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Originally published June 22, 2009 at 1:35 AM | Page modified June 22, 2009 at 1:36 AM

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An economy ready for recovery

Gov. Chris Gregoire's decision not to ask for a tax increase in Washington state was the right one, and will pay dividends once the economic recovery begins.

Gov. Chris Gregoire made a tough decision this year not to ask for a tax increase, and legislators, some of them reluctantly, backed her up. That was the right decision, and it will soon begin to pay off.

The state's economy is likely within a few months, or even weeks, of hitting bottom. Car sales and single-family housing permits have flattened out, and state economist Arun Raha now says the economy will hit bottom in the third quarter, which starts July 1.

"We think initial unemployment claims have already peaked," Raha says. Total unemployment hasn't peaked and won't for many months, but it is growing at a slower rate.

Raha's analysis comes with an official forecast of state government revenue for the two years beginning July 1.

This week, his forecast was down about $300 million from the forecast he made in March. That sounds like big drop, but in a $30-billion budget, it is 1 percent.

Tax collections have also dropped in the last few months. In response to both of these things, Gregoire ordered agencies to cut employee costs another 2 percent.

To get through this recession without a tax increase means that when the recovery begins, the weight of state government will be no greater than before. People will be able to use extra earnings to pay their debts, resume spending and invest in their futures.

Copyright © 2009 The Seattle Times Company

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