State economists conclude Oregon just enjoyed a blockbuster decade

Good news is hard to accept at times, as when economists tell us that Oregon has just enjoyed one of its best decades ever – growing jobs, boosting wages, narrowing income inequality and diminishing poverty at rates not seen in most of our lifetimes.

Wait, what? 

Yes, that’s what the data shows for Oregon’s economy during the past decade, most notably for the gains achieved by low- and middle-income families.

As state economists reported this week in their most recent Economic and Revenue Forecast, the 2010s not only belied the “decade of deficits” predicted by state officials after the shock of the Great Recession but catapulted Oregon from a laggard to a leader on a number of indicators that measure economic progress for working families from state to state. 

So, how come we’re not celebrating this success? 

One reason: There’s a tendency on both the left and the right to belittle any signs of progress of this kind. The former tend to see the glass half empty, reminding us that many working families are still struggling, while the latter complain of pressures on businesses that are overtaxed and overregulated. Both, for different reasons, think we should be doing better, no matter what.

But the data tells us that we’ve been doing better than we realized in ways that deserve more attention and analysis. 

Most telling: In their look back at the last decade, the state economists documented an historic improvement in median household income – a metric for “how most of us are doing” that moderates the outsized effect of the top 1% on overall averages.

Here’s what the economists report:

“Oregon’s income growth in the past decade has been stronger than nearly all other states. In recent years this growth now means Oregon’s median household income now outpaces the national median for the first time since the mills closed in the 1980s. In 2021, Oregon’s median household income stood 2.6 percent above the nation, marking the largest relative vantage point for the typical households in the state vis a vis the nation in at least three generations.”

This is big news. Before the last decade, Oregon policy makers puzzled over how a decline in household incomes that began in the 1980s had proven to be so persistent. They produced reports trying to better understand and overcome the problem. But they never developed a strategy to tackle this problem directly. That was understandable, as household incomes are the product of multiple factors: jobs, wages and social spending, to name a few.

Then, in the last decade, Oregon fired on all of those cylinders – with steady employment gains, minimum wage increases and an expansion of our Medicaid program that brought more benefits to working families and more federal dollars to the state. 

The result was not only long-overdue gains in incomes but a more equitable sharing of these gains. As the economists found:

“All Oregon households in the bottom 70 percent of the distribution have higher incomes than the U.S. This means households earning up to $106,000 per year out earn their national peers. As such the vast majority of local households are doing relatively better. Now, it does (not) mean all of these households are doing well or not struggling to make ends meet. It just means they are doing comparatively better than their national peers.”

This is progress, even if it means we still have far to go to overcome income inequality. 

Another lesson from the last decade is that these gains were achieved in a period of higher taxes for high-income individuals and large businesses. The arguments that tax increases cost jobs or put a damper on economic growth didn’t hold up in the 2010s, although that doesn’t mean the tax-bearing capacity of our economy is unlimited. The challenge for the next decade will be to use these new funds wisely, as the practical and political case for further revenue-raising tax reforms appears to be spent.     

I warned not so long ago that the next decade may be more challenging than the last. I still think that’s the case, both economically and fiscally. But another data point in the latest revenue forecast shows that the state is better prepared to weather a downturn than ever before. 

The state’s reserves and ending balances now exceed a goal set after the Great Recession. At $6.5 billion, they represent 45% of the state’s annual General Fund budget, providing enough ballast to ride out the turbulence of all but the most severe recessions in the years ahead. 

So that’s another lesson from the last decade. State government finally learned to save for a rainy day. 

All in all, the last decade was a time of real progress. We should keep that in mind as we navigate the next.