A panel of economists gathered Thursday by the Greater Oklahoma City Chamber assured civic leaders that despite the city’s red-hot economic growth, the current good times are sustainable and not just another energy boom destined to go bust.
At the same time, panelists warned that a recent decision by Gov. Mary Fallin to opt out of an Affordable Health Care Act program will cost the state billions and do nothing to combat a burgeoning poverty rate. They also agreed state lawmakers are misguided in trying to further reduce the state income tax rate and should instead focus on sales taxes.
Robert Dauffenbach, professor and director of the Center for Economic and Management Research at the University of Oklahoma, recalled that early in his career, Oklahoma City was overshadowed by Tulsa as “the real city with its act together.”
Dauffenbach noted that while the energy industry contributes greatly to the local economy, Oklahoma City’s Metropolitan Area Projects initiative and other quality-of-life efforts are to credit for the city’s forward momentum.
“Those seeds invested years ago are paying handsomely today,” Dauffenbach said. “Oklahoma City pulled it together, and Tulsa seems to have lost it for some reason. There’s something going on in this community that is keeping it together for a very sustainable future.”
But challenges remain, warned Dauffenbach and fellow economists Mickey Hepner, Dan Rickman and Russell Evans.
Dauffenbach said Oklahoma City has lost 20,000 manufacturing jobs since industrial employment peaked in 2000. Over the past dozen years, the city has added 20,000 jobs in health care with more growth ahead as the baby boom generation continues to hit retirement age.
“The crest of that wave has yet to come to us,” Dauffenbach said.
Hepner, dean of the school of business at the University of Central Oklahoma, cautioned that Fallin did not do the state’s impoverished residents any favors when she decided earlier this month to not expand Medicaid as part of the Affordable Health Care Act.
The legislation, Hepner said, would have allowed adults up to 133 percent of the poverty rate to enroll in Medicaid, with the federal government paying up to 130 percent of the expense in what would have been a 10:1 match in spending.
“We just turned away additional money that could have generated billions of dollars of economic growth in this state,” Hepner said. “From an anti-poverty perspective, that was a mistake. From an economic development perspective, it was an incredible mistake. It was an incredible opportunity that was wasted.”
A loud cheer went up as one audience member challenged Hepner, saying the federal government was not being honest in the amount of debt and obligations being accumulated with the health care legislation.
Hepner responded that the Congressional Budget Office determined the legislation will not add to the country’s debt and will instead lower its debt.
He said entitlements are to blame for the burgeoning federal debt.
“We have promised benefits for a long time we just can’t afford to pay,” Hepner said. “And we are passing that on. … We can’t solve those problems by one party acting alone. We can’t solve those problems with one party saying ‘no.’ We have to work together.”
Fed, state tax issues
Evans, executive director at the Steven C. Agee Economic Research and Policy Institute at Oklahoma City University, said another threat could be posed by the stalemate in Washington over budget cuts and increased revenues referred to as the fiscal cliff.
If no agreement is reached, Evans warned, the $110 billion cut in spending will include a $55 billion reduction in military spending that could trigger dramatic changes at Tinker Air Force Base and other military installations in the state.
Evans, however, discounted the possibility of the Republicans and Democrats not reaching an agreement.
“It’s inconceivable some deal won’t be struck,” said Evans, noting he has been told by contacts in Washington that the ‘fiscal cliff’ is “a meaningless, artificial crisis.”
Likewise, the economists unanimously agreed state lawmakers need to shift their efforts from cutting income tax rates to cutting sales tax rates.
Hepner said income taxes account for 40 percent of state revenues and that eliminating the remaining income tax revenue would cut $2 billion from education, roads and other basic state functions.
“We have an income tax that is below the national average,” he said. “We have a sales tax above the national average. I’d argue the sales tax is a much bigger issue.”