SOU business profs offer thoughts on U.S. economy

A trio of Southern Oregon University Business School professors will tackle the 2010 economy at the SOU/RCC Higher Education Center in Medford on Tuesday night.

Curt Bacon, Kip Sigetich and Dan Rubenson will discuss the nation's economic outlook and entertain questions. Business School Dean Raj Parikh will moderate the event.

When the federal government needs more money to pay its bills, it heads for capital markets, said Rubenson, who teaches economics.

"It might have trouble getting a loan at a low interest rate, but once the interest rate (on bonds) gets high enough, plenty of people are willing to lend money," said Rubenson.

"The federal government has got a little edge. Unlike everyone else, the government has the ability to tax to make sure it can make its payments. When they are competing with everyone else, it pushes up interest rates for everyone else."

He said one of the issues that will bear watching in the months to come is government borrowing relative to the size of the economy.

Every state has constitutional controls to balance its budget, except for Vermont. Many states have been balancing their budgets with federal stimulus dollars in recent months, Rubenson said.

"States can only raise revenue or cut spending," he said. "There are only two ways out. That's why for a long time a lot of Nobel Prize economists have suggested federal revenue sharing to state and local governments during recessions. There was revenue sharing in the stimulus bill that came out, but not enough to fill the whole hole — it's huge and big nationwide."

At an individual level, credit card applications that flooded mailboxes a few years ago have dwindled dramatically.

"It's changing because of the riskiness of borrowers," Rubenson said. "Most people that are good credit risks already have credit cards, so there isn't a lot to push out into that market."

When it comes to student loans, Rubenson said common sense has to rule the day.

"In principle," he said, "when people are borrowing for college they are making an investment in their future, much in the way businesses get equipment with the expectation it will pay off for them."

Reach reporter Greg Stiles at 541-776-4463 or e-mail

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