January 1, 2010 Volume 111 Number 1

Lying by numbers

Oregonians Against Job-Killing Taxes, the business-backed group fighting Measures 66 and 67, makes “jobs” the heart of its campaign, and argues the tax increases will cause job losses. They claim they even have a number for job losses which “economists” say the measures will cause — 70,000 – a figure repeated in 28 separate statements in the voters pamphlet.

Scott Moore, Yes on 66 and 67 spokesperson, chuckles when asked about the “economists” who came up with the 70,000 figure. “Technically, it meets the necessary truth conditions, because there are two economists who say that,” Moore said.

The two are Bill Conerly and Randall Pozdena, and they conducted their analyses for the Cascade Policy Institute, the same group that a few years ago was calling for putting Social Security funds in the stock market. Conerly is chairman of the group’s board of directors, and Pozdena is its “academic advisor.”

Reached by phone, Cascade Policy Institute Executive Director Steve Buckstein confirmed how Conerly and Pozdena came up with their analyses. See if you can follow.

To assess the impact of Measure 66’s tax increase on very-high-income individuals, Conerly re-used an economic model he developed four years earlier to argue for a capital gains tax reduction. Based on that previous study of tax and economic data from 50 states over 26 (or 27) years, Conerly concluded that for every percentage decrease in the capital gains tax rate, the rate of economic growth would increase by 0.091 percent. Reasoning that there’s no difference between capital gains taxes and income taxes on high-income individuals, he then turned that equation upside down to say that for every percent of income tax increase on high-income individuals, the economic growth rate would go down by the same factor. He then applied that factor to an old State of Oregon economic forecast to conclude that for every year that passed, more and more jobs would not be created by these rich individuals. In the first year, Conerly said, the impact would be small — 5,570 jobs — but by 2015, the impact would total 36,000 jobs.

Pozdena did a similar thing for Measure 67’s corporate tax increase, only he used as his basis a study of capital movements between different nations that belong to the Organization for Economic Cooperation and Development. Pozdena concluded that the 1 to 2 percent increase in the corporate income tax rate would cause the state’s growth rate to decrease 0.1 to 0.2 percent. Then, he applied that to a state economic forecast from before the late 2008 economic meltdown to come up with a figure of 22,000 and 43,000 jobs that would not be created by corporations and rich individuals — over the course of 10 years. The common sense explanation for this, Pozdena explained on Cascade’s Web site, is that people would choose where to live and where to invest, and would invest less in Oregon.

Add the two, and you get 58,000 to 79,000 jobs not created by the private sector over five years … or 10 years. Buckstein explained that he took the top figure in that range, 79,000, and tweaked it downward to make it a number of “full-time equivalent” jobs, and that’s how the 70,000 jobs figure was born.

Opponents of the measures took that 70,000 and ran with it, conflating –jobs not created” with actual pink slips, ignoring that Pozdena and Conerly had crunched their numbers over five or 10 years, and instead comparing it to the 130,000 Oregonians who lost jobs in the current recession.

And the worst part, says Oregon House Speaker Dave Hunt, is that while worrying over the theoretical jobs not created by the private sector, theyêre ignoring the real, countable jobs created in the public sector when the State of Oregon collects and spends these funds. Those are people who live and spend their money in Oregon: teachers, in-home caregivers, and construction workers on state projects.