The nation and Oregon have both entered periods of uncertainty as a result of the November 2016 general election, well known local economist John Mitchell told the Portland Business Alliance at its annual economic forecast breakfast on Tuesday.
On the nation level, the unexpected election of Donald Trump as president has created a wide range of uncertainties, Mitchell said, including the country's future monetary, trade, tax and immigration policies. Although gridlock in Washington, D.C. might be broken because Republicans control the presidency and congress now, Trump is such an unusual politician that no one can predict his detailed policies yet.
In Oregon, the defeat of the corporate sales tax measure means the 2017 Oregon Legislature will face a $1.7 billion budget shortfall with no guaranteed new revenue source. Oregon Gov. Kate Brown has yet to bring the labor and business leaders who fought over Measure 97 together to hash out an alternative tax reform measure for lawmakers to consider. Because the Democrats in the Legislature can raise taxes without Republican votes, that raises the specter of deep spending cuts followed by a "Son of 97" ballot measure fight in the future, Mitchell said.
"I don't think of Donald Rumsfeld very often," Mitchell said of the U.S. defense secretary during the Persian Gulf War," but I remember when he said there are known unknowns and unknown unknowns. Right now, there are a lot of unknown unknowns.
Mitchell also brought up the concept of "Black Swans," major and big events that should have been predicted. He said last year was full of such events, including the Brexit vote in Britain, Trump's election, "and the Chicago Cubs."
Despite the uncertainties, Mitchell predicated that both the national and Oregon economies are pointed to continue their lengthy recoveries from the depths of the Great Recession. He noted that the unemployment rates have fallen below 5 percent, which economists consider full employment, reflecting a tight labor market that should continue boosting wages.
"Businesses need to get used to the idea that they might have to begin training new employees for their positions because the field of candidates is getting much smaller," said Mitchell, calling that a good thing for workers because it can change their lives.
The Federal Reserve Board has finally begun increasing interest rates, which will contribute to inflation but should also reward investments, Mitchell said. And, Portland is still among the fastest growing cities in the country, which will boost the housing market if enough construction workers can be found to meet the growing demand.
"I didn't see a lot of unemployed construction workers on the streets of Portland when I got down here this morning," Mitchell said, referring to the event's location at the Nines Hotel.
During his presentation, Mitchell repeatedly told the audience that Trump's election shows that people need to think more broadly about what can happen on the international, national and local levels. He said the political order that has existed since the end of World War II is being challenged, creating both risks and opportunities.
"The range of possibilities to be considered has widened. You have to think more broadly about possibilities now," Mitchell said.
As in his previous economic forecast presentations before the PBA, Mitchell sprinkled what could have been a dry talk with jokes, literary illusions, poetry, and references to recent books and papers he found compelling. Among others, he recommended the paper "Fading American Dreams: Trends in Absolute Income Mobility Since 1940," which found that only 50 percent of those in their 30s are earning more than their parents at that age. And he cited the book "Extraordinary Times" by Marc Levinson, which argues that the country's phenomenal economic growth between 1948 and 1973 was not normal but a one-time growth spurt that will likely never been repeated.
The PBA is Portland's chamber of commerce. It participates in the Value of Jobs Coalition which has produced 16 reports since 2010 that document the creation of good paying jobs is essential to the region's economic growth and the generation of sufficient taxes for needed government services.