Turbulence watch on the state's economy

Forbes gives the state high marks for its business climate, but you wouldn't know that at a summit of business leaders, suffering from the Boeing jitters.
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Boeing plans to add 1,200 jobs at its Renton plant over the next couple of years.

Forbes gives the state high marks for its business climate, but you wouldn't know that at a summit of business leaders, suffering from the Boeing jitters.

Majority Democrats in Washington got a nice assist last week from Forbes magazine. It named Washington the second best state in the nation to do business, up from third last year. The ranking came out the same week the Association of Washington Business (the state'ꀙs Chamber of Commerce) held its 20th anniversary 'ꀜPolicy Summit'ꀝ at Suncadia Resort near Cle Elum. (I moderated a legislative panel at the event.) AWB is not generally all that pleased about the state's business and political climate.

Ironically on cue, the Forbes ranking coincided with the Washington Department of Labor and Industries proposing a 7.6 percent workers'ꀙ compensation insurance premium hike for 2010. That announcement triggered a renewed round of calls by business interests for workers'ꀙ comp reform. Generally, corporate Washington believes the current industrial insurance program costs too much and is too generous to injured workers. Ideas for reform include creating a settlement option so that permanently injured worker claims can be closed and don'ꀙt stretch on for decades. Labor unions fiercely oppose this idea, arguing settlement is not in the best interest of the worker.

No doubt Republicans and the business lobby will push hard during the 2010 legislative session for workers'ꀙ comp reform. They'ꀙll point to the rate-hike, rising long-term disability pay-outs, and a recent Deloitte Consulting report that says Washington'ꀙs industrial insurance rates are a competitive disadvantage. Democrats, loathe to anger labor anymore than they already have, will likely brush off calls for reform by pointing to the Forbes ranking.

The wild card in this debate is Boeing. The aerospace giant'ꀙs lobbyists have already come-a-knocking at Gov. Chris Gregoire'ꀙs door to talk about workers'ꀙ comp reform (Boeing is self-insured, but must play by the same rules as companies insured by the state). If by January Boeing has decided to build its second 787 line in South Carolina, Democrats will be under enormous pressure to do something to try to save future production lines, such as the 737's, from moving out of state.

At AWB'ꀙs Policy Summit Boeing'ꀙs future in Washington was top-of-mind. Boeing remains the big, giant canary in the coal mine. And while it went unsaid, the gut-check seemed to be that Washington has probably already lost the second 787 line. Last Friday, the Charleston, South Carolina Post and Courier quoted a state lawmaker there confidently predicting Boeing will make the move — based on the incentive package South Carolina is dangling in front of the company. 'ꀜThis is going to be our gold rush, if it happens,'ꀝ said Rep. Chip Limehouse of Charleston.

In response, Washington Senate Minority Leader Mike Hewitt, R-Walla Walla, issued this statement: 'ꀜIt'ꀙs tragic that Washington appears to be on the verge of losing billions in future business and countless jobs to South Carolina and yet we refuse to address two cost-of-doing-business issues critical to Boeing: unemployment insurance and workers'ꀙ compensation taxes.'ꀝ

Nonetheless, Gregoire told the 'ꀜPolicy Summit'ꀝ attendees what she told reporters a few weeks ago: that she is making the 'ꀜbusiness case'ꀝ to Boeing why it makes sense to stay in Washington, rather than any Boeing-specific concessions or incentives. It'ꀙs an interesting line coming from a lawyer who'ꀙs spent a career working in state government.

A few other notes from Suncadia Resort: The theme of the AWB gathering was 'ꀜCharting a Course through the Turbulence.'ꀝ But as Gregoire wryly noted the first agenda item was golf registration. A panel of economists predicted that more state-chartered bank failures are yet to come, as with Venture Bank earlier this month. While economists seem to agree the recession has bottomed out, there'ꀙs always concern about a 'ꀜdouble-dip recession,'ꀝ whereby we start to see a recovery and then there'ꀙs another nosedive. Economists sometimes refer to it as the 'ꀜdreaded W.'ꀝ

Finally, because consumer spending makes up 70 percent of the economy, the speed of the economic recovery will rely in large part on consumer confidence. That suggests a slow climb out of the recession, rather than a V-shaped recovery. Turbulence, indeed.


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