Tuesday, February 14, 2012

Walker and Jobs

The Recess Supervisor has a rather elegant explanation of why he disagrees with Scott Walker's economic policies:
In my mind, the failure is simple.  When an economy is weak, don't take spending out of it and don't severely diminish the spending capacity of many of its participants.

Walker's proposals are failing for the same reason that Obama's Making Work Pay tax credit bombed.  The theory behind Making Work Pay was that people would be more inclined to spend their additional money if they got it a little bit at a time instead of in one lump sum.  But what behavioral economists found is that if the money received on an incremental basis is relatively insignificant, it doesn't get spent at all.

So while some conservatives are wildly rejoicing at a  $20 or $30 savings on their property tax bills courtesy of Governor Walker, the reality is that their $20-30 came at the expense of many public employees losing their jobs, or the tens of thousands of public employees who are now taking home thousands of dollars less each year as the result of higher health insurance and pension costs.
The RS goes on:
In other words, less economic activity is generated in Wisconsin by 200 people with 20 extra dollars than is generated by one person in Wisconsin with 4,000 extra dollars.  Not really rocket science, but we should note that the Obama administration got this one wrong as well.
Or we could put it another way: more economic activity is generated by one entity spending $1-3 billion (i.e. the state) than by 2 million people not doing anything with $20. (I'm going to assume that this is not the extension of that argument that the Supervisor had in mind when he made it, but it seems to me like one that could follow.)

Compounding this is Walker's actual strategy for bringing jobs to Wisconsin: the "Wisconsin is Open for Business"plan -- which really isn't anything more than a marketing strategy -- relies entirely on importing jobs from out-of-state and completely ignores native jobs creation. Job importing should definitely be part of any strategy, but Walker's budget, economic policies and leadership tone have made Wisconsin completely unattractive to companies who might otherwise be interested in relocating or expanding into the state. Why would anyone want to build a workforce here when there's so much labor strife that seems waiting to spill over into the private sector? How can Wisconsin promote an educated workforce when we're slashing school budgets? What about potential infrastructure issues? etc. Businesses aren't just going to to listen to what Walker promises them, they'll want to know what the long-term prognosis for the state is and right now it's completely debatable.

Right now the company that is being held up as a model of Wisconsin's potential economic prowess is Epic Systems in Madison, which every elected official in the state seems eager to label as the Microsoft of the Midwest or the Dell of Dairyland -- and for good reason. Epic really should be a model that Wisconsin follows: they were founded in Wisconsin, currently employ 5000+ people (and have something like 150,000 resumes on file), are investing in Wisconsin with an enormous campus outside of Madison, and are feeding the growth of local suppliers and vendors. What more could we ask from a business? Epic is no more likely to leave Wisconsin than Apple is to leave Silicon Valley. That's largely because they were founded here and businesses generally don't leave the places where they were created. Yet these are the very businesses that are being neglected when Walker concentrates all of his energy on importing jobs -- that may or may not come here in the first place ad are increasingly not likely to do so now -- at the expense of cultivating them here, which is exactly what's happening with his slash and burn budgeting.

I do disagree with the Recess Supervisor on one point: that Walker's job pledge was unrealistic. It certainly was a gimmick, but one that even his opponents thought plausible early in the campaign, yet also one that was made before the financial meltdown of September 2008 when the prospects for achieving such a goal declined precipitously. At that point it was nearly impossible to remove the central tent-pole of his entire campaign. Walker has since has numerous opportunities to adjust his goal to a new economic reality and not doing so make him look ridiculous. 250,000 may have been possible at one point, but Walker's agenda has clearly proven to be no way of getting to that goal.

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