An Oregon Economic Report for 2008

Previews and predictions
With Pat Becker Jr., Bill Conerly, Tim Duy, Bill Rutherford, and Ralph Shaw

BrainstormNW assembled five of the regionís best economic minds to discuss their financial forecasts for 2008. Attending the roundtable: Pat Becker Jr., portfolio manager and analyst at Becker Capital Management and frequent contributor to Bloomberg News; Bill Conerly of Conerly Consulting, a founder of Cascade Policy Institute and author of ďBusinomics: From the Headlines to Your Bottom LineĒ; Tim Duy, University of Oregon economics professor, author of the Index of Economic Indicators for Oregon and former economist for the U.S. Treasury Department during the Clinton Administration; Bill Rutherford of Rutherford Investment Management, past Oregon State Treasurer, CEO of two international investment companies, and author of ďWho Shot Goldilocks;Ē and Ralph Shaw of Shaw Management, former Chairman of the Governorís Council of Economic Advisors and one of the western regionís leading venture capitalists. Comments below have been edited for length and clarity.

BrainstormNW: What was your reaction to recent headlines that housing prices were stable in Oregon, but falling 4 percent nationally?

Pat Becker Jr.: I think the housing market in certain areas is okay. If you drive out to Happy Valley, it is not happy. There are clearly areas that are obliterated. We had Patty Moss in from Bank of the Cascades last month, a great bank, with probably some of the best growth rates of any bank in the nation. They are clearly seeing a slowdown in the two markets that they operate in ó Boise and Bend.

BNW: Bend is a growth area for Oregon?

Becker: It is, especially if you put it in perspective in terms of how far those markets have come since 2004. It got overbuilt. There are too many homes, too many lots for sale. There is too much inventory. I donít think I would be gloomy about real estate in the Pacific Northwest. Inventory has gone up, so we will have to see what the data says, because housing price data lags. Your house is not worth what it was in 2006, but I donít think this is the greatest depression in housing in the Pacific Northwest.

Bill Rutherford: I have lived in Oregon most of my life, and I have seen the value of homes go down a few times ó 1973-74 and 1981. What typically happens is that the Oregon housing markets gets soft, doesnít plummet, stays the same for awhile, and then climbs.

BNW: How will the subprime problem affect this region? Will it lead to a recession here? Will we be better off or worse than the nation?

Ralph Shaw: The problem is more than the category subprime. It is adjustable rate mortgages. What are interest rates going to reset to, when they do reset? The Oregonian reported that maybe as much as a quarter of all the households in Portland are spending more than 50 percent of their income on housing, which would make them ineligible for any kind of conventional mortgage. It would also probably make them ineligible for leading a halfway decent life.

Bill Conerly: The biggest problem is people coming off of teaser rates. You could have a falling interest rate environment and people still have a 2 percent point reset.

Becker: What about liquidity? Thatís where the banks say, ďYou want that jumbo mortgage? You canít have one.Ē

Shaw: What I am concerned about today is my cost to carry my house. Thatís what we are worried about when we talk subprime. Thatís what the Wall Street Journal is talking about when they write an article and say that it wasnít wholly subprime borrowers who took out subprime mortgages.

Rutherford: The magnitude of the problem is whatís important. We donít really know what the magnitude is. The Fedís initial cut was 50 basis points, and they cut the discount rate. They put a lot of money into the credit markets to ensure free flowing capital. They have tried to do the best job they can, but clearly they didnít appreciate the size of it. Maybe we donít know the size of it. Maybe the Fed doesnít know. When you see little towns in Norway losing their money because they lost subprime loans, it is kind of hard to figure out how far this thing goes.

Shaw: Did they lose the money or did they have to write down their assets?

Rutherford: They lost money. The investments became worthless. You could look closer to home at the state of Florida Investment Pool. They had a run on that pool. They have marked their assets down 24 percent because they ended up with some of this stuff. It has been well reported that what Florida bought was subprime SIVs (Structured Investment Vehicles). There were two banks in Germany that failed for the same reason. In Florida it is clear they marked the funds down, and then the local governments came and said, by the way, we want our money. And the state of Florida said, no way, we are not giving anyone money.

Shaw: It was a run on the bank?

Rutherford: The school districts and the city governments could not meet their payroll.

Shaw: If they didnít have to sell assets to meet the run on the bank, what did they lose?

Tim Duy: When we talk about this stuff as being worthless paper, it is not worthless.

Conerly: Some is, some isnít.

Duy: A lot isnít. At the back end of it there is still a house, and that house might be worth 80 percent of what they thought. Or even 60 percent. But there is a big difference between 60 and 0. The argument is that the financial system is fundamentally solid. You wipe out a couple of quarters of profits on average. We know there is an issue in the financial markets of unknown magnitude that at one level could cause a credit crunch. We know how that is going to affect us ó negatively. On another level we know there is an issue of housing that will continue, and that gets us back to how it affects Oregon.

Shaw: How many cranes are operating in the Pearl District?

Duy: That would be the one area where you can say there is still some overbuilding. The condo market has slowed dramatically. Who is moving down to the Pearl District? One of the problems is do people really want to be there? Do they want to be in a suburban area versus the inner core? How much of that downtown core was spec built?

Becker: Bend is where you are seeing real stress. Someone said Pronghorn has only sold one unit.

Duy: They have seven resort communities in Bend planned on paper and they canít move what theyíve got.

Becker: They will absorb it.

Duy: They will absorb it in five or 10 years.

Shaw: When you ask about housing price declines, you look at the time value of money. If you wanted to sell your house today in Oregon, what would you get for it? How long would it take to sell your house for what you think it is worth, if you put it on the market?

Conerly: The big picture is the total number of housing units we have, whether it is condo or single family, and population growth. At our peak we were more than 70 houses per 100 new residents, and thatís obviously not sustainable. Yes, we are overbuilt. Some areas are overbuilt worse than others. If you look at the national figures, we are better off. On the national side there is a problem, but not as bad as the doom and gloom headlines. There is the issue of how it plays out in Oregon. The other issue is, does that spread to the non real estate areas? That is the real risk to the economy.

Duy: If you look at some of those national indexes, the local headlines may have overstated the strength of the housing market.

Rutherford: Back to how the Federal Reserve is handling this: It is important that we can contain it to the financial sector. Thatís what they are trying to do. Are they being successful? Can they be successful?

BNW: Oregon is creating service jobs but losing manufacturing jobs. Per capita income is comparatively low for the region. Where are the incomes and jobs in this area to support what looks like some pretty high-priced housing inventory?

Becker: Affordability in housing is a huge problem.

Duy: Right. As Ralph was just saying, a quarter of all Oregon homeowners are spending 50 percent of their income on their mortgages.

BNW: What is the health of the tech industry in our region?

Becker: For the most part technology is healthy. Most of the IT budgets for 2008 were done last month. Some of the surveys coming back are showing weakness for 2008.

BNW: What companies? What sectors?

Becker: Across the board. If youíre Oracle, or SAP, and youíre selling a big ticket item and youíre a CFO of a company buying, and you are worried about the economy, it is tougher to get that deal sold. In general, technology companies derive a greater percentage of their revenue from overseas, which is a nice thing right now because of the way the dollar is. Larger companies derive revenue from overseas, and that is where their earnings growth has come from in the past year.

Shaw: How many of those companies are here?

Becker: Not very many. We have lost so many of them.

Shaw: Pixelworks is the best example of what has happened to high-tech in Oregon. It reached its peak six, seven, maybe 10 years ago.

Becker: Became public in spring of 2000.

Shaw: They raised several hundred million dollars. They had a product at the time which was highly competitive, used to make flat panel displays better. Where are they today?

Becker: They missed a design cycle, and they got killed.

Shaw: In 2000 when they went public, that industry was considered the future of the state as far as the cluster analysis that we ran of the state.

Becker: There were three very good competitors in that market when they went public.

Shaw: Where is the stock today compared to when they went public?

Becker: A dollar or two dollars. I donít look at it anymore. Shaw: What happened to InFocus?

Becker: Same deal.

Shaw: What happened to Planar Systems?

Becker: They have done okay. What are they, eight or nine bucks?

Shaw: What happened to their basic business? In this state the growth of high technology businesses has been more of a negative than a positive. What happened to Toshiba? Fujitsu?

Conerly: We were a tech manufacturing center more than a software center. The peak year in the U.S. for high-tech manufacturing jobs was 1986. People were still assembling PCs. Manufacturing employment is down in high-tech because they are so productive. What is happening in Oregon is a national trend toward fewer employees in high-tech.

Shaw: It makes no difference that on a relative basis we are tracking the same as other places, because in this state high-tech was considered to be the panacea for growth looking forward.

Conerly: So was agriculture 100 years ago.

Becker: I agree with Ralph. Tech gets a lot of headlines that it is the golden key. For somebody who owns a business, it seems like there are a lot of great businesses that donít get their due for their contribution. For example, Precision Castparts.

Duy: How about the steel industry as a whole, the metals industry? There are 17,000 employed here in that industry.

Becker: Timber in this state is a large employer. Something I look at is charitable donations around this state. A lot of that money still comes from old industry.

Rutherford: Back to Intel. Will they sell more stuff overseas? Is that going to translate to more jobs in Oregon?

Becker: Intelís largest employment base is here. In Oregon.

Rutherford: So if they sell more widgets in China?

Becker: They donít build their latest and greatest fabs over in China. They are afraid they will steal the technology. Your leading edge fabs, your 45-nanometer fabs ó where are they putting those lines? They are down in Chandler, Ariz., and out in Hillsboro. They are not in China. When they have a commodity part they will build a plant in China, where the labor costs are lower. Labor in a semiconductor plant is important, not huge. Water, electricity are huge.

Shaw: Intel is building basically commodity type capability in these places?

Becker: They will not put 45-nanometer technology plants in China. Patent laws are the biggest worry tech executives have about putting a plant in China.

Shaw: The people who run Intel Oregon said they will not hire any more people in Oregon. The man who came to Oregon initially for Intel said a few months ago that if they had to do it all over again, they would never have come to Oregon. They will not expand in Oregon.

Becker: Some of this may be rhetorical by Intel. They may be negotiating for tax credits.

Conerly: A significant fact is that the global economy started accelerating a few years ago at 5 percent GDP, and we are beneficiaries of that. Exports from Oregon and Washington are way up. We feed off of Boeingís strength. Boeing is producing primarily for the export market ó that is a strength for the Oregon economy.

BNW: So even though we are 28th in per capita income in the country, you think our economic outlook is fairly bright?

Conerly: Fairly bright is too strong a word. It certainly is not gloomy. We will have below par growth in 2008, but it will be better than the national below par growth.

Duy: Oregon job growth rates have dropped off measurably. They have gone from 3 percent to 1 percent. The nation has gone from 1.2 percent to 1 percent. You have had a much bigger shift in job growth here, a much bigger deceleration across those factors. Thatís disconcerting because Oregon tends to be more volatile than the U.S. as a whole. You could argue that the U.S. economy looks to grow at 1 percent this year and Oregon looks to grow at lower than 1 percent.

Conerly: Why is Oregon more volatile?

Shaw: Malpractice.

Conerly: We have a bigger manufacturing base and manufacturing is more volatile.

Rutherford: The fact that Intel grows and sells more stuff overseas, does that translate into jobs here?

Becker: Not necessarily.

Rutherford: So Intel/tech sells more stuff, but it doesnít translate to jobs in Oregon. So are there other drivers that do translate to jobs? Those are high paying jobs that tech creates.

BNW: Oregon has weak infrastructure. Our universities are rated 200th in the world, our roads nonexistent, and some of the other fundamentals of the economy like the tax system ó not great.

Rutherford: Are you asking the question, can we grow in spite of all those obstacles?

BNW: Yes.

Rutherford: Would we grow better if we didnít have those obstacles? Absolutely. If the state would invest in higher education, it would be a wonderful accelerator. We have room for upgrading our infrastructure. I see last month the governor said they are going to do something after 20 years of neglect.

Conerly: A couple more bike lanes are what we really need to get that traffic flowing.

Duy: Thatís not what they are talking about, at least on the surface. I donít disagree that there are going to be bike lanes. I think people are starting to recognize that it canít be just bike lanes. It has to be a new lane on I-5, and it has to be new bridges. They are talking about the Columbia River crossing as a significant project. It is also rail.

Becker: If you sit down with Gordon Smith, he will say Oregon for the first time ever is net positive in federal dollars, yet that money comes in and goes to people who control the spending on it, and it doesnít go to where priorities might be different.

Conerly: Because the people who control spending want light rail.

Duy: Yes, and that means that the money gets spent, but it doesnít make the infrastructure we need. Under Gov. Vic Atiyeh, when asked to rebuild bridges that needed to be rebuilt, we did it. There is recognition that we have been building bike lanes and light rail, and it is getting more difficult to travel around the Portland area.

Becker: We have to do it to be more competitive.

Rutherford: These comments about jobs are another reason we need to take care of our infrastructure. Now when we need job creation, transportation would be a good place to get it. I hope that the governor perseveres in his new effort. I am concerned, as you say Tim, that some of the money will be diverted to other activities.

Shaw: We have increased our employment by fixing all these bridges. Now, if we switch those people to roads, the job growth is negligible.

Conerly: It would be a mistake to look at this transportation idea and think of it as a jobs program. Think about it as something needed to facilitate commerce.

Rutherford: The side benefits will be jobs. I think the governorís background, if I recall, had something to do with unions.

BNW: Pat, youíre in the finance industry, and the biggest private employers in downtown Portland are health care companies, law firms and finance firms. What is your sense of the finance industry in Portland? Growing? Shrinking?

Becker: Clearly, there is a difference in tax structure between businesses that operate in downtown Portland versus businesses that operate in other counties. It is substantial enough to where businesses are moving out of the downtown core. And whether the city sayís they are doing it or not, it is happening. One of the worries we have right now is that the financial community, those companies with assets under management, is still downtown. There is Mazama Capital with $7 billion under management, us, Becker Capital with $2.5 billion, Tygh Capital with $3.5 billion, Roxbury with a billion plus, and the old Columbia with billions. One by one these guys are getting picked off. They are moving to Kruse Way. Dale Benson moved to Kruse Way. Another firm with $3 billion under management is moving in the first quarter. What follows from this is the loss of some things that I think Portland wants to keep.

BNW: Specifically?

Becker: First, the whole transportation plan is based on downtown being the core. When businesses move to the suburbs it wreaks havoc with your downtown transportation plan. The other piece of that is that we have at least 200 companies come through our offices every year, and they sit up on the 21st floor and look at Mt. Hood. It is a great advertisement. They stay at hotels, go to the restaurants, sometimes they go to Bandon Dunes. We have a fairly big effect on the economy. If the financial community starts to move to Lake Oswego, those dollars and that infrastructure will follow, and I donít know if that was the intended plan. Businesses like us get hurt more because of how that tax is structured more than very large companies. Statistics will show that businesses like ours pay 90 percent of that tax (Business Income Tax).

Rutherford: Do you find it significant when it was reported in the Oregonian that the city of Portland has a $38 million surplus that they didnít expect, and they were making plans how to spend it?

Becker: That is their business. Because Class A office space downtown is now on par with Kruse Way, when the lease comes up for us and other businesses, it is going to be competitive. Yes, we would rather be downtown, all things being equal. But we pay more in that tax than we do in rent. Go to charitable events downtown and look at the list of where the money comes from ó that money comes from financial services companies. We give 1 percent of our gross revenues away every year. If we are in Lake Oswego, are we still going to give to the arts downtown? Absolutely, but you do tend to focus your charitable efforts closely to where you are located.

BNW: What do your customers say about you being located in downtown Portland?

Becker: Our clients come from all over. They come from the airport, so downtown is convenient. We are all located in the core area. If we start to move, we will move together.

BNW: Tim, how did you invent the Index of Economic Indicators for Oregon? (See for more information.) What do you see when you look at the latest numbers?

Duy: I did it because there wasnít one that was well publicized. I saw a need for it. I started to pull together data relevant to the Oregon economy. What it has been suggesting lately is that the economic environment in Oregon is slowing down significantly.

BNW: What are your measures? What do you use in your indicators?

Duy: The Oregon specific ones are: non-farm payrolls, which have been flat for six months but have now slowed; the help wanted advertising of the Oregonian, the Bend Bulletin and the Register Guard; the weight mile tax that is collected by the state, which measures the trucking industry; Oregon initial unemployment claims; and Oregon residential building permits. We also have a couple of national indicators: U.S. Consumer Confidence rating, which is important because it has dropped excessively in the last couple of months. Also, the interest rate spread between 10-year Treasury bonds less the federal funds rate and new manufacturing orders adjusted for inflation.

Becker: Are they equally weighted?

Duy: They are weighted in such a way as to minimize their volatility.

Becker: What about help wanted ads and the trends there?

Duy: I became a little nervous in the beginning of 2007 because help wanted advertising really started to spill over. And it wasnít just in Portland; it was also the Register Guard, and later the Bend Bulletin. You started to see this downtrend. I started to think, is this a cyclical trend or a broader trend? Soon after that, initial unemployment trends started to come up. They didnít come up fast, but up from the lows weíd had, and job growth rolled over from 3 to 1 percent. The national forecast has not been so bleak. I asked: Is Oregon going to be more or less impacted given the national housing market? It should be less impacted than other parts of the nation, but putting that against the traditional volatility issue of the Oregon economy and how these two things weigh out? It suggests there is slowness.

Conerly: Public perception is as negative as I have seen it. I have looked at the consumer confidence numbers for a long time and it is rare that they actually help you compared to looking at the fundamentals, such as employment and inflation. When I look at the Oregon economy in the short run I give extra credence to three national industry sectors. Durable goods orders because we are a manufacturing state. We are seeing consistent lousy numbers in terms of business sales, business profits, and cost of capital for investment. The second industry is wood products. We are a significant timber economy, but the housing downturn hurts. The third area is exports. We are for more export- oriented than the national average. That is the bright side.

Duy: Thatís true also for the nation as a whole ó exports are pulling us away from this down trend that weíre feeling.

BNW: At its annual conference last month, the Oregon Business Council mantra was sustainability. And yet Business Week ran a cover story in late October, ďLittle Green Lies,Ē in which a man who went to Aspen Ski Company to make it ďgreenĒ said that he really didnít know what he was doing making a company green. Does it mean anything to you, sustainability?

Rutherford: Energy conservation is big right now. Is it more talk than action? Companies have found it is good public relations to be green, and they are also finding that it does help their bottom line. Companies like Wal-Mart are trying to make their lighting more efficient and that probably does have an effect.

BNW: Arenít we talking about stuff on the margins versus real things like building nuclear powers plants? Are we helping the dialogue if we push things on the margin and stay away from the bigger ticket items because they are controversial?

Shaw: Sustainability will have an effect but mostly on the state budget and state revenues. The reason is that under the program where you get tax credits for putting in energy savings devices, like solar, that program is written so that it wonít be meaningful in terms of additional energy being produced, but it is going to be meaningful in terms of the tax credits that are derived for those installations. It is widely considered by people who are in that tax credit business to be a boondoggle, with the state being the loser.

Conerly: What is the total cost for of all those Oregon state government efforts to reduce global warming? Do you know the price tag? The Legislature says, yes we are going to be green ó so do this, that and the other. Nobody adds up the cost.

Shaw: Take a look at the program known as Betsy (Oregon Business Energy Tax Credit). I sat in on the meeting of people who were going to use these credits. The credits are unlimited. They were laughing at the state for putting no limitation on this because they said this was going to cost the state tens of millions.

Duy: There are two issues here. It makes perfect sense for firms to reduce their energy consumption as a profitability measure. Many firms are finding a way to do that and market it as their green effort. The second question is to what extent this should be government-directed policy to create a cluster initiative that has some real traction? My view is that clusters happen by accident, rarely by some type of directed action. The question you raised earlier is that everybody saw tech and said this was going to save us from the decline of the forest industry, and now tech has reached a certain plateau. People are turning their attention to sustainable as the buzzword. There is value to it, but if we donít burn a gallon of gas here, it is going to be burned in China. The impact on global warming is going to be zero. That aside, there are some real issues as to whether you can build an economy over a concept like tech, or like sustainability, or whatever the cluster of the day is.

BNW: Tech is a real economy. Is sustainability a real economy?

Duy: The argument is whether we can attract firms that value sustainability, whether it be firms that value being in downtown Portland and paying a tax to be there or whether it be firms that value being an ecological leader in energy offsets.

Shaw: What I read is that most of the tech fabs in this state that were closed because they were not capable of producing 65- or 45-nanometer technology are now being reopened as solar cell production facilities. We are seeing that sustainability concept translated into real employment in those fabs.

Duy: It is not that you wonít get some companies that do sustainability work. Of course you will; everyone will. Itís whether or not that becomes your engine of growth. Should you direct state resources to something else?

BNW: How many people in the state are making solar cells?

Shaw: There are at least three companies.

BNW: And how many do they employ?

Shaw: One of them just announced they would revive a fab and at some point they would be employing 400 people. Today, German companies are setting up facilities in the U.S., and Germany is the leader in solar cell production. They are setting up facilities in Oregon because we have the equipment. It is very inexpensive. They donít need the same precision that you need in micro-processing.

Conerly: Do you get more energy out of a solar cell than you put into the manufacturing of a solar cell?

Duy: You will in the future.

Conerly: Until then, you are actually being unsustainable, using more energy. When we got off of the price system of measuring the value of inputs versus the value of the outputs, you donít have a clue.

Rutherford: If you are going to apply those standards, then you have to do it with ethanol.

BNW: The New York Times magazine says to build nuclear power plants if you want to do something about global warming. Here, the city of Portland buys 1,000 bikes. There seems to be a disconnect between what is in the public dialogue and serious solutions.

Duy: The tough questions are costly. Bicycles are cheap, and they make everybody feel good. Nuclear power plants are costly and potentially have side effects.

Conerly: They donít make anybody feel good.

BNW: We are seeing in the international and national press a conversation about nuclear power plants. They are being built in Scandanavia; they are being built in the Southwest.

Rutherford: The French just signed a big contract to build a whole bunch of them in China. People are wringing their hands but what choice do the Chinese have unless they want to pollute us more, and themselves.

Conerly: Canada gets a ton of energy from nuclear.

BNW: Nuclear power plants are costly, but we blew one up a year ago as a symbol.

Rutherford: That might have been the peak of that anti-nuclear mentality. Who knows when it will turn out to be, but I think inevitably we are driven back to nuclear.

Duy: The more important trade-off in our region is not nuclear or not, it is whether you decrease the electricity coming off the Columbia River.

Conerly: If you want renewable energy, what is more renewable than hydroelectric energy?

Duy: Water keeps falling out of the sky. What are you going to do if you start tearing the dams down?

Shaw: We had the buyer for Northwest Natural Gas appear before the Governorís Council of Economic Advisors. He came in and said to us that two LNG (Liquified Natural Gas) regasification facilities were being built in the Northwest.

Conerly: It would only take half of one facility to fill all the natural gas demand in Oregon, Washington, Idaho, and Montana, and the rest would be export.

Shaw: It would be wise to build a regasification facililty, whether in North Bend or Clatskanie. I suspect that nuclear energy in Oregon will never be built. It takes only six to nine months to put in a natural gas facility. Natural gas prices, instead of going up to $15 where they were a couple of years ago on a wholesale basis, are now closer to $7. We will have a surplus of natural gas in this area. We may have more energy capability in this area than we know what to do with. It will be natural gas, not nuclear. And for natural gas we wonít have to wait 10 years for licenses and construction.

Duy: Except that LNG facilities are controversial.

Shaw: One thing about LNG ó it isnít the governor who decides. It isnít the local mayor who decides. It isnít whether 99 percent of the state doesnít want it. It is the Federal Regulatory Commission who decides, and they have already made decisions to put regasification facilities in New England against objections by people in Massachusetts. The people in North Bend have said they want that facility. The Clatskanie facility has gotten past the first number of hurdles and it looks like that may very well take place.

Conerly: However, that gas will trade at market prices. There are pipelines to move it to California. You can even go the long run and move it to the Midwest. Yes, we will have plenty of energy, but it is going to be at world prices.

Shaw: Yes, but it will be available in the short run. And world prices will fluctuate. At this moment it will answer whatever questions one might have. It will push nuclear that much more into the future. They are not going nuclear if there is an alternative, and natural gas is a clean alternative.

Economic Predictions for 2008 Recession/No Recession

Conerly: Yes, 25 percent probability of a recession in the next 12 months. Oregon will do better than the nation.

Rutherford: Yes, closer to 40 percent in the next 12 months. Oregon will do better than the nation.

Duy: Yes, closer to 40 percent in the next six months. I am concerned Oregon will do worse.

Shaw: Yes, 25 percent and Oregon will do worse.

Becker: I will say 30 percent. Oregon will do better.

If you were governor for a day, your top three priorities for 2008

Rutherford: Tax structure, higher education and infrastructure, and, four, would be job creation.

Duy: I follow with Bill. If you had a fourth, you could add land-use planning

Becker: A sales tax and education: higher-ed and K-12.

Conerly: Reform the tax structure of the state, and of course that will never happen in Oregon. State government should be thinking about labor forces issues. I think we need to be thinking about transportation more creatively, rather than just throwing money at it ó things like hot lanes and toll roads.

The three biggest surprises in 2008

Duy: I think the mortgage issue, at least the credit angle, will play itself out quicker and with less consequence. Housing will be affected, but not to the dire ends that the media predicts. I think that we have a lot of play out of the dollar.

Shaw: A sharp decline in energy prices. The mortgage crisis will be substantially handled by mid-year. And sometime next year, the equivalent of a tax revolt over property taxes will start to make the rounds.

Becker: There is no recession. The state of Oregon actually begins to build roads. And the real estate market is not as bad as predicted.

Conerly: The economy will do better than people think. Hillary picks Ron Paul as her running mate ó that would be a surprise. Rutherford: Interest rates go lower than people think. The economy actually does better than people think. And as a result of lower interest rates, we have fewer housing problems that we anticipate.

Shaw: Wait, can I add one more?

BNW: Sure.

Shaw: The Trail Blazers win the NBA title.

BrainstormNW - January 2008

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