Major missteps cost the state jobs

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Scott Walker ran for governor in 2010 on the promise to create 250,000 jobs using the core Republican economic strategies of cutting taxes, easing environmental and consumer regulations and reducing government spending.

As a result of those actions, however, the state’s economic performance in comparison with the rest of the nation’s has been dismal by most measures.

“Almost to the month since Walker took office, Wisconsin has fallen behind the nation in job growth,” said Jack Norman, former research director at the Institute for Wisconsin’s Future, a progressive but nonpartisan group whose mission is to educate the public about state policy issues.

Walker and his supporters are touting the state’s shrinking unemployment numbers as evidence that he’s succeeded in boosting Wisconsin’s employment market. But experts say that figure is misleading, because large numbers of people have simply stopped looking for work. People who were pushed off the unemployment rolls when Republicans reduced the length of time they qualify for benefits helped to drive the unemployment figure down, said Jennifer Epps-Addison, executive director of Wisconsin Jobs Now. 

Epps-Addison also pointed out that the unemployment figures fail to reflect the thousands of Wisconsinites who went from decent-paying jobs to service-sector jobs that pay so poorly that some cannot survive without taxpayer-supported public assistance. Ironically, while Republicans in Wisconsin and elsewhere condemn social welfare programs for “fostering dependency,” they award large tax breaks to corporations that don’t pay workers enough to keep them off food stamps and other public assistance programs. 

Progressives refer to that as “corporate welfare.”

Admittedly, the governor of a state and the mayor of a city actually have much less control over the economy than their promises and boasts suggest.

“The research would show that overall state and local policies might have an effect on the margins of the economy, but they’re not a real driver,” says Gary Green, professor at UW–Madison, whose research and teaching focuses primarily on community and economic development. “About 10 percent of business growth might be attributed to state or local policies. But we’re driven more by what’s happening in the global economy, especially in Wisconsin, where we’re so much more driven by manufacturing than other states.”

Still, “What governors can do is a little bit of tipping at a crucial time,” Norman said. The big decisions that Walker has made on the economy have tipped it in the wrong direction, he added.

Following is an assessment of some of the critical missteps that Walker made and what Democratic gubernatorial candidate Mary Burke said she would do differently.

Public-spending cuts

In what his detractors branded as a scare tactic, Walker falsely proclaimed during his 2010 campaign that Wisconsin was bankrupt. The state faced a projected budget shortfall but was nowhere near being out of funds — or funding.

Walker called his first budget a “budget repair bill.”

In fact, Walker enters into his re-election campaign after submitting a biennial budget last year with a projected shortfall of $505 million, according to the nonpartisan Legislative Fiscal Bureau.

The real goal of Walker and his tea party backers was — and is — to starve the government, which they contend saddles business activity with red tape. Walker’s inflammatory rhetoric was used to justify massive government spending cuts, which he claimed were needed to balance the state’s budget.

At the same time, Walker instituted tax cuts that disproportionately benefited the wealthy corporate interests that contributed massively to his campaign. He promised the cuts would stimulate jobs.

Walker’s spending cuts, which Democrats criticized as draconian, succeeded in yielding a budget surplus of nearly $1 billion last year. That’s more than he expected, and his supporters are trumpeting it at as Walker’s greatest achievement.

But the cost of that surplus was jobs, according to economic experts. In taking money out of the paychecks of the state’s 300,000 public workers, Walker took a massive amount of money out of Wisconsin’s consumer economy.

“Walker tripped us when we were trying to get back up,” Norman said. “It’s not like a factory shutdown that has an impact in just one community. You’ve got public school (workers) everywhere in Wisconsin, so the cuts saturated the state.”

“Some of the states that did not make some of these severe cuts seem to be doing better than Wisconsin right now,” Green said. 

High-speed rail and energy

One of the first things Walker did as governor was to renege on a deal already in the works to build a high-speed rail line connecting Milwaukee and Madison. He returned $810 million in economic stimulus money that the federal government had earmarked for the project.

The Spanish train manufacturer Talgo, which had built a manufacturing facility in the Milwaukee area to support the project, pulled out of the state and sued it for about $66 million, claiming breach of contract. 

Burke and others said the train would have brought good jobs to the state, along with increased economic activity along its route.

“In the short run, it would have created a lot of jobs and investment,” Green said. “If you look at these projects around the country, they do support a lot of development. The (Walker) administration thought it would take too much support from the state to maintain it.”

Walker is believed to have rejected the money to shore up his anti-government cred with the tea party in anticipation of a 2016 presidential run. While his action gained national headlines and the gratitude of his supporters in the fossil fuel industry, there’s no question that it hurt the state economically.

“We need a governor who will fight to bring Wisconsin taxpayer dollars back to Wisconsin,” Burke said, “particularly when they would spur economic development and job creation.”

In addition to blocking high-speed rail, Walker also prevented alternative-energy projects, especially wind energy projects, from moving forward. The alternative-energy movement not only has the potential to lower the state’s own energy costs but also is considered one of the most promising areas for creating the so-called “jobs of the future.”

Walker has never stated his reason for opposing wind and solar energy, but a number of his largest donations have come from the fossil fuel industry.

Medicare expansion

Norman said Wisconsin has traditionally ranked poorly compared with other states in getting back the federal taxes that citizens of the state pay. But when Walker turned down $100 million in Medicaid expansion money from the federal government, he became an instant hero to the tea party at the cost of health care for tens of thousands of poor Wisconsinites.

That action once again turned down jobs for the state.

Jobs in health care pay relatively well, much better than service-sector jobs. Critics say that refusing the Medicaid money cost thousands of potential jobs as well as increased economic activity that would have created other jobs. 

Education cuts

When Walker declared that Wisconsin was “open for business,” he seemed to expect companies to relocate to the state to take advantage of lower corporate taxes, a poorly paid, non-union workforce and a weakened regulatory environment.  But large companies of the sort he sought seldom relocate at all, and those that do are looking for a skilled, educated workforce and the kind of quality-of-life perks that attract the best workers, according to experts.

“Higher graduation rates and having a higher percentage of your workforce with degrees lends to creating a strong economy,” Burke said.

But, instead, Walker took a hatchet to public education in the state. His first budget stripped $2.6 billion from education at a time when the state could have taken advantage of high unemployment to re-educate workers, according to Norman and others. His cuts on a per-student basis were the nation’s highest.

An especially disastrous decision Walker made was cutting funding to technical colleges by 30 percent. Wisconsin already lagged behind the nation in terms of having workers versed in the latest production technology, Norman said. Walker’s cuts made the state even less attractive to manufacturers and knowledge-based industries, according to him and others.

“It’s absolutely stupid to defund something that’s helping manufacturing,” Norman said. “You should use your tax dollars to supporting training people with a specific job in mind. This is targeted job assistance.”

Norman said that across-the-board tax cuts can’t possibly stimulate job creation in the same way that targeted job assistance can.

Interestingly, Minnesota raised taxes by $2 billion beginning in 2011, the same year that Walker cut them by $1 billion. Minnesota used the additional money to invest in education and job creation.

Despite Wisconsin’s cuts and Minnesota’s increases, not one Minnesota business relocated across the border. In fact, from March 2012 to March 2013, private-sector jobs increased in Wisconsin by 1.1 percent, ranking the state 34th in job creation, according to the U.S. Bureau of Labor Statistics. Minnesota ranked 16th, with 2.1 percent job growth during that period.

The WEDC

When Walker took office, he eliminated the Wisconsin Department of Commerce, which Burke headed under Gov. Jim Doyle at a time when the state had 80,000 more jobs than it does today. The office was charged with helping business startups, an area in which Burke is considered a world-class expert: She set up sales and distribution operations for Trek Bicycle Corp., a company founded by her father, in five European countries and oversaw operations in seven nations.

Walker replaced the commerce department with the Wisconsin Economic Development Corporation, a public-private partnership that’s  been one of the highest-profile disasters of Walker’s administration, plagued by turnover, outrageous cronyism and the loss of millions of taxpayer dollars, some of which simply disappeared. 

“Under Walker, Wisconsin ranks 48th in new businesses created,” Burke said. “At a time when entrepreneurs and small businesses need access to capital, WEDC failed to get $35 million designated for business loans out the door. That’s unacceptable.”

Burke said even if the agency had been staffed by professionals, it didn’t have adequate funding to handle the magnitude of the economic crisis in the state. She would have allocated $200 million, she said. She also would have targeted that money to go to businesses with the greatest potential for creating jobs.

“The specific industries and businesses I would target vary by region,” Burke said. “Our state is best viewed through its various regional strengths — for example, biotech and health information in south central Wisconsin, clean water research and development in Milwaukee and forestry products and tourism in the north.”

Overall, Burke would promote investment in high-tech and alternative energy, particularly solar energy.

“As recently as 2010 we were keeping pace when it came to developing and utilizing solar power, but the last three years have seen a precipitous decline here in Wisconsin, while the rest of the country continues to move forward,” Burke said.

Sales tax increase

Walker recently floated the idea of eliminating the state’s income tax and increasing the sales tax to make up for the revenue loss. The effect would be to make Wisconsin sales taxes the highest in the nation — more than 13 percent. 

Burke said this approach “would kill jobs and raise taxes on 80 percent of Wisconsinites.”

“Taking money out of the pocket of the families whose purchasing power drives our economy to give another tax break to those at the top doesn’t make sense — it would devastate businesses near the state’s borders and potentially cause businesses to leave the state,” Burke said. 

Norman said Wisconsin tax code has been historically regressive, but the sales tax idea is the most regressive he’s ever heard. “Burke should go berserk on Walker for floating that proposal,” he said. 

Are you better off?

During a 1980 presidential debate with incumbent President Jimmy Carter, Ronald Reagan famously instructed voters to, “Ask yourself, ‘Are you better off today than you were four years ago?’”

Voters felt the answer was no, and Carter lost his re-election bid.

Democratic gubernatorial candidate Mary Burke might consider asking Wisconsin voters the same question in her race to depose Republican Gov. Scott Walker in November. Despite the strained spin that Walker and his supporters are frantically applying to his record, only the wealthiest of voters have received a boost under his administration. The main question standing in the way of a Burke victory is whether she can inspire enough of those who’ve suffered under Walker’s policies to vote in a non-presidential election year, because the wealthy and those who identify with them are likely to turn out for Walker in record numbers.

Burke is a wealthy businesswoman, and downtrodden Wisconsinites might look at the two candidates and wonder, “What’s the difference?” That perception is not going to compel them to head to the polls in November. Political analysts concur that Burke and her campaign must overcome  that image in order to win.

Comments 

+1 1 Larry 2014-04-16 10:29
When you look at the funky employment/ unemployment numbers you are saying that Scotty is doing the exact same thing that Obama is doing on the national level. Conclusion there is zero difference between political parties or politicians. People just think so. In both instances the rich got richer and the poor got poorer. The above is simply blather. Change names and parties and it could be written about anybody on either side.
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