other state programs.

Fruits also obtained a Jan. 16 e-mail from the study’s author, Stephen Grover, noting the mixed results, and asking the Energy Department’s then-assistant director whether he should change the report. He offered to combine categories in the final draft, thus making the negative results go away.

In the end, that’s what happened. The final report showed only positive impacts of the program.

Asked about the e-mail, Grover said the changes were intended to correct for potential inaccuracies. He said that such changes are common in presenting a report.

But when directed to Fruits’ blog, which details the changes to the draft, Sen. Chris Telfer, R-Bend, called it “disappointing.” “You’ve got my blood boiling now,” she said.

Read the full story in the Bend Bulletin (registration required).

Posted in Economic Impacts, Energy, Government, Press | Comments Off

USA Today on stimulus and stimulus skepticism

Wednesday, April 1st, 2009

usat_logo2USA Today ran a front page story on the the impacts of early stimulus projects. While the story focused on the businesses and families that hope to benefit from the stimulus spending, there was one dissenting skeptic:

Eric Fruits of Economics International in Portland, Ore., warns that stimulus spending may not revive the economy in the long run. “Borrowed money has to be repaid. A job today may come at the cost of someone not having a job in two or three years,” the economist says.

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Oregon’s persistent unemployment problem

Monday, February 2nd, 2009

Oregon Business - February 2009Oregon’s unemployment rate is among the highest in the country and is heading toward double digits. Eric Fruits notes in his recent Oregon Business column that Oregon is different, though. It’s different because it has what seems to be a permanently high unemployment rate. In more than half of the past 30 years–through good times and bad–Oregon has ranked in the top 10 states for unemployment. Even through much of the dot-com boom, Oregon’s unemployment was among the highest in the country.

What makes Oregon different so that it always has high unemployment?

As with most economics issues, there is no single answer.  In Oregon, several factors combine to produce the state’s long-run high unemployment.

  1. Unemployment benefits. The Economic Policy Institute in Washington, D.C., ranks Oregon as one of the more “generous” states for unemployment benefits. On one hand, unemployment benefits help to put food on the table. But overly generous benefits allow job seekers more leeway to hold out for higher wages than they would otherwise, thereby slowing their return to work.
  2. Taxes and regulations. Taxes and regulations raise costs to firms offering employment. Rigidity in employment laws adds to a firm’s costs of growing its workforce. In addition, employer-provided health insurance in Oregon is expensive because of regulations mandating that insurers cover specific conditions, procedures or treatments. Such mandates raise the costs of adding and retaining employees.
  3. Minimum wage. A binding minimum wage creates a surplus of unskilled labor. At $8.40 an hour, Oregon has one of the highest minimum wages in the country. This has the effect of decreasing the amount of labor demanded by Oregon businesses and increasing the amount of labor supplied by Oregon workers. On the upside, owners can be choosy about who they hire. But, this puts the unskilled in a Catch-22: Their inexperience makes them unemployable at the high minimum wage so they cannot get experience to justify the wage.
  4. Migration. If people are moving to the state faster than jobs are being created, higher unemployment results. Oregon has a well-deserved reputation for livability. As a result, people from outside of Oregon are attracted to the state and people who are here already are hesitant to leave: Some people would rather be unemployed in Oregon than find work out of state.

Is there a solution?

On the public spending side, many Oregonians are hopeful that an injection of state and federal infrastructure spending will pull people off the unemployment line and onto construction crews. However, by the time projects are funded, requests for bids are issued, contractors are in place and workers are hired, we may already be six months into a recovery.

On the private side, investments by businesses produce the gains in productivity that fuel future production and consumption. Broad-based investment tax credits and similar investment incentives are not as alluring as large-scale spending programs and showpiece infrastructure projects. On the other hand, much of the blame for the current recession has been placed on the credit crunch and the resulting decline in private investment. Broad-based investment incentives would mitigate some of the crunch and encourage firms to begin spending and hiring again.

Posted in Economy, Environment, Press | 1 Comment »

The high costs of climate change policies: Oregonian

Saturday, January 24th, 2009

OregonianEric Fruits has an op-ed in the Oregonian on the economic and fiscal costs associated with Oregon’s proposed policies to halt climate change.

Oregon is a leader in climate change legislation. The state has adopted one of the most ambitious greenhouse gas emissions reduction goals in the world. Although Oregon is big in leadership status, it is small in size. Even if all Oregonians dropped their energy consumption to zero–or doubled it–the Earth’s climate would never know it. Thus, policies to substantially reduce greenhouse gas emissions in the state run the risk of being virtually “all pain, no gain.”

There is no getting around it: both carbon taxes and cap-and-trade programs raise energy prices. If either program is put into effect, households, businesses, and the public sector will have steeper power bills and will pay more to drive their vehicles. Meeting the goals would mean Oregon’s economic growth would be cut almost in half. In turn, state and local governments would collect $4.4 billion less in revenues.

Numerous businesses are shrinking, closing shop, or exiting the state, leaving Oregon with almost double digit unemployment. Higher energy prices under a carbon tax or cap-and-trade program will only make things worse.

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The consequences of cutting carbon

Saturday, April 26th, 2008

Economists are notorious for offering advice on how to boost economic growth. So why in the world would some one provide advice on how to slow a state’s economy? Answer: To cut carbon emissions.

Eric Fruits writes in Oregon Business that the state’s efforts to cut carbon are sure to reduce the state’s economic growth. Similarly, reducing economic growth is one way to cut carbon emissions. Dr. Fruits provides five ways in which cutting carbon will slow the state’s economy:

  1. Carbon taxes mean that every good purchased by every household and business in the state would be more expensive
  2. “Green” energy mandates, euphemistically known as renewable portfolio standards, force companies to use more expensive sources of energy
  3. Deferring road maintenance will reduce the flow of goods in an out of the state.
  4. Eliminating industrial land means that carbon emitting businesses will have to locate elsewhere.
  5. “Picking winners” with “green” tax credits will stifle investment in other businesses in the state.

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Our latest health care “crisis”

Sunday, January 20th, 2008

For almost 50 years, health care expert have diagnosed a “crisis” of high and rising health care costs. It is easy to fall into the trap of thinking that all of today’s crises are new. In fact, high and rising health care costs are not a new problem.

Eric Fruits writes in Oregon Business that one part of the crisis has been the rising cost of health care and health insurance. For years, the cost of health care has outpaced inflation. In turn, the costs of health insurance have risen rapidly, taking a toll on businesses and their employees. Another part of the crisis is the number of uninsured. Last year, Oregon’s governor tried to sell voters a huge tobacco tax increase by pointing to an estimated 117,000 uninsured children in Oregon. These parts of the crisis are related and were born out of the growth of the third-party payer system of covering health and medical costs.

Posted in Economy, Health Care, Press | Comments Off

Can streetcars bring life to languishing urban areas?

Wednesday, October 10th, 2007

Politicians and the planners they hire argue that streetcars and other rail projects provide a magical opportunity to change the zoning and uses of languishing urban areas.

Eric Fruits writes in Oregon Business that there is nothing magical about streetcars.  Politicians always have the opportunity to wave their zoning wands to accommodate developers demands.  Streetcars are to development as french fries are to a burger platter–a nice, but not necessary, complement.

Posted in Press, Real Estate, Transportation | Comments Off

Taking hostages can be good for business

Monday, July 2nd, 2007

Does your employer want to be held hostage? Do your customers want to be held hostage?

Eric Fruits writes in Oregon Business magazine that sometimes it’s optimal to hold your customers hostage or to be held hostage by your employees. Unique skills benefit a business because the company’s competitors can’t duplicate the products or services it provides the market. Just as an employee with unique skills has leverage over his employer, a firm with unique products or services has leverage over the market. This leverage produces more sales or lower costs. Either way, it improves the bottom line.

Posted in Competition, Press | Comments Off

Economists Brainstorm about the economy

Sunday, June 10th, 2007

Eric Fruits participated in a roundtable discussion sponsored by BrainstormNW. Other participants were on the Oregon governor’s Council of Economic Advisors. Dr. Fruits discussed downtown Portland real estate and business trends. He also noted the difficulties entrepreneurs face in starting and expanding business in Oregon.

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Walking the “razor’s edge” in downtown Portland

Wednesday, November 29th, 2006

I was interviewed for today’s Wall Street Journal regarding Portland, Oregon’s downtown real estate market. I noted that Portland’s downtown is more vibrant than a lot of other cities, but that demographics combined with Portland’s business climate and long-ranging infrastructure projects put the downtown market on “the razor’s edge.”

Coinciding with the WSJ article, the Oregonian announced that a major downtown retailer is leaving for the suburbs. Then, I received an email announcing that the Cascade Policy Institute will move out of downtown.

Posted in Press, Real Estate | Comments Off