Category: Wisconsin business

The economic consequences of the coronavirus

Benjamin Yount:

Some of the jobs lost to Wisconsin’s coronavirus shutdown will not come back.

The state’s economic development office, the WEDC, sent a report to lawmakers that outlines the economic impact of the coronavirus.

“Although this report can only capture a snapshot in time and further monitoring will be required to fully understand and refine recommendations, several clear themes were identified that clearly have the potential to shape Wisconsin’s recovery,” the report states.

WEDC found:

  • Tourism, retail and service businesses are still closed, are open in voluntary limited capacity or are struggling for customers. Most have seen substantial declines in their business and are unsure of their long-term prospects.
  • Agriculture and food and beverage, which have been identified as essential businesses, are seeking to anticipate the markets and manage disruptions to the supply chain.
  • Manufacturing and construction saw less immediate disruption but anticipate the long-term economic impact with slower consumer spending and overall activity as well as declining capital investment.
  • Forest products have had perhaps the starkest divide, with consumer paper goods at record highs while the decline in printed advertising has seriously impacted the catalog and magazine industry.
  • Education and health care – both huge economic engines in their own right – have also been disrupted or nearly brought to a halt by the pandemic.

“If anything, this report reflects the complexity of a crisis that hits every person, every region, every economy in our state and beyond our borders,” WEDC CEO Missy Hughes wrote in the report.

But some aspects of the report are brutally simple.

“Many jobs simply disappeared overnight, especially among service workers,” Hughes noted. “The reality today is many of the jobs previously held in the service industry will not recover.”

Hughes doesn’t have a number for how many jobs will never return, but the report does have some estimates about the number of jobs lost and the amount of money the coronavirus lock down cost businesses.

The report says businesses reported $22.2 billion in income losses, and another $37.8 billion in other economic losses. Those same businesses reported 2,648 lost positions.

Some of those business losses were offset by nearly $14 billion in federal aid. The vast majority of that federal money went to farmers and businesses in the state through programs like PPP and farm payments.

WEDC’s report notes that both income and sales tax revenue to the state dipped during the worst of the coronavirus lock down. But the report states it is too early to tell just how much state government will lose by the time 2021 rolls around.

Recall, however, that Gov. Tony Evers tried his best to shut down the state by dividing businesses, and therefore their employees, and therefore Wisconsinites, into “essential” and “nonessential” (including the businesses whose employment is nowhere near normal). Keep that in mind when you assess fault.

 

But will Manchester’s open?

Facebook Friend Benjamin Riche passes on several memes that demonstrate that the latest concession by Gov. Tony Evers against his Safer at Home edict misses the point:

 

And, perhaps the pièce de résistance …

(For readers who missed the point: None of these businesses exist anymore, at least in Wisconsin.)

 

While Gov. Nero fiddles …

Benjamin Yount:

Wisconsin’s largest business groups are using such words as “devastating” and “extinction-level” to describe the economic problems created by the state’s coronavirus lockdown.

Wisconsin’s Manufacturers and Commerce and the state’s Restaurant Association were just two of the groups pressing lawmakers to reopen the state on Thursday.

The groups said many businesses cannot wait another month to reopen.

Wisconsin Restaurant Association President Kristine Hillmer says half the state’s restaurants could close forever if the lockdown lasts longer.

“Prior to the crisis, there were 12,796 eating and drink establishments in our state. We employed over 284,000 people, representing about 9 percent of people in our state,” Hillmer said. “That represented $10.1 billion in estimated sales in Wisconsin.”

Hillmer said the numbers today are very different.

“A survey conducted between April 10 and April 16 this year illustrates the devastating impact on our industry,” Hillmer said. “One hundred thirty-six thousand-plus restaurant employees have been laid off or furloughed since the beginning of the outbreak.”

WMC’s Scott Manley said it is an economic imperative to reopen the state’s economy.

“As we sit here, right now, we have 19 percent unemployment. That is twice as high as it was during the worst days of the Great Recession, Manley said. “We’ve got 450,000 people who’ve filed for unemployment claims since social distancing regulations took effect.”

Manley added that most stores had seen their foot traffic cut in half, and restaurants and bars in the state have it worse than that.

Governor Evers says he’s willing to talk about reopening the state, but wants to see a plan from Republicans first.

Hillmer said that lawmakers and the governor should be working together, not squabbling.

“It is urgent that we use this time to figure out how these businesses can reopen, safely,” Hillmer told lawmakers.

How to Crash Wisconsin’s Economy, written by Tony Evers

WFRV-TV in Green Bay:

The results of a statewide survey by the University of Wisconsin Oshkosh show 35 percent of responding businesses say they will be forced to close if current coronavirus-related conditions persist for more than three months.

According to UWO, results also showed 8,795 jobs lost in the earliest days of Wisconsin’s Safer at Home order, along with losses of $95 million in inventory, $126 million in income, $26.6 million in lost wages and productivity income and nearly $404 million in other impacts.

The survey yielded nearly 2,550 responses from companies in 63 of Wisconsin’s 72 counties from April 1-10, according to Jeffrey Sachse, director of UWO’s Center for Customized Research and Services (CCRS).

“The conditions reported here represent companies’ efforts to adapt to changing conditions,” Sachse said. “These impacts are certain to rise when we revisit these companies in a month, two months and six months’ time. The assistance that these companies require and the effects felt throughout the state’s economy are both unprecedented and continuous.”

UWO is partnering on the survey project with the Wisconsin Economic Development Corporation as well as New North and eight additional Regional Leadership Council organizations to assess coronavirus recovery ability and state and federal aid efforts. Additional cooperators include the Wisconsin Technology Council and the Wisconsin Workforce Development Association.

The business, ranging from small sole-proprietorships to large firms like Kobussen Buses and UW Health, were still trying to adapt to changes implemented in the Safer at Home order at the time of this survey.

UWO says 40 percent of responding firms indicated not being able to report specific impacts at the time, making the results understated.

The findings only point to greater effects as the worldwide health crisis persists, Sachse said.

He adds the firms reported using a variety of approaches, including delaying payments and reducing inventories, as means of minimizing the impact of the crisis.

“Responding firms suggested that their greatest immediate needs are access to greater liquidity in the form of low-interest loans, grants, and access to customers. This closely mimics trends reflected in the national policy debate and recent surveys reported by the Federal Reserve Board and Small Business Administration,” Sachse said.

Firms reported seeing a sharp reduction in productivity due to a shift to working from home, with most reporting a 25-50 percent decrease. This also tracks with national trends and reflects the difficulty that many traditional firms face in adapting to the rapidly changing conditions, he said.

The survey is the first in a series that will track the economic impact of the coronavirus, according to UWO. Responding companies will be surveyed again during the first months of May, June, July, and for the foreseeable future, with results released during the third week of each month.

Companies are invited to continue to respond to the initial survey at http://uwo.sh/covid-19-econ-disruption and be added to the survey group.

In addition, CCRS has released an interactive dashboard detailing survey responses along with advice and insights from University faculty at http://uwosh.edu/ccrs/covid-19-survey.

Evers’ response was the Badger Bounce Back, which essentially freezes the state’s economy for a year by creating an impossible standard for testing.

 

Evers vs. farmers

M.D. Kittle and Josh Waldoch:

Times were tough down on the farm before the COVID-19 outbreak. Now, each new day is filled with dread, filled with collapsing markets, looming bankruptcies and ruined lives.

“At this point, we’re all looking at a train barreling over a cliff, not really sure if anyone is going to survive when we hit the bottom,” Brodhead-area farmer Rob Riemer told Vicki McKenna this week on NewsTalk 1310 WIBA.

The pasture-raised cattle and egg Riemer Family Farm dates back nearly a century. The third generation now wonders if their southcentral Wisconsin farm will survive the coming months.

The pandemic and Gov. Tony Evers’ sweeping Safer at Home order locking down much of Wisconsin has hit America’s Dairyland particularly hard.

Dan Smith, president and CEO of Cooperative Network, said the agriculture industry in general was just beginning a slow recovery from a painful downturn over the last four or five years. The severity of the coronavirus shutdown of the economy at large was like “pouring gasoline on a fire,” Smith said.

Overnight, the dairy industry lost about 40 percent of its marketplace — the food service industry. A big chunk of that market includes schools, which began closing en masse a month ago. Markets instantly changed, as Evers ordered most consumers to stay home. Food processors couldn’t turn on a dime to meet the changes, and everything seemed to slow to a crawl.

Riemer said last year was bad enough. His farm suffered a “six-figure loss.” The reserves are gone. Now, if the economic shutdown continues, his family farm, like so many family farms, won’t make it.

“We’re just talking a matter of months basically. Most of us will probably survive a month or two, some will not. But if this goes on extended, by the end of the summer, fall, or later, I don’t think you’re going to have more than a handful of farms survive this,” the farmer said.

A report earlier this month, Institute for Reforming Government lays out the rising challenges confronting Wisconsin farmers and calls on the Legislature to finish the business of passing reform legislation that will help bring back prosperity to the Dairyland’s farms.

Smith said farmers do need help, but just throwing money at the problem isn’t going to cut it. He said it’s time for systemic changes to sustain agriculture and promote a safe and reliable food system.

But things are going to have to change quickly if Wisconsin wants to save its family farms, the ag expert said.

“Agriculture was already the at-risk patient, to put it in the language of the pandemic,” Smith said. “This really hits at the worst possible time.”

Listen to the Vicki McKenna’s interview with Rob Riemer here.

When Tony Evers seems reasonable

Gov. Tony Evers posted on his Facebook page a Milwaukee Journal Sentinel story about the state’s dairy industry and said …

‪We cannot accept this as the future for Wisconsin dairy farmers. This is America’s Dairyland and in our state you never have to go it alone. ‬
‪We are in this fight together. ‬

Or not. WI Nate posts responses to Evers’ post:

There may be Republicans or Republican-leaners who don’t drink milk or eat dairy products. They do not seek to eliminate an entire industry because they don’t like milk. That is entirely a phenomenon of the political left.

By the way: What would happen if humans stopped consuming dairy products? Cows would become extinct. There is no other reason for cows to exist.

 

Pot, meet kettle, meet other kettle

Bruce Murphy:

Somebody high up at the Milwaukee Journal Sentinel doesn’t like the Wisconsin Examiner, the new progressive publication covering the state Capitol. You can tell this because the newspaper keeps hammering the same misleading message.

First there was an August 20 JS story on the rise of liberal ‘news’ websites in the state, the use of quotes around news tipping readers off that maybe these groups don’t do real journalism. Then came an August 21 summary of the newspaper’s stories that week by reporter Sarah Hauer which described the Wisconsin Examiner as a “partisan political website.” And then there was JS editor George Stanley’s August 23 column warning to his readers to “Watch out for slanted political coverage” from publications like the Wisconsin Examiner.

So If the Examiner is a “slanted” and “partisan” operation whose claim to cover the news deserves to be questioned and put in quotes, it should be easy to find and report some examples of such journalism, right?

And yet the Journal Sentinel story on the Wisconsin Examiner, by Patrick Marley andMary Spicuzza offers not one example of a slanted or inaccurate story by the publication.As the reporters surely knew, the Examiner actually had one the biggest Capitol scoops in its first few weeks of launching. Its editor Ruth Conniffdid a story revealing that Republicans were discussing using a Joint Resolution to pass redistricting and thereby bypass Gov.Tony Eversand continue gerrymandered districts in Wisconsin.

The Journal Sentinel did a follow-up story that credited the Wisconsin Examiner, while quoting Republican leaders (who pointedly declined to respond to Conniff) denying any such plan.

Conniff also credits her reporterIsiah Holmes with being the first Wisconsin journalist to report on Pentagon spy balloons doing overhead surveillance of the state. This was based on an earlier story by The Guardian, but Holmes hit upon a company called Persistent Surveillance Systems, which sells a similarly sweeping surveillance system.

His story was published at 9:30 on August 8th and about 90 minutes later the Journal Sentinel published a similar story byBruce Vielmetti that also mentions Persistent Surveillance Systems in his story. Did he get that from the Examiner story? “I don’t think so,” Vielmetti says, adding that he remembers the company from some prior stories he read.

That’s a pretty squishy reply and it’s worth noting the Journal Sentinel has always been reluctant to credit other publications who are first to report a story. Indeed, back when Holmes was a free lance reporter for Urban Milwaukee, he did a remarkable investigative piece revealing that a transitional living center that is supposed to help drug addicts had seen five residents die of overdoses within eight months and that the center hadn’t been licensed by the city.Weeks later the Journal Sentinel did a story on the opioid deaths and the city review of the center’s license without crediting Holmes or Urban Milwaukee, whose reporting led to the city’s scrutiny.

The main thesis of the JS story on Wisconsin Examiner is that it is a “left-wing” response to right-wing sites like the MacIver Institute. But MacIver was started as a think tank, not a news site. And when it did do journalism, its methods could be questionable, as Sourcewatch has noted: In 2009 MacIver operative Bill Osmulski was charged with obtaining interviews with two elected Wisconsin officials under false pretenses. The MacIver Institute falsely claimed the state Government Accountability Board would deem recall signatures from “Mickey Mouse” or “Hitler” to be valid when counting signatures in the recall effort against then-governorScott Walker.

MacIver is first and foremost a political group whose staff works to support the Republican Party. Thus, it filed class action suits against the Government Accountability Board and Milwaukee County District Attorney John Chisholm for their role in the John Doe Probe of Walker. While MacIver has done more reporting in the last couple years, it does so sporadically: its site lists four new stories it did in the month of August and 13 in July. The Examiner did more than that in its first two weeks. One of MacIver’s main “reporters” is Chris Rochester, who is also the communications director for the group. The other is Matt Kittle, who previously wrote for the now defunct conservative site, Wisconsin Reporter, where he did hundreds of stories with Captain Ahab-like obsessiveness bashing the John Doe probe.

The Examiner has hired four experienced journalists, including Conniff, who worked for two decades for the Progressive Magazine while also doing columns for the Madison weekly Isthmus, Erik Gunn, a former Milwaukee Journal reporter of many years and longtime Milwaukee Magazine contributing editor, Melanie Conklin, who worked for years as a reporter for Isthmus and the Wisconsin State Journal, and Holmes, who free lanced for several years for Urban Milwaukee and other publications. The JS story only reports on Conklin’s background.

The Examiner is funded by the liberal Hopewell Fund, but as Conklin told the JS, the publication is “non-partisan,” and it has already proven itself with many solid news stories. Whereas the JS has already followed up on two Examiner stories, it rarely cites the MacIver Institute. I emailed Marley and Spicuzza for examples of some MacIver stories cited by the JS, and Marley, who responded, had to go all the way back to 2009 to come up with three stories. Versus two for the Examiner in two weeks.

Nice bit of weasel work on Cunniff’s and Murphy’s parts here. “Nonpartisan” and “nonideological” are not synonyms. I’ve been on the radio with Cunniff. Her politics are obvious, as are Isthmus’ for decades. And as I’ve stated here before, Murphy despises Republicans and conservatives, and he proves that here.

Their story has the feel of one assigned by an editor (to not one but two journalists) with a pre-ordained thesis. Most stories start that way, but a good reporter (and both Marley and Spicuzza are good ones) is first and foremost curious and driven to find the real story, even if it departs from the original thesis. In this case there is a huge one that was ignored: the decline of for-profit journalism and the rise of non-profit journalism.

Between 2008 and 2018, newspapers lost 47 percent of their newsroom jobs, as the Pew Research Center has reported. “These major cutbacks, according to the Institute for Nonprofit News… are fueling the growth of nonprofit news outlets,” as the Johnson Center, which tracks non-profits, has reported. “In late 2017, both the Guardian and The New York Times announced the establishment of nonprofit wings….philanthropy is pouring new money and emphasis into nonprofit journalism.”  According to another analysis, there are now some 270 U.S. nonprofit news sites, with most popping up in recent years.

You can see that in Wisconsin, where the for-profit Wisconsin Gazette went of business, the Journal Sentinel has suffered a massive loss of staff and the size of the Business Journal has steadily declined. Meanwhile non- profits like WUWM-FM and Wisconsin Public Radio have maintained or increased their news coverage. Even Radio Milwaukee does some news stories these days. Now add the Examiner to the list.

On an average day, a reader interested in coverage of the Capitol will find more stories by checking Wisconsin Public Radio and Wisconsin Examiner than from the Journal Sentinel. Urban Milwaukee republishes stories by both publications, along with stories by Neighborhood News Service, the Wisconsin Center for Investigative Journalism and Wisconsin Justice Initiative, all also non-profits. And as for-profit entities like the Journal Sentinel continue to decline, you’re likely to see more of its one-time coverage replaced by non-profit journalism.

That’s the big trend in journalism which the JS story on the Examiner pointedly ignores, because it’s bad news for the newspaper. Instead it publishes a sloppy story lumping the Examiner in with political entities like MacIver or the liberal super PAC American Bridge. Whatever nuance emerges in the story by Marley and Spicuzza (and it isn’t much) was quickly overwhelmed by Hauer and Stanley slamming the Examiner as partisan and slanted. It’s all part of an exercise to convince readers the JS is the only news source you can trust, and to do this the paper publishes an obviously misleading story.

I learned something decades ago. A publication should never, ever write about its competition. There is no way for you to look good in the process. Do good work, and let the readers and advertisers decide. And the market (which, as you know, liberals hate) will decide whether the Wisconsin Examiner survives or not.

 

News from a former employer

Back in my business magazine days, I went to a business journalism conference at the Journal Communications headquarters in downtown Milwaukee.

In my 10 years of working for the Journal empire, it was the only chance I got to see the headquarters. (Though Mrs. Presteblog purchased a Journal Communications shirt I still own, even though it’s severely faded and two sizes too large.) I got to see Radio City, home of WTMJ and WKTI radio and WTMJ-TV, several times thanks to my appearances on “Sunday Insight with Charlie Sykes.”

Steve makes a point.

I’ve written here before about how working for Journal Communications was better in its employee-ownership days than in its publicly traded days. (The Sykes show came in the latter period; for some inexplicable reason the first time I was invited, in the late 1990s, my boss — who later proved the maxim that most people leave an employer not because of their pay, but because of their boss — said being on Sykes’ show would be a bad idea. A decade later upon my return, that boss thought it would be a good idea.) For one thing, I got very discounted long distance phone service (remember those days?) and discounted subscription rates to the Milwaukee Sentinel and then the Milwaukee Journal Sentinel.

Steve is wary about something. This was the show where, beforehand, Mikel Holt looked at what I was wearing and announced that I “dressed black.” I took that as a compliment, though I wasn’t, and still am not, sure what he specifically was referring to.

George Mitchell writes:

While Milwaukee Journal Sentinel Editor George Stanley likely does not read every story that appears, he surely reviewed Thursday’s piece by Tom Daykin on the relocation of the paper away from its Fourth & State headquarters.

That story included this:

The company’s roughly 260 employees will be moving to the 330 Kilbourn office complex, 330 E. Kilbourn Ave., said Andy Fisher, the Journal Sentinel’s chief business executive.

The new offices will help the Journal Sentinel better retain and attract employees, Fisher said Thursday.

“It’s a more modern facility that I think people will feel a lot more comfortable in,” he said. “It’ll have a really fresh feel.”

That rationale, of course, is preposterous. It’s the kind of spin that would be filleted by the likes of Dan Bice.

Not long ago the idea of the Journal Sentinel leaving a headquarters built almost a century ago would have been unthinkable. It is a dispiriting and symbolic development, particularly for those who can recall when the paper and its predecessors were “must read” documents in the morning (and afternoon).

When I entered the UW-Madison Journalism School in the mid-60s the daily Milwaukee Journal had a circulation of about 375,000. At the time of the 1995 merger with the Sentinel the daily circulation of the new paper was about 325,000. A year ago (February 2018) it was a meager 82,000 — a 71 per cent decline from the merger’s debut edition.

The precipitous decline mirrors a national trend. According to the authoritative Pew Research Center:

U.S. newspaper circulation reached its lowest level since 1940, the first year with available data. Total daily circulation (print and digital combined) was an estimated 28.6 million for weekday and 30.8 million for Sunday in 2018. Those numbers were down eight percent and nine percent, respectively, from the previous year, according to the Center’s analysis of Alliance for Audited Media data. Both figures are now below their lowest recorded levels, though weekday circulation first passed this threshold in 2013.

Specific Pew research on the Milwaukee market is sobering for newspaper adherents. A minuscule 13 percent of adults report they “prefer to get their local news” from print media. The numbers are even worse when considering responses to an open-ended question of where adults “most often” get their news. Only ten percent cited the Journal Sentinel. By comparison, more than four times as many cited the local affiliates of Fox, NBC, and ABC.

The implications of this seismic development, locally and nationally, are wide-ranging. TV news and social media can’t hold a candle to the potential of an economically solid newspaper staff when it comes to comprehensive news coverage and investigative reporting.

My own preoccupation involves how the decline of the Journal Sentinel (and other papers) will affect public policy. What do local officials, legislators, and their staffs now rely most on for information? Do “special interests” now call more of the shots?

What hasn’t changed is the enormous impact our elected officials can have.  They decide who does and doesn’t have educational choice. They decide whether the transportation system is maintained and strengthened. They set criminal justice policy.

Among the myriad groups and associations that seek to influence these issues, all must now have elaborate websites and communication strategies that move their messages to the top of Google searches. This in turn shines a light on the undisputed left-leaning bias of Google, Facebook, Twitter and their ilk.

Yesterday’s story is hard to find on the Journal Sentinel website today. That in no way diminishes the significance. The symbolic nature of vacating the paper’s headquarters for a nondescript private office building is a bummer.

One other piece of interesting news: The Journal Sentinel (now part of Gannett, which may be in the process of being purchased by a company owned by one of the Milwaukee Bucks owners) is moving into the same building as the Wisconsin Institute for Law and Liberty. Maybe WILL can arrange to run into Journal Sentinel reporters and editorial writers and set their minds right.

Trump’s tariffs are so big …

Brett Arends wrote this last week:

I’m used to partisan, inaccurate drivel from all sides these days, but the media’s coverage of President Trump’s tariffs and the so-called “trade war” takes some kind of cake.

There’s no serious doubt that some in the media would absolutely love to tank the stock market. They figure that would hurt Trump’s re-election chances in 2020. Monday’s stock market slump, which saw the Dow Jones Industrial Average DJIA, -1.41% tumble 2.4% and the Nasdaq Composite 3.4%, looked just like what the doctor ordered.

I write this, incidentally, as someone who is no fan of the president. But I remember when politics was supposed to stop at the water’s edge.

And, anyway, facts are facts. Most of what the public is being told about these tariffs is either misleading or a downright lie.

I’ve been following the coverage all weekend with my jaw on the floor.

Yes, tariffs are “costs.” But they do not somehow destroy our money. They do not take our hard-earned dollars and burn them in a big pile. Tariffs are simply federal taxes. That’s it. The extra costs paid by importers, and consumers, goes to Uncle Sam, to distribute as he sees fit, including, for example, on Obamacare subsidies.

It wasn’t long ago the media was complaining because Trump was cutting taxes. Now it’s complaining he’s raising them. Confused? Me too.

And the amounts involved are trivial. Chicken feed.

President Trump just hiked tariffs from 10% to 25% on about $200 billion in Chinese imports. In other words, he just raised taxes by … $30 billion a year.

Oh, no!

The total amount we all paid in taxes last year — federal, state and local — was $5.51 trillion. This tax increase that has everyone’s panties in a twist is a rounding error.

Meanwhile, the total value wiped off U.S. stocks during Monday’s panic was about $700 billion. More than 20 years’ worth of the new tariffs.

Even if Trump slapped 25% taxes on all Chinese imports, it would come to a tax hike of … $135 billion a year. U.S. gross domestic product (GDP) last year: $20.5 trillion.

So even this supposedly scary “escalation” of this “tariff war” would, er, raise our total tax bill from 26.9% of GDP all the way to 27.5% of GDP.

Oh, and isn’t it interesting to see some people’s priorities? Apparently the most shocking part of this trivial tax hike is that it might raise the price of new Apple iPhones.

Last I checked, these were luxury items, right?

Meanwhile, the trade spat seems to be bringing down food prices. China is going to take less of our farm products. So wheat prices are down 20% since the start of the year. Soybeans are at 10-year lows.

Good for consumers, right?

No, no, of course not! Silly you. This is also bad news … for farmers!

And all this ignores the much bigger picture, anyway.

The tariffs are simply a means to an end. The president is trying to get China to start buying more of our stuff. He knows the so-called Middle Kingdom, which now has the second-biggest economy in the world, responds to incentives more than to nice words. These tariffs give China an incentive to open up.

OK, so China’s first reaction is just to retaliate. Big deal. That’s just posturing.

Right now we export less to China than we do to Japan, South Korea and Singapore put together. That’s the point. So the effect of China’s new tariffs on the U.S. are yet another rounding error. Even if China banned all imports from the U.S., that would amount to only 0.6% of our gross domestic product. And we’d sell the stuff somewhere else.

Don’t buy the hysteria. President Trump is simply trying to pressure our biggest competitor to buy more American goods. That should be a good thing, even if you don’t like him.

Arends is not, as far as I know, a Republican or a conservative. Marketwatch lists him as “an award-winning financial columnist with many years experience writing about markets, economics and personal finance. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a Chartered Financial Consultant. His latest book, Storm Proof Your Money, was published by John Wiley & Co.”

So Arends may be right. We better hope he is.

 

Tax cuts and the economy

M.D. Kittle:

The booming economy of 2019 continues to be fueled in large part by the GOP Tax Cuts and Jobs Act of 2017. 

And Badger State companies and their employees continue to reap the rewards of tax relief. 

“Also, what may not be as immediate is (the tax savings) have allowed us to bank some cash…It’s a fact that there are going to be funds there for us to be able to put toward capital expenditures when the time is right,” Jung said.

U.S. gross domestic product (GDP), according to initial reports from the U.S. Commerce Department, grew by a whopping 3.2 percent in the first quarter, crushing estimates and soothing worries of a looming economic slowdown.

Companies like Pewaukee-based Trico Corp.have much to do with the U.S. economy’s impressive expansion. Bob Jung, CEO of the century-old industrial lubricants business, will tell you that the $1.5 billion tax relief package passed by the Republican-controlled Congress and signed into law by President Trump continues to benefit businesses like his — and Trico’s employees. 

A year ago, Jung confirmed that, thanks to the tax cuts, Trico would provide $650 bonuses to its workforce, and the employer planned to increase contributions to employee 401(k) accounts. The company also expected to hire more full-time workers. Jung said Trico paid out those additional benefits earlier this year. 

The lower tax rates for S corporations like Trico have made a big difference to the bottom line. But the reform package also included beneficial accounting changes. Jung’s company was able to change from accrual to cash accounting, allowing Trico to recognize revenue and expenses only when money changes hands, not when revenue is earned and expenses are billed (but not paid) under accrual accounting. 

Jung said the tax cuts have helped the company expand products and services to customers. Trico sales are up 10 percent on the year, he said.

“Also, what may not be as immediate is (the tax savings) have allowed us to bank some cash,” the CEO said. “It’s a fact that there are going to be funds there for us to be able to put toward capital expenditures when the time is right, perhaps in the fourth quarter.” 

Such sentiment bodes well for economic expansion ahead. 

Economists’ consensus had pegged GDP growth at about 2.5 percent to start the year. Many are upping their full-year estimates following the latest numbers on top of a healthy 2.9 percent growth rate in 2018. On average, the U.S. economy has added 180,000 jobs in the first three months of the year, while the major markets continue to break records. 

Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department.

Grover Norquist, president and founder of Americans for Tax Reform, said the GOP tax reforms were designed to ramp up economic growth over the next three to four years. When you cut corporate income tax rates from 35 percent to 21 percent, however, that frees up a lot of capital to reinvest, Norquist said. And U.S. companies have done just that. 

Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department. That’s a considerable amount, even as Bloomberg and other media outlets chortled that it was a far cry from the $4 trillion President Trump predicted would return post-tax reform. 

“We saw the growth immediately from the first year, so imagine what will happen over the next two, three, four or five, six years (with) the most powerful, pro-growth, pro-wage increase” tax reform law, Norquist told MacIver News Service in a recent edition of the MacIver NewsMakers podcast. 

U.S. businesses continue to pass along their tax savings to employees, to consumers, and to their communities. 

Americans for Tax Reform has tracked some 800 examples of new hires, pay raises, benefit increases, bonuses, facilities expansions, and utility rate reductions directly related to the tax cut package. This incomplete list, which only notes firms that have made public announcements, includes the largest corporations to the smallest shops — including dozens of Badger State companies, like Trico.  

And Madison-based Musicnotes, Inc. 

Last year, the worldwide leader in digital sheet music, announced it was giving 3 percent salary increases to its 55 employees, thanks to the corporate tax cuts. Tim Reiland, the company’s executive chairman, said Musicnotes intended to expand its workforce. 

“We definitely benefitted from the tax reform and we have passed some of that along and continue to do that,” Reiland said.

It has done that and more. 

“This is a really positive story for us and it continues,” Reiland told MacIver News last week. “We definitely benefitted from the tax reform and we have passed some of that along and continue to do that.” 

Musicnotes has added six positions, boosted salaries by an average of 10 percent, and expanded office space by about 15 percent since the beginning of 2018, Reiland said. He calls it the “virtuous circle.” 

A lot of the company’s growth has to do with its products and the people behind them, Reiland said, but a significantly lower corporate tax rate certainly helps. 

“It’s very real. It’s cash flow. That’s what you need to grow a business,” he said. “It has been a significant benefit to us, and we’ve shared, we’ve rewarded, we’ve plowed back and we continue to do that.” 

Beyond business expansion and employee bonuses, a lot of companies have used a portion of their tax savings to benefit their communities. Case in point, CUNA Mutual Group. The Madison-based mutual insurance provider was able to make the largest contribution ever — $20 million — to its philanthropic foundation, thanks in part to tax reform. 

“The reform benefit is helping us,” said CUNA Mutual spokesman Phil Tschudy. “The reason we did this is so we could ensure that our foundation is funded for years to come, regardless of economic situations.” The foundation turned 50 this year.

Consumers, too, continue to benefit from the 2017 tax reform law. 

State regulators announced last year that WE Energies’ electric customers would receive a one-time credit in July and a slight decrease in rates “from a portion of the savings from the company’s lower federal corporate tax rate.” The Milwaukee utility’s customers received a combined $374 million in refunds, through bill credits, in 2018, according to WE Energies spokesman Brendan Conway. 

“We have also lowered the amount of debt customers would have had to repay us $47.2 million,” he said in an email. 

On top of that, the utility’s recent filing with the state Public Service Commission proposes to use an additional $111.3 million in tax savings to lower customer costs in 2020 and 2021. 

Democrats, led by Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer called the benefits delivered by the tax cuts “crumbs.” But employers and workers nationwide have been able to keep a lot more bread — and impressive economic growth shows the power unleashed when taxpayers are freed from the burdens of taxation.