Category Archives: Wisconsin business

05.14.13
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Texas vs. the U.S. (including Wisconsin)

Barack Obama went to Texas on his perpetual-campaign tour Thursday.

Texas is the state that, in terms of job growth, has basically propped up the entire U.S. economy, according to Texas Gov. Rick Perry:

The Texas Model works:

• While the U.S. lost 2.5 million net jobs over the last five years, Texas created 530,000 net new jobs.
• Over the last 10 years, Texas created 33 percent of the net new jobs nationwide.
• Texas has been the top exporting state in the nation for 11 straight years.
• Texas is ranked #1 on CNBC’s 2012 Top States for Business list.

And just this week, Chief Executive magazine ranked Texas the best state to do business for the ninth year in a row, and Site Selection Magazine ranked us the most competitive state in 2012. Mr. President, the Texas Success Story can be the American Success Story.

Investors Business Daily adds:

And since the recovery started in June 2009, Texas has outperformed Obama on every important economic measure.

Jobs: Private sector jobs have shot up 10% in Texas since June 2009, which is twice the national growth rate. And while U.S. employment is still 2% below its pre-recession peak, in Texas it’s 5% above the state’s previous high.

Labor force: Nationwide, the labor force — the number of people who have jobs or are actively looking — has remained virtually flat since the recovery started, climbing just 0.3% over the past 45 months. Texas, in contrast, has seen its labor force climb 6.2%, as workers flood the state.

Wages: According to the Bureau of Labor Statistics, average annual wages in the U.S. rose 5.4% from May 2009 to May 2012. In Texas, they rose 6.1%.

Per capita income: Texans have also seen their per capita personal income grow faster than the nation as a whole, increasing 13.3% compared with 10.5% nationwide, Bureau of Economic Analysis data show.

GDP: And Texas’ economy has grown faster than the overall economy since Obama took office. Between 2009 and 2011, real GDP in Texas expanded 8.7%, while the nation’s overall GDP managed just 4.6% growth, according to the BEA.

And while Obama and his backers complain that austerity is now standing in the way of economic growth, Texas proves that more government spending and government jobs aren’t needed to grow the economy.

Overall state spending has been flat since 2010, according to the National Association of State Budget Officers, and BLS data show that state and local government jobs dropped 16,500 since the recovery started.

The two statistics that stand out like sore thumbs are personal income growth, which in Wisconsin has trailed the national average since the late 1970s, and government spending, which is twice what it would have been had the state had controls on spending on taxes back in the 1970s.

With discontent in this state over its subpar job growth, and of course the pathetic national economic “recovery,” Perry says Texas’ economy is based on:

 Low taxes

 Lawsuit abuse reform

 Predictable and effective regulations

 Balanced budgets

 Accountable schools and a competitive workforce.

Which of these apply to Wisconsin or the nation? Definitely not low taxes. (Wisconsin is fifth highest in state and local taxes and eighth worst in business tax climate, and when state taxes are added, the U.S. has the highest corporate income tax rate in the world.) Lawsuit abuse reform? According to the Institute for Legal Reform, Wisconsin’s legal environment ranks 15th. (Texas ranks 36th, which probably is the reason for Texans for Lawsuit Reform.) “Predictable and effective regulations”? In Wisconsin? The land of Damn Near Russia?

Wisconsin has a legally but not factually balanced budget. Our schools are definitely overrated (while the education establishment screams bloody murder about attempts to make schools accountable), and our workforce appears to be overrated as well in the opinion of the only people who count, employers. And on each of these points where more needs to be done, the Legislature, which according to media reports is controlled by the Republican Party, has done next to nothing.

What is the Wisconsin Model? High taxes, 3,120 levels of government, grossly excessive regulation, slavish financial devotion to public schools, and, by the way, below-average business and personal income. Three and a half decades (or more) of the same old thing isn’t working.

 

05.09.13
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How to help the middle class (but they won’t)

I have been around Wisconsin media so long that I know both of the people in this piece — Tom Still of the Wisconsin Technology Council (formerly of the Wisconsin State Journal), and former U.S. Rep. Steve Gunderson (R–Osseo):

A report released this month by the Brookings Institution confirmed what many observers already suspected: Metro Milwaukee lost almost twice as many private-sector jobs in the decade of 2000-’10 as the average for the nation’s 100 largest metro areas.

What hurts most is not that metro Milwaukee’s 6.8% job loss was well above the national average of 3.9%, but that a large share of those jobs were good jobs – with decent wages, benefits and some sense of security and opportunity until the bottom fell out. …

Rebuilding the endangered middle class in America is the subject of The New Middle Class: Creating Wealth, Wages, and Opportunity in the 21st Century, written by former Wisconsin congressman Steve Gunderson, now president and CEO of the Association of Private Sector Colleges and Universities.

The book provides an unvarnished look at why the American middle class has eroded over time, beginning with events, trends and policies dating to the 1970s, and offers some paths forward – assuming there is sufficient private and public will to follow them.

Gunderson, who also served in the Wisconsin Legislature before representing the state’s 3rd Congressional District as a moderate Republican for 16 years, grew up in what he described as a classic middle-class environment. His grandfather was a farmer, his father a car dealer and virtually everyone around them in the northwest Wisconsin community of Pleasantville fit that profile.

Today, Gunderson believes, the middle-class ethos that contributed so much to the nation’s civic and economic fabric is threatened – not just in Wisconsin, but across the nation, at a time when competition from abroad has increased and the middle class is growing in emerging nations.

“Everyone thinks the end of the middle class began at the end of the recession,” Gunderson said last week. “It didn’t. It began in the 1970s. The good news is there is still time to save it.”

The book outlines a host of reasons the number of statistical middle-class households and their income growth has stagnated. Those include the instability of private and public retirement plans, the crumbling of the housing market following the growth bubble, policies and practices that encouraged a culture of personal spending vs. saving, global competition, a lack of innovation in some industries and more.

Of late, Gunderson argues, one of the biggest factors contributing to the decline of the middle class is political gridlock.

“Both parties talk a great deal about restoring the middle class, but neither of them does anything about it,” he wrote. “The truth is – they can’t. The middle class cannot be restored in this era of severe political polarization. Unless politicians from both parties are willing to make compromises and restore the middle ground of American politics, the middle class will continue to erode. Throughout our history, consensus has built the middle class. Now, partisanship has destroyed it.” …

The consensus Gunderson proposes … begins with understanding the world has changed and the economy that existed a generation or even a decade ago has changed with it. The “knowledge economy” of the 21st century requires skills that weren’t necessarily needed for middle-class jobs in the past. That has heightened the need for higher education that doesn’t stop at the edge of a traditional college campus. …

To Gunderson, that’s not just more people with bachelor’s, master’s and doctoral degrees, but lifelong learners with certificates that address the needs of employers in emerging sectors that are most likely to create middle-class jobs.

Rebuilding the American manufacturing advantage, stabilizing retirement plans, easing the home-ownership crisis and solving the federal deficit riddle are also part of the equation. At the center of it all is what Gunderson describes as a “middle class compact” that focuses on fostering a growth economy, something he believes Democrats and Republicans alike can embrace.

Rebuilding the middle class, in Milwaukee as with anywhere else, is essential to economic security, civic cohesion, democracy and even national security. It’s a task that cannot begin soon enough and that cannot be accomplished without public and private cooperation.

I was a big fan of Gunderson when he was a congressman. He raises interesting points, though I see absolutely nothing about how you foster a growth economy that “Democrats and Republicans alike can embrace” because of the nature of today’s politics. (Not that politics was beanbag in the permanent-campaign ’90s either, but those seem like the good old days now.)

Bill Clinton, the president during Gunderson’s last two terms in Congress, was about Bill Clinton, so he worked with whatever side was the majority in Congress. Barack Obama is much more of an ideologue, and split control of Congress doesn’t help. Politics is a zero-sum game, remember — one side wins (gets (re)elected, gets their legislation passed, generates big campaign donations), the other side loses.

Obama and his Democrats have, in fact, been actively hostile to the middle class, not to mention, as we know, their employers. Neither side agrees on how to create a “growth economy,” which makes those other four goals impossible, but when one side refuses to make things better for the middle class, that turns your book into fiction.

05.08.13
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WEDC vs. the Legislature(s)

The Wisconsin Reporter reports:

The operation at the Wisconsin Economic Development Corp. apparently is so muddled that the Legislative Audit Bureau could not adequately “assess the effectiveness of WEDC’s economic development programs.”

The bureau’s audit, released Wednesday, found information WEDC submitted to the Legislature in November “did not contain all the required information, contained some inaccurate information and did not clearly present information about the number of jobs created and retained as a result of its programs.”

Auditors found it “difficult to assess the accuracy and completeness of the number of jobs that WEDC reported” because WEDC did not independently verify the information submitted by the companies that took WEDC cash or tax credits, or follow up on the 55 percent of contractually required progress reports that were never submitted. …

The audit found that internal WEDC documents show no jobs created or retained as a result of Community Development Block Grant awards, whereas WEDC’s report indicated 302 jobs created and 63 jobs retained.

The audit was so alarming that Rep. Samantha Kerkman, R-Randall, and Sen. Robert Cowles, R-Green Bay, co-chairs of the Joint Legislative Audit Committee, called for a public hearing May 9.

That’s just the tip of the 94-page iceberg released by the audit bureau, which underline’s the quasi-public economic development corporation’s neglect of statutory requirements and internal policies in almost every facet of operation.

With the hearing tomorrow (and an emergency meeting today), I have a thought for Rep. Kerkman, Sen. Cowles and the rest of the Legislative Audit Committee: You’re looking in the wrong place.

The much bigger question is whether or not WEDC is improving the state as a place to do business. The answer depends less on WEDC than on what the Legislature does.

First: Rep. Peter Barca (D–Kenosha) claims the state needs to return to the previous Department of Commerce. The mere fact that Barca got a job with the U.S. Small Business Administration as a Band-Aid for his boo-boo of losing his Congressional seat to Mark Neumann does not make Barca qualified to pontificate on business or business climate.

More important than Democrats’ stupid political games-playing is the fact that the economic development corporation model works in this state. If it didn’t, there wouldn’t be this many economic development corporations in this state. Economic development corporations employ people who know what they’re doing in economic development.

Barca’s preferred model, the Department of Commerce (and its predecessor Department of Development), was the state agency that was supposed to promote business while simultaneously regulating business. That’s not very business-friendly, but then again neither is this state. And, by the way, the Department of Commerce was the agency that watched while the state hemorrhaged jobs during the Doyle administration.

If the WEDC has problems, they need to be fixed immediately. But the problems with this state’s business climate have little to do with the WEDC and much more to do with things that have predated the WEDC.

What’s been done about the $2.2 billion Doyle tax increase? Hardly anything. (Not that Doyle should be exclusively blamed; remember when Wisconsin had the highest state and local taxes in the nation under Gov. Tommy Thompson?) Has state government been restructured to be considerably smaller and perform better? Have any state employee positions been eliminated? Have we gotten rid of any of the 3,120 units of government in this state? Has the job-killing Department of Natural Resources been reformed at all? (Ask the developers of the restaurant not far from here, whose lot remains completely undeveloped thanks to the DNR.) Has a single regulation been repealed?

The reason Wisconsin continues to perform badly in state business climate comparisons — regardless of how the issues of importance are ordered or weighted — is because nothing significant has been done to improve this state’s business climate. This may be the most regulation-happy state in the country not named California. (And because we have regulations, we have regulators, government employees who make more money and have much better benefits than those whose taxes pay those salaries and pay for those benefits.) Schools in this state are not as good as we like to think they are, which means workforce quality isn’t as good as we think it is. Businesses don’t like unions. The supposedly courageous Walker refuses to sign right-to-work legislation. Our vaunted quality of life generally matters the least, believe it or not, to businesses making location decisions.

Those are things the Legislature decides to do. The WEDC is in charge of marketing Wisconsin as a place to do business. It’s tough to do that when the product isn’t very good. The Legislature needs to improve the product WEDC is trying to market.

Remember the phrase (attributed,  possibly even accurately, to Albert Einstein) that insanity is doing the same thing repeatedly and expecting different results? Well, Wisconsin has been a high-tax high-regulation lots-o’-government state for at least 100 years. (That would be when the income tax started.) And our economy has been subpar for at least the last 35 years, and probably long before that. Until our approach changes, the results will continue to be mediocre at best.

 

05.07.13
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The risk we take by not taking risks

Glenn Harlan Reynolds:

When the economy was last this bad for this long — back in the dreaded Jimmy Carter era — there was one upside: While inflation raged and unemployment stayed troublingly high in America’s big businesses, a lot was going on in America’s garages. Steve Jobs and Steve Wozniak werestarting Apple, Bill Gates and friends were starting Microsoft and a variety of other new entrepreneurial ventures were lining up for takeoff.

So you might hope that there’s a similar silver lining in today’s economic Slough Of Despond. But so far, that hope would seem to be unjustified.

At any rate, the latest data indicate that start-ups are becoming rarer, not more common. A new report from JPMorgan economist Mike Feroli indicates that employment in start-ups is plunging. New jobs in the economy tend to come from new businesses, but we’re getting fewer new businesses. That doesn’t bode well. …

One reason, I suspect, for a job market that looks more like Europe is a regulatory and legal environment that looks more like Europe’s. High regulatory loads — the product of ObamaCare and numerous other laws — systematically harm small businesses, which can’t afford the personnel needed for compliance, to the benefit of large corporations, which can.

Likewise, higher taxes reduce the rewards for success, making people less likely to invest their money (or time) into new businesses. And local regulatory bodies, too, make starting new businesses harder.

But I wonder if the biggest problem isn’t cultural. Since 2008, this country hasn’t celebrated achievement or entrepreneurialism. Instead, we’ve heard talk about the evils of the “1%” ” about the rapaciousness of capitalism, and the importance of spreading the wealth around. We’ve even heard that work in the public sector is somehow nobler than work in the private sector.

Countries where those attitudes prevail tend not to produce as much entrepreneurialism, so it’s perhaps no surprise that as those attitudes have gained ascendance among America’s political class and media elite, we’ve seen less entrepreneurialism here. …

Some people, of course, will start businesses no matter what politicians and pundits say, and will do so even in the face of hostile legal and regulatory climates. But their numbers will be fewer, and so will be the numbers of jobs generated. As millions of Americans are unemployed — while millions more have dropped out of the workforce entirely — perhaps it’s time for our political class to think harder about the messages it’s sending. And perhaps it’s time for voters to send the political class a message of their own.

That message, by the way, is grossly overdue in Wisconsin.

 

04.24.13
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Steve somewhat agrees with a Democrat!

I have known Joe Wineke as a particularly odious Democrat, a former state senator and head of the Wisconsin Democratic Party. During a political issue in which Wineke was on the wrong side, someone commented that “Wineke” was pronounced “WHINE-icky.”

Then I heard from Wineke’s successor as head of the state Democratic Party, and Wineke sounded statesman-like in comparison.

I’m not sure what happened to Wineke, because based on what he wrote for the Wisconsin Policy Research Institute, he’s starting to make sense:

By any definition, Wisconsin is in economic trouble.  Recent reports rate the state 44th in job creation and, according to CNBC, 46th in the quality of our workforce.  Even worse, for the past 30 years, we have ranked 48th in personal income growth.  We are not creating enough jobs, our workforce is not diverse enough and our income lags well behind the rest of the country.  If something does not change and change soon, Wisconsin could be last in the nation in job creation.

It is imperative that we change the way we do business. We need to think big and de-politicize the process while doing so.

State government likes to talk about job creation, but consistently thinks small.  Both political parties waste time blaming each other.  Republicans think we can fix everything by cutting taxes and weakening the regulatory climate.  Democrats play the “soak the rich” card at any available opportunity and often reject anything that smacks of business help.  Neither plan does much to create well-paying jobs.

Wisconsin should look at four areas that will create greater economic opportunity for our state. We need to:

  1. Make major investments in business capital.

  2. Change our tax code.

  3. Fix our transportation system.

  4.  Provide major investments in education.

The detail of Wineke’s bullet points:

Start with business capital.  It is no secret that businesses (especially small and start-up business) are having a very difficult time getting private-sector funding.  Recently, the Wisconsin Alumni Research Foundation and the State of Wisconsin Investment Board came up with a plan to provide up to $30 million in investment capital.  A good start, but the amount of funding is so small that it will only help on the edges.  Wisconsin needs to create a large business and venture capital fund, place it out of the hands of politicians and fund the program through bonding.

This is at least worth pursuing, although how you “place it out of the hands of politicians” is an excellent question. (In fact, Wineke’s desire to “depoliticize the process” seems naïve, though well-intentioned.) There’s also a policy question of whether you really want government involved in financing business, although that is already the case with such organizations as the U.S. Small Business Administration.

Second, we need to look at taxes.  Wisconsin should follow the four basic principles of sound tax policy: simplicity, transparency, economic neutrality and stability.  Start by eliminating the tax on tangible personal property.  It is poorly administered, is complex, treats businesses worse than other property owners and is very unstable.  Currently this tax raises around $260 million per year and is entirely placed on the business community.

We should also rewrite our sales tax code.  We currently exempt more from the sales tax than we collect, creating unfair disparities.  For example, internet sales are tax exempt in Wisconsin.  Customers on Main Street pay.  It is grossly unfair and puts our merchants at a disadvantage.  But, once again it will require our elected officials to think outside the box.

There are points to be made on both sides of the Internet sales tax, but revising the sales tax while keeping the revisions revenue-neutral is worth considering. Tax revenues should increase because of increasing economic activity, not because of increasing taxes. As long as Wineke correctly wants to get rid of the personal property tax, he should also favor dumping the corporate income tax, which, like the personal property tax, is not paid by businesses, but is paid by businesses’ customers.

Wineke’s focus on taxes ignores the fact that, while taxes are the most important component of a good, or bad, business climate, it’s not the only component. I’d love to see a Democrat take on the job-killers at the Department of Natural Resources and the other regulatory agencies that make doing business a struggle in this state.

Wisconsin business moves by highways.  It costs millions of dollars to replace or add a mile of road.  Our transportation funding system is a relic from 50 years ago.  It is dominated by a large gas tax and a registration fee that is regressive.  The United States has reduced oil consumption by nearly 15% in the past two years, reducing available tax revenue.  This trend will continue.  We must have the courage to find new ways to fund transportation.  The most logical way is to create an assessment on vehicle miles traveled (VMT).  A VMT assessment is fair.

Here’s where our paths diverge. My preferred way to fund transportation is to fund vehicular transportation, and not mass transit, bike paths or the other non-vehicular forms of transportation that suck money out of the transportation fund while having nothing to do with moving state businesses’ products from plant to seller. Apparently Wineke is OK with the state’s knowing how much you drive; I am not.

Fourth, we need to get back to funding education properly.  In recent years, education has become a “whipping post” for too many.  Instead of cutting income taxes by two dollars a week, put that money into K-12 education, technical colleges and our University System.  We also need to refocus our technical colleges away from being the portal to enter four-year campuses and get them back to teaching job skills.

When you consider that the number one area of state spending is on education, it’s unclear what “funding education properly” is, or what the result of “funding education properly is.” This state’s schools are, bluntly, overrated, despite the fact that few states’ taxpayers have been burdened by the taxes Wisconsinites pay for our supposedly great schools. Schools need to earn more money by doing better, not merely given what the education establishment defines as “funding education properly.”

The other thing about school funding is that there remains no evidence that school quality leads to economic growth on the macro (that is, statewide) level. As I’ve pointed out before, when a person’s education improves, that person’s economic opportunity improves, including leaving Wisconsin for greener pastures. We’ve had better schools than most other states for the entire 30 years our state has ranked 48th in personal income growth.

I disagree with a lot of what Wineke wrote, but I give him credit for not singing out of the Democratic songbook. (Using a bible metaphor seems oxymoronic.) The state’s business climate should be a nonpartisan issue. If you’re going to create more jobs, you have to improve the business climate, since, even in this overgoverned state, business still employs the majority of employed Wisconsinites.

Assuming that jobs are an issue in the 2014 elections, Wisconsinites should welcome Democratic candidates who come up with a superior approach to the approach of the late 2000s Legislature, which, under Democratic control, took a poor business climate and made it worse. Democratic gubernatorial candidate Tom Barrett didn’t come up with a better approach, which is why he remains the mayor of Milwaukee and why Democrats are the minority party in the Legislature.

04.16.13
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Job one: Fire the government

Christian Schneider tries to explain job growth, or lack thereof:

Conservatives tend to believe that Obama’s policies have cut off the air supply to the national economy, and states such as Wisconsin are left gasping for breath. This seems to ring a little more true, as the state economy tracks with the national economy — Wisconsin’s jobs numbers don’t drive the numbers around the country. But that doesn’t explain why Wisconsin’s private-sector job growth is slower than 43 other states, according to numbers released in late March.

Walker’s critics believe the governor’s collective bargaining reforms are to blame for the state only picking up 20,479 jobs between September 2011 and September 2012. Public workers, now forced to pay into their pension accounts and kick in more for health benefits, have less money to spend, creating less economic activity, they say. But the numbers belie this claim: According to the state Department of Revenue, state income and sales taxes are up 5% in 2013, and new business start-ups were up 8.4% in 2012, compared with 2011. People are spending and making money, but the jobs continue to lag behind other states. (Interesting that the “people have less money to spend” argument vanishes when the left argues for higher property taxes.) …

For one, although it’s hard to tell this to a Wisconsinite who has lost his or her job in the past four years, the bad economy didn’t damage Wisconsin as much as it did other states. The crash of 2008 eviscerated some states, while Wisconsin was able to hold fairly steady; since Wisconsin didn’t fall as far, it doesn’t have as far to snap back. Naturally, if Wisconsin is able to mitigate the effects of the downturn and remain on an even keel, it is going to look better during the bad times and worse during the good times.

The numbers tend to bear this out. Between January 2009 and January 2011, Wisconsin either was gaining more jobs than the national average or not losing as many as other states were nationally. Thus, while the state only gained jobs at a 0.9% clip in the last annual time period measured, it started at a much better place than other states.

Take, for example, Wisconsin’s neighbors, Michigan and Illinois – both of which were eviscerated by the recession. In January 2010, Michigan’s unemployment ballooned to 13.8%, while Illinois’ was 11.3%. As of September 2012 – the date of the most recent reliable numbers – Michigan’s unemployment rate was still at 9.2%, Illinois’ rate was 8.9% and Wisconsin’s was 6.9%.

Yet according to the jobs numbers just released, Michigan’s private-sector job growth in the last year was 2%, Illinois’ was 1.4% and Wisconsin’s was 0.9%. So Wisconsin lagged behind those two, but is still in total, in much better shape. Without question, the states hardest hit by the recession have to come back from much farther behind.

On the other hand, take a low-unemployment state such as Minnesota. The unemployment rate in Wisconsin’s neighbor to the west is 5.6% – and its recent private-sector job creation numbers only barely beat Wisconsin’s, 1% to 0.9%. Iowa’s unemployment rate is 5%, and its gained jobs at a pedestrian rate of 1.3%. It appears that states that didn’t lose a lot of jobs during the bad times tend to gain them back at a slower rate during the good times.

Further, some of Wisconsin’s sluggishness may have to do simply with demographics. According to the Wisconsin Taxpayers Alliance, Wisconsin routinely lags behind the nation in job creation – since 1996, Wisconsin has outperformed the national job growth average in only 28 of 102 months, or 27% of the time. …

The WTA posits that some of this slow growth may be attributable to the graying of the Wisconsin population. Between 2002 and 2011, the state’s working-age group grew by only 5.9%, compared to 9.3% nationally. Further, they point out that new firm creation in Wisconsin in 2011 was second to last in the nation, beating only Iowa. Without new businesses, the jobs can’t follow.

Schneider follows up by comparing unemployment rates and job creation numbers.

First point from his original column: Schneider lets off Obama entirely too easily, probably because his piece really isn’t about Obama. When 15 percent of the population is either unemployed, underemployed, or no longer looking for work (what economists call the U6 measure of unemployment), you as president are a gigantic steaming pile of failure, and you deserve every negative thing that happens to you.

As far as Wisconsin is concerned, however, there is more to the story. Much of it is history, but most of it is bad policy. Note that since 1996, Wisconsin has outperformed the national job growth average 27 percent of the time. Since the late 1970s, Wisconsin has also trailed the nation in per-capita personal income growth. Counting Walker, that’s five governors worth of economic fail.

There has been little fundamental change in state government over those 3½ decades, and even before that. We have too many units of government (3,120 at last count), too many government employees, too many laws and too many regulations, all of which are poisonous to business and economic growth. (Not surprisingly, we’re poor in economic freedom within North America.) We have too few job creators in this state (partly due to our historic antipathy toward wealth), with obvious and not-so-obvious consequences.

We have spent more than nearly every other state on education. Improving your own education is great to improve your own economic opportunity. Spending on education has not, however, been proven to improve a state’s economic performance. (If proof existed, Superintendent of Public Instruction Tony Evers would be screaming from the top of the Wisconsin Education Association Council building about how we must spend more on education to improve our economy, with proof attached. He does the former lacking evidence of the latter.)

When one improves his or her education, that does improve that person’s economic opportunity. That includes the opportunity to leave for somewhere with, in that person’s opinion, more economic opportunity. (Or weather that is not shitty.) Improving education is a microeconomic benefit, not a macroeconomic benefit.

Despite our rankings of (as of 2010 or 2011) 20th in gross state product (1.7 percent of gross domestic product), 29th in per capita gross state product, 21st in median household income (below the national average), and 21st in per capita personal income (again below the national average), we have the fifth highest state and local taxes in the country. If we had the fifth highest gross state product, we’d have 2½ times our present economic output. If we had the fifth highest median household income, each family would have nearly $12,500 more money each year. If we had the fifth highest per capita personal income, each of us would have $5,500 more every year.

The Walker administration has not fundamentally changed state government to make this state actually business-friendly. (For instance: Nearly all of the Doyle administration tax increases are still intact. And with all the Act 10 screaming, the state has as many government employees as it did under Doyle.) The Walker administration appears to be the 21st century answer to Dwight D. Eisenhower as president — do the same stuff the Democrats did, but do it better (you hope).

I see no interest in fundamentally different, much smaller government in this state. So don’t expect real improvement in the state’s economy, regardless of Obama’s criminal maladministration of the national economy. Apparently people here are satisfied with mediocrity in their pocketbooks and from their politicians.

04.16.13
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You know what they say about assuming

After some assuming music …

… Gallup CEO Jim Clifton:

During my 40 years at Gallup, I’ve observed that one of the main reasons very talented leaders fail is because their thinking failed them. Not their leadership or management skills, which in many cases are just fine, but their thinking. Specifically, failed leaders in business and politics are usually wrong about a core premise that drives all their strategies. …

Many people in the highest levels of U.S. government think that 1.5 billion Muslims are uncomfortable with the West because they “hate us for our freedom” and that “religion divides us.” So, leaders build policy — war, economic sanctions, and anti-terror campaigns — around these assumptions. But Gallup World Poll data tell another story entirely.

The world’s Muslims don’t hate us because of our freedom or our way of life or because they’re religious fanatics. Gallup finds that their discomfort comes predominantly from a hopelessness rooted in economic despair and joblessness. This is an economic problem, not a religious one. Yet too often, policies are created around these wrong assumptions. …

Correct assumption No. 1: Entrepreneurship trumps innovation

Many thinkers and leaders in the U.S. and around the world have reviewed decades of America’s global economic dominance and concluded that the country has been a colossus because of superior innovation. That is the global conventional wisdom, the core assumption. Thousands of conferences around the world have been organized around this assumption. Some countries are even building “innovation cities.”

In my view, rooted in decades of Gallup research and our company’s work with many multinational corporations and city and national governments, this assumption is dead wrong. And I believe that America has stopped growing because leaders are governing from this faulty premise.

The U.S. cannot innovate its way out of its stagnant growth. It must enterprise its way to prosperity. Simply put, when it comes to fostering long-term economic growth, entrepreneurship trumps innovation. Put another way: An innovative product or service has no commercial value until a talented businessperson finds a customer for it. ,,,

The U.S. has no peer at high-level intellectual development. The country has many of the best universities in the world. And the best of America’s private and public K-12 schools do a marvelous job at intellectual development, which is nurtured systematically and intentionally. But entrepreneurial development is completely left to chance. Right now, if you’re a 12th-grader blessed with an unusually high IQ — perhaps even in an inner-city neighborhood like California’s Compton or Watts — testing will find you. And if you’re really brilliant, you’ll get extra special treatment and possibly scholarships to the best schools in the country. You may even get financial help all the way to a Ph.D. at MIT, then go off to NASA, the National Institutes of Health, or the like. If you’re blessed with real talent to think and learn, the system likely will find you. …

However, if you were born with rare entrepreneurial talent — unusual determination, optimism, and problem-solving skills — the system has no way of finding you, certainly not in Compton or Watts. Nothing finds you. There is no formal identification system. There are no formal special classes, no colleges bidding for you, no evening classes with the best teachers, and nothing sent to your parents that identifies you as gifted. Colleges and universities place tremendous weight on SAT or ACT scores. But nobody asks about the applicant’s ability to start a company, build an organization, or create millions of customers. America leaves that to chance. …

The U.S. Department of Education should lead the creation and passing of a bill that requires all high schools and middle schools to test every student for entrepreneurial aptitude. Gallup is working with some of the best test makers in the world now, and we are confident that the intellectual attributes of entrepreneurship are as testable as IQ, athletic “40 speed,” or vertical jump height. …

Correct assumption No. 2: Small businesses are the key to America’s economic revival

When small businesses boom, jobs boom, GDP booms, and exports boom.

There are approximately 6 million small businesses in the United States, and they are the very backbone of the country’s democracy. Those businesses fund significantly more American jobs and GDP than big business does. Here is something you likely don’t know: Of the 6 million small businesses out there, 75% of the owners or proprietors aren’t in business to build something big. They aren’t trying to build the next Intel or Waste Management. They’re not even in it for the money. Most small-businesspeople are in it for one reason: freedom. Almost no leader in the world knows that.

Three out of four entrepreneurs get up each morning with the simple yearning for total, complete, unimpeded independence. They must be their own boss or they can’t cope with the day. They cannot be employed at IBM or even at a local car dealership because they are like the coyote — they can never be domesticated. So let’s not try. Instead, let’s say, “God bless you for all the jobs and economic energy you create. It’s great to have you here.”

The remaining 25% of these small businesses do want to build something big. They do get up every day dreaming of creating an empire of customers and services. They are the most important people on the planet because when they win, America wins — and when America wins, so does the global economy.

When these 1.5 million businesses boom, jobs boom, GDP booms, and exports boom. In my view, nothing is more heroic in America right now than creating a customer abroad. The White House should give medals every Monday morning to small-business owners who are booming because they have found foreign customers to export to, and those exports are crucial to creating American jobs. It’s not too hard to believe that whether the U.S. goes broke or is prospering in 10 years lies predominantly in the American cultural phenomenon of small business — the 1.5 million empire builders.

Correct assumption No. 3: Entrepreneurship must be fostered at the city level

Let me narrow that 1.5 million number down to 1 million, because that’s probably a more accurate estimate of high-potential small-business boomers and empire builders. And I’d rather use a more conservative figure.

Here is an intervention that would help those 1 million small-businesspeople prosper and thrive and thus drive a resurgence of the U.S. economy: Cities should dedicate one great coach — a local star senior adviser, an executive or entrepreneur with a proven track record of success — for every 10 high-potential small businesses. This is not an activity for Washington or for the states. This must happen city by city.

What we need at the national level is a campaign that asks every single mayor and city councilperson in the country this question: What is your plan to boom high-potential small businesses? Although, in my opinion, many mayors and city council members likely will have little grasp of the subject of entrepreneurship. Still, they’re the place to start because the future of their cities depends on the degree to which they make their cities attractive to entrepreneurs. Those city leaders may think their job is negotiating union contracts and government-employee benefits, but they won’t be able to pay their employees, much less help their cities prosper and thrive, without a growing and thriving entrepreneurial sector. …

To jump-start a stagnant U.S. economy and put the country on a path toward long-term economic growth and prosperity — even global dominance once again — leaders must get their assumptions right. They must understand that entrepreneurship trumps innovation and that finding the next generation of great entrepreneurs means cultivating them in middle schools, high schools, and colleges and universities, just as surely and intentionally as the country cultivates innovators.

The college role in cultivating entrepreneurs is explained by Syracuse University Prof. Carl Schramm:

If one manages, using Facebook and other social media, to establish celebrity status, however restricted the province in which it is achieved, pre-college adolescents come to believe the world has deemed them somehow accomplished.  Narcissism is the result of a theorem of social engagement that sees successfully establishing a unique identity as the goal of life.  The achievement of objectively important things that are judged important because they advance the welfare of others – seems a terribly old fashioned, outdated and irrelevant way to order one’s life.  Beyoncé bests Ben Carson!

Thus, aspiring entrants are asked to write about, among other things, how something they have done has changed the world!  Anticipating such questions, and either affirming the values that are presumed to underlie them or knowing that their students have to play this game to successfully apply to college, something on the order of 80 percent of school districts require students to do “community service” projects as a condition for graduation. …

Given that getting into college no longer brings with it the expectation of a good job in an economy that is starting to appear as if it discriminates against too much education in entry-level positions, maybe an alternative question should be substituted.  Why not ask aspiring students if they ever started a business, worked in a new business, know an entrepreneur, or might themselves want to create a new business?  This simple change or addition to the required essays could be the first great lesson colleges might teach.

For one, it might cause students to think that their role in the economy is more up to them to make than for their college education to preordain.  Increasingly, in an economy that is changing in profound ways not the least of which is that productivity in all industries is reducing the demand for even highly trained labor, everyone will be more and more responsible for the opportunities they can make.  Perhaps the most successful applicants will write that their goal is to “make a job, not take a job.”  Come to think about it, the phrase has a faint community service ring to it.  Maybe existing jobs should go to those who can’t make their own.

Second, it would force high school students to consider that perhaps business is not such a bad career choice.  In fact 90 percent of graduates work in the private sector.  Surely they are creative people who have dreams of changing the world for the better.  And, can anyone say that working at Apple or Genentech, or Johnson and Johnson is not changing the world for the better?

Speaking of making jobs, a third benefit comes to mind.  Most of the new jobs made in America are in new firms.  About eighty percent of all new jobs are found in firms less than five years old.  So could it just be that entrepreneurs are doing the very best community service?  What does a phi beta kappa graduate starting an all night basketball league accomplish that is somehow more beneficial to society than the “B-“ graduate who undertakes the risk of starting a company that brings a needed new product to the world, and in the course of doing so gives ten unemployed people jobs that never before existed?  With employment these people can go on to earn dignity and support families and help break the cycle of poverty.

Finally, if colleges required students to write about their entrepreneurial aspirations, maybe high schools and universities might learn something about how to structure education in ways that really improve what students learn and need to learn.  The college that sets its sights on helping more of its graduates start businesses that can help the society become more robust economically might think twice about developing courses in any number of fields where students will never find meaningful work; teaching high school seniors how to write their community service essays being one.

04.11.13
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Bucks vs. Bucks

Proving that there is more than one side even on the right, Right Wisconsin has two points of view about the Milwaukee Bucks (you know, the NBA team — you have heard of them, right?) and whether they should get a new arena to replace the aging (by pro sports standards) Bradley Center.

Whether you like it or not, by the economic standards of professional sports the oldest arena in the National Basketball Association is an economic airball for the Bucks. When the Bradley Center opened, the four most famous NBA arenas were the Boston Garden, the Forum in Inglewood, Calif., the Spectrum in Philadelphia, and Madison Square Garden in New York. The Celtics, Lakers and 76ers are all in new arenas (the Garden and Spectrum aren’t there anymore), and Madison Square Garden was gutted so that Knicks games are more fan-friendly and more lucrative to the Knicks’ owners.

Not only does the Bradley Center have too few revenue generators compared with the Packers’ Lambeau Field, the Brewers’ Miller Park, and the Badgers’ Camp Randall Stadium and Kohl Center, it wasn’t designed well in the 1980s. Having attended games there, I can personally attest there are two sections of seats that have good views — the lower level seats inside the basketball court end lines. The lower-level end zone and corner seats are awful, and the upper-level seats are in Racine, Johnson Creek, West Bend and the middle of Lake Michigan.

Section 221.

Section 400.

Savvy Pundit explains the pro-replacement side:

Milwaukee is one of only 28 cities in the world who have an NBA franchise. You would think that would be a matter of pride, and something that the leadership of a city would jealously protect. Indeed, this week we’ve seen stories of the lengths to which the city of Sacramento and it’s Mayor, Kevin Johnson, are going to defeat the full court pressure to steal their team being put on by Seattle.

Mayor Johnson – a former NBA all-star – has led the effort to keep the Kings in Sacramento, personally pushing through measures that will have the City of Sacramento contributing $258 million to the construction of the new arena, and even taking city ownership of the new facility. …

Contrast this with the City of Milwaukee, where our own Milwaukee Bucks face an uncertain future due to an aging arena. Mayor Tom Barrett has largely been invisible on the issue.

The one notable time he did poke his head out of his hole on the matter it was to state that he would draw a line in the sand and oppose plan that didn’t require that someone else solve the problem. Quoth the Mayor: “I cannot support a City of Milwaukee or Milwaukee County only financing plan [for a new arena].”

Now, I get it that the Mayor would prefer to have someone else pay for the new arena. But the simple fact is, at the end of the day this is a Milwaukee problem and it’s going to require a Milwaukee solution. In terms of regional or statewide fan appeal, the Bucks are not the Packers.

They are not even the Brewers. Losing the Bucks would be a sad thing for the whole state, but it would be a real and devastating economic loss for the City of Milwaukee, for the city’s image, and for the vitality of its downtown entertainment and hospitality businesses.  For the suburbs and outstate communities, the Bucks are a “nice to have.” For Milwaukee they are a “need to have.” Whether he likes it or not, this one is going to fall on Mayor Barrett. His city is the one at risk.  His leadership is on trial. And his effort is going to have a lot to do with whether the Bucks are a part of Milwaukee’s future or just part of a proud and ever more distant past.

On the opposite side is Patti Breitigan Wenzel:

There is no way around it,  the presentation given by Martin Greenberg at the forum on a new arena sounded like an opening argument in a case to win full public financing for the complex.

“Herb Kohl will not participate in this debate,” Greenberg said. “But there are three statements he agrees with.  First, the time is now to finance and replace the Bradley Center; two, he (Kohl) will make a significant contribution to the construction and three; Milwaukee’s chances to keep an NBA is not robust without a new arena.”

Then Greenberg added the kicker – “Why should Kohl’s money lead the way when other cities have fully publicly funded their arenas?”

Places like San Francisco or Foxboro or Houston.

Owners expect their home cities to provide a competitive place for their teams to play,” Greenberg said. “A quid pro quo for obtaining and maintaining a professional franchise. The public must do the same and Kohl shouldn’t be required to do so. No public investment, no arena, no Bucks.”

A little blackmail there, Mr. Greenberg? …

What about the other pressing matters Milwaukee and the region are facing?  A failing school system, a dysfunctional behaviorial health system, lack of intergovernmental cooperation that would be needed for any type of public financing plan to even come to fruition.

But we should be grateful to Herb Kohl that he has deemed us worthy to be the home of his multi-million dollar sports franchise?  Especially since he won’t even deign to tell us how much he is willing to pony up for his portion of a new arena.

I say there is a lot more talking to do and common ground to be found before we forge ahead with this gift.

And shouldn’t the owner of the team participate in the debate? Or are the Bucks going to follow Mayor Barrett’s lead and just passively watch how this unfolds?

A couple points about Wenzel’s piece: The “other pressing matters” are not really about money, at least in the first and last cases. Milwaukee Public Schools is the worst school system in the state and one of the worst in the country. No amount of money will repair MPS. The issue of intergovernmental cooperation is more about political will than about finances.

Kohl’s presence in this little drama illustrates, perhaps to your surprise, the state’s historically bad business climate. According to Forbes magazine (as reported by Small Business Times), the richest Wisconsinites, and their positions on the Forbes 400 billionaires list, are:

  • 56: John Menard, of Menards (pronounced “Menar!”), net worth $6 billion.
  • 142: Diane Hendricks, of ABC Supply, $2.9 billion.
  • 151: H. Fisk Johnson, Imogene Powers Johnson, S. Curtis Johnson and Helen Johnson-Leopold, all of S.C. Johnson, $2.7 billion each.
  • 170: Herbert Kohler and Kohler family members, $2.6 billion.
  • 190: James Cargill II, one of the owners of Cargill, $2.4 billion.
  • 285: Judy Faulkner, founder of Epic Systems in Verona (not Madison), $1.7 billion.

That’s it. Herb Kohl is not on that list. Mark Attanasio, who purchased the Brewers from the Selig family, isn’t on that list either, and he’s not a Wisconsinite anyway. (Not a single Wisconsin name came up to purchase the Brewers from the Seligs when the Seligs finally sold the team.) The fact there aren’t more Wisconsinites on the Forbes 400 proves that you can’t make big money in Wisconsin. because of our high taxes (fifth highest state and local taxes in the country, and eighth highest business taxes in the country) and, as Menard can attest, our pervasively anti-business attitude in government and in our culture. (Too many Wisconsinites believe rich people became rich by stealing, and not enough Wisconsinites start or own businesses.)

Two people on that list have sports connections. Menard owns a racing team. Kohler owns the two golf courses, Whistling Straits (home of the 2010 PGA tournament, and a fine experience a day there was) and Blackwolf Run. Kohl, meanwhile, already gave $25 million to build the University of Wisconsin’s Kohl Center, a much better place to watch basketball. Jane Bradley Pettit, who donated the money for the Bradley Center, is dead. Name another Wisconsinite with the financial wherewithal and the sports interest to purchase the Bucks and contribute significantly to a new arena.

There is no white knight to rescue the Bucks when Kohl decides to unload the franchise. Neither Barrett nor, apparently, Milwaukee County Executive Chris Abele will lift a finger for the Bucks. The suburban Milwaukee counties were none too pleased at paying the 0.1-percent sales tax to build Miller Park, and Miller Park is used twice as often as the Bradley Center for Bucks games, with more than twice the nightly attendance. (A sales tax referendum, which the Packers used to get the 0.5-percent Brown County sales tax to fund the early-2000s Lambeau Field improvements, would not pass in any county near Milwaukee, and not in Milwaukee County either.) I don’t see Gov. Scott Walker spending any political capital to keep the Bucks in Wisconsin.

When an out-of-state market hungry for pro basketball is ready to deal, the Bucks will leave Wisconsin, and most Wisconsinites won’t care.

04.10.13
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Halfway

Republican gubernatorial candidate Scott Walker took the bold step of pledging the creation of 250,000 jobs during his first term in office.

How is Gov. Scott Walker doing? The MacIver Institute did some investigative reporting:

Wisconsin has 137,372 more private sector jobs than when Governor Scott Walker first took office in January 2011, according to the most recent data available from the Bureau of Labor Statistics, which puts him past the halfway point towards his goal of creating 250,000 private sector jobs in his first term.

This information was contained in the BLS’s Quarterly Census of Employment and Wages. That census includes detailed information from more than 96 percent of employers. This is much more accurate than monthly jobs’ reports, which are compiled by surveying a fraction of employers.

The Milwaukee Journal Sentinel used the same data to determine Wisconsin ranked 44th in private sector job growth from September 2011 to September 2012.

John Koskinen, Chief Economist at the Wisconsin Department of Revenue, confirmed the private sector job growth numbers uncovered by the MacIver News Service, “That’s literally true,” however, Koskinen said economists typically use the same month from different years to avoid seasonal variations in employment.

Although Koskinen might be uncomfortable comparing jobs numbers from January 2011 and September 2012, the Democratic Party of Wisconsin felt those two months strengthen the Milwaukee Journal Sentinel story.

“The day Scott Walker took office, we were 11th in job creation. Now, we are 44th, and it is a direct result of both his inattention and his policies. Those have included massive cuts to job-creating investments in education, health care, technology, infrastructure and vocational training,”reads a DPW release from March 28, 2013.

DPW neglected to mention the fact that during that same timeframe, Wisconsin added over 137,000 private sector jobs putting Walker well on track to meet his goal by the end of his term. And although the chief economist for DOR is wary of using such a timeframe, Koskinen completely rejects the statement that Wisconsin is 44th in job creation.

During a presentation in March, Koskinen pointed out Wisconsin’s unemployment rate is consistently lower than the national average. Also, previously the BLS reported Wisconsin was losing jobs, only to have to revise those numbers later and admit the state gained jobs.

The Dumocrats failed to report that the last Democratic governor, James Doyle, presided over a single-year job dump of 121,000 jobs.

Do the math yourself:

Of course, the politically unaligned might point out that those 137,000 created jobs merely make up for Doyle’s 2009, with a few more jobs thrown in. The 15 percent of Americans who are either unemployed, less employed than they want to be, or are no longer looking for work because there are no jobs (look up U6 unemployment) want a full-time job and don’t care who gets credit for it.

Media Trackers asserts:

For Democrats who have spent the better part of the last two years attacking Walker on various issues, including jobs numbers, the news is a blow to their political messaging. If Walker is halfway towards completing his goal, that is no small feat considering the fact that Wisconsin employers still struggle with relatively high taxes and what some experts have said is a burdensome regulatory climate.

If Walker and legislative Republicans moves to cut taxes, streamline the tax code by eliminating tax credits for government-favored items, they may actually get to Walker’s job creation goal. The numbers show them to be well on their way.

That, however, is a big if, and one piece of evidence that this is not necessarily good news. (Independent of the most recent monthly county unemployment rates, which are definitely not good news.) The worst thing that could happen here is for Republicans to assume the job numbers mean the Legislature doesn’t have to fix our “relatively high taxes” and “burdensome regulatory climate.”

There is nothing “relatively” high about Wisconsin’s state and local taxes. To have the fifth highest state and local taxes in the country means taxes are too high, period. The last time we had a Democratic governor and Democrat-controlled Legislature, taxes increased $2.1 billion. The Legislature has not eliminated those tax increases, which is one reason why Wisconsin ranks a miserable 43rd in taxes on business (also known as “job creators”). The only people who feel that Wisconsin’s “regulatory climate” is “burdensome” are those who have to deal with state regulators (also known as “job creators”).

Moreover, this state has trailed the nation in per-capita personal income growth since the late 1970s. Yes, that dubious accomplishment goes back to the days when Patrick Lucey was the governor. Every governor since then, including Walker, has failed to improve that. That has everything to do with this state’s business climate and the state’s continuing hostility to business (also known as “job creators”).

 

04.01.13
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Job one for UW

Priority number one for new UW–Madison chancellor Rebecca Blank, according to John Torinus:

There is a growing concern that part of the state’s laggard economic performance can be put at the doorstep of its flagship campus. The massive taxpayer inputs to that powerhouse campus don’t seem to match the outputs.

Put succinctly, the state has been losing GDP share for four decades or more. And it’s not getting better. The state ranks in the bottom ten year after year in job and business creation. …

Those graduates need jobs, and that comes from business creation. Even the jobs on the public side depend on business creation, the ultimate source of supporting tax dollars.

When the economy lags, businesses cut back on job creation, but cuts often follow on the public side not long afterward. That’s true almost everywhere, except in Madison where the public ranks grow in good times and bad times, under Democratic governors or Republican governors.

Maybe it’s that bubble around Madison that saps the urgency for growing the economy. Even there, though, the Madison economy hasn’t kept up with othr metro areas that are home to major research universities. …

Among her initiatives could be these:

  • Focus the campus on entrepreneurship in the mode of Stanford, Utah and MIT. We pale in comparison. Academic R&D, patents and licenses are great, but the payoff for citizens comes from business creation and the resulting job creation. Make the effort statewide.
  • Engage foundations affiliated with the UW in business startups. The Wisconsin Alumni Research Foundation gave her a leg up, a starting point, last week by teaming with the state pension fund to launch a $30 million venture fund for IT startups. Great. But what about other foundations, like the UW–Madison Foundation with more than $2 billion in assets? Other foundations also could make alternative investments in the intellectual property of the state.
  • Lead the way back to the Wisconsin Idea. The time-honored state concept of pulling together the state’s best experts on different public policy issues should appeal to Blank, whose academic and government career centered on public policy. Since [former UW System president Katherine] Lyall and Gov. Tommy Thompson, that methodology has withered. Instead, cocooned governor staffs have dominated policy making. Organizations like Competitive Wisconsin have had to step into the gap.
  • Engage the private sector, standard operating procedure at Stanford, Utah and MIT. Take a page from UW–Milwaukee Chancellor Mike Lovell, who is getting that interaction into high gear. UW–Madison lags other Big Ten universities on industry-supported research.
  • Do a strategic study of the various departments, centers and institutes on the campus. Many of the centers that should be leading the thinking about the economy and driving innovation are invisible. What is the role of UW– Extension, for example? Where are the La Follette Institute and the Center on Wisconsin Strategy? We need a replacement for the late Don Nichols, who led pieces of economic thinking about Wisconsin.
  • Use public policy expertise to look at the under-managed benefit structure for university employees. Tens of millions of dollars could be saved for better purposes if public employees were on the same kinds of plans as private sector employee. That’s where the money is. Don’t complain about budgets until you have done so. FYI: that can be done while IMPROVING health care.