Foxconn and its Wisconsin Denemies

Wednesday’s White House announcement about Foxconn coming to Wisconsin brought with it predictable complaints from the Wisconsin left, which I have read so you don’t have to. (Warning: Hypocrisies ahead.)

First, Democratic Party of Wisconsin Chair (because no one else wants the job) Martha Laning:

“I welcome new business and jobs to Wisconsin. After six years of seeing job creation promises go unfulfilled and watching major corporations shut down factories or move jobs elsewhere, it’s great to see Democrats like Sen. Tammy Baldwin and Rep. Mark Pocan encouraging new economic activity in the southeastern Wisconsin. 

“Democrats are laser focused on expanding the middle class and giving every Wisconsinite the opportunity to succeed and achieve the American Dream. But in order to have an economy that works for all us – not just the millionaires and billionaires – state-subsidized private sector jobs need to be a good investment that offers a living wage and ensures safe working conditions.

“While we are all thrilled at the prospect of new jobs coming to the state, it is entirely reasonable to be cautious of a scandal-plagued job creation agency handing over taxpayer funds to foreign investors that could potentially leave Wisconsinites with the bill decades into the future.”

Note that the statement includes no examples of what Baldwin and Pocan (whose district doesn’t include “the southeastern Wisconsin”; that would be the House district of Speaker of the House Paul Ryan) have done to encourage new economic activity.

Sen. Chris Larson (D–Milwaukee):

“It is with good reason that Wisconsinites are not yet willing to blindly put their faith, and money, in a feeble jobs promise. We’ve been deceived by Walker’s rose-tinted glasses before.

“Since taking office, Walker has left a trail of broken promises. His pattern of deception has resulted in our hard-earned tax dollars being handed over to campaign donors and companies that outsource, as well as some of the biggest tax breaks going to the richest people in the state, some of whom have used tax loopholes to avoid paying any state income tax for years.

“Our neighbors care about making sure this is a good deal for everyone in Wisconsin. Any move for Foxconn to locate in Wisconsin must also fit with the spirit of our great state. We look to partner with companies that will respect our state’s shared lands and waters. We should reward companies that pay our neighbors a living wage and treat them fairly. If they expect special treatment, they need to have a long-term commitment to our state so we know they won’t abandon Wisconsin as soon as a new enticement goes on the table from somewhere else.

“Wisconsin leaders should not commit to corporate welfare or anything that carves out special exceptions in our laws if it will unfairly hurt local businesses already in our state. Every small-business owner knows: with a billion dollar pinky swear, the devil is always in the details.

“Too many people in our state are struggling in low-wage jobs and living in fear that any day the security of health care could be pulled out from under them. They deserve leaders who will be looking out for their future.

“We demand fairness, and that’s what we’ll be looking for in this deal.”

Based on this Foxconn should feel free to delete any job applicants with Milwaukee home addresses. Larson’s job creation record is nonexistent.

Sen. Jennifer Shilling (D–La Crosse):

“While I welcome new businesses to the state, I want to ensure any state-subsidized private sector jobs offer a living wage and safe working conditions. As we look to expand Wisconsin’s middle class, Democrats will continue to focus on boosting small businesses, strengthening workplace protections and encouraging more locally-grown start-up companies.

“Communities and small businesses that could be at a competitive disadvantage deserve full transparency when it comes to Gov. Walker’s proposed tax breaks for Taiwanese investors. I am cautious of committing taxpayers to decades of economic costs and liabilities.

“The bottom line is this company has a concerning track record of big announcements with little follow through. Given the lack of details, I’m skeptical about this announcement and we will have to see if there is a legislative appetite for a $1 to $3 billion corporate welfare package.”

Numerous media outlets have highlighted a pattern of Foxconn’s misleading job claims and broken promises on economic development. The Washington Post detailed a series of “splashy jobs announcements” from Foxconn that promised thousands of jobs and billions in investments that never quite materialized in Pennsylvania, Indonesia, India, Vietnam and Brazil. With declining wages across Wisconsin and a stagnant economy, Gov. Walker has yet to produce the 250,000 jobs he promised to create by 2015.

Even the Democrats know they’re (accurately) viewed as anti-business when a news release starts with “While I welcome new businesses to the state …”

Assembly Minority Leader Peter Barca (D–Kenosha), as quoted by The Capital Times:

Assembly Minority Leader Peter Barca, D-Kenosha, said he met with Foxxconn representatives bout a week-and-a-half ago, and the company is looking at sites in Kenosha, Racine and Milwaukee counties.

It’s an “exciting opportunity” for southeastern Wisconsin, Barca said, but he wants to make sure the plant provides “long-term, family-supporting job opportunities.”

That must have just killed Barca to use the words “exciting opportunity.” (Barca was in the U.S. Small Business Administration, but as a political appointee, not someone who did important work.) Along with passing on this:

Democrat toadies Zero Wisconsin Now (boldface theirs):

One expert has described Foxconn’s approach to negotiations over public subsidies for their operations saying, “they extract everything they can.”

The company’s track record promising major investments in facilities and gaudy numbers of jobs versus the reality of what they do, or don’t, is well documented in both the U.S. and globally. In addition, serious questions have been raised about the labor practices of a corporation that installed “suicide nets” outside its Chinese operation after over a dozen employees killed themselves or attempted to by leaping from a plant rooftop.

A deal of this magnitude could rank as one of the largest ever public subsidies to lure a private corporation to a state. It demands significant scrutiny and prompt, detailed answers to questions including:

What specific incentives are being proposed for Foxconn, what government entities will be involved in providing them and what are the proposed funding sources? Will legislation be necessary at the federal, state and local levels?

What, if any, new revenue does the state expect to collect from this project in exchange for a multi-billion dollar public subsidy?

What, if any, financial commitments will Foxconn make in exchange for public subsidies? Will they provide funding for worker training, infrastructure upgrades or other community projects?

How many Wisconsin residents will be employed directly, full time by Foxconn at the proposed Wisconsin facility upon its completion versus temporary workers, workers from other states, international employees, and jobs being projected that are actually ancillary to the manufacturing plant operation?

What types of jobs will they be and what will they pay?

What assurances will be provided on labor conditions and benefit? Will the jobs offer comprehensive health care and retirement benefits? Sick time? Vacation? Family and medical leave? Will employees be allowed to unionize should they so choose?

Is this facility being proposed because of a commitment to investing and expanding operation in the U.S. or as part of a strategy to evade potential restrictions or tariffs on foreign based manufacturers of goods imported to the U.S.?

What are the benchmarks Foxconn must meet in order to receive subsidies and what, if any, clawback provisions are in place to recover expenditures of tax dollars if they are not met?

Will access to records associated with the negotiations be denied by Gov. Walker and others?

Are there assurances of environmental or other regulatory exemptions upon which the Wisconsin Foxconn project is based?

Most importantly: Why was this done in 100 percent secrecy?

Zero’s last question is the easiest: Given that we knew this was happening before it was officially announced, it wasn’t done in 100 percent secrecy. These details are negotiated away from public view — whether negotiated by Republicans, Democrats or nonpartisan politicians — because the business demands it. If state or local spending is involved, then the Legislature and county and/or municipal boards will have to approve them, and that won’t be in secret.

About tax credits, Scott Bauer of the Associated Press reports via tweet:

Foxconn tax credits are tied to performance, no credits given if Foxconn fails to invest capital or create jobs

The state would get zero money from Foxconn if Foxconn doesn’t move to Wisconsin. The actual cost of subsidies is zero, because they only exist because of Foxconn’s moving to the state. (Unless you believe, like Democrats do, that every cent of everyone’s and everything’s money belongs to government.)

The other questions … well, I’ve already asked the pertinent questions well before those trying to deflate partisan disadvantage. I have more objectivity about people I vote for than Democrats seem to have.

This GIF posted by a Facebook Friend sums up what Wisconsin Democrats really think:

Milwaukee County Executive Chris Abele, neither a conservative nor z Republican, takes credit:

“Today’s announcement that a major global employer, and one of the largest manufacturers in the world, will be setting up massive operations in southeastern Wisconsin is a great example of what can happen when we all work together. It’s also a testament to the strength and appeal of our workforce and the commitment from many levels of government to devote the resources needed to invest in the kind of infrastructure that will attract and retain global talent.
“The Milwaukee area has been experiencing an unprecedented economic development boom, spurred largely by projects in the Park East, at the Couture, and on the County Grounds. This deal takes that development to another level and I believe represents the greatest opportunity in a generation to empower our job market, sustainably raise wages for our workforce, begin to address the racial disparities that exist in economic opportunity, housing, transportation, and employment, and show the rest of the world how effective and innovative our Wisconsin workforce can be.
“I’m excited to make sure our neighbors to the south in Racine and Kenosha counties will join Milwaukee County in driving the state’s economy forward and upward. A regional, and comprehensive, approach to workforce development is exactly what it will take to ensure that Foxconn has the skilled workforce and transportation infrastructure they need to thrive in Wisconsin for years to come.
“I congratulate the many partners representing diverse business, education, and labor interests who worked so hard to make this development a reality of which everyone can be proud.”

Labor interests? Education interests? Whatever.

As for the varied criticisms of the Walker approach to economic development, the Department of Workforce Development released this Wednesday afternoon:

The Department of Workforce Development (DWD) today released the U.S Bureau of Labor Statistics (BLS) estimates of unemployment and employment statistics for metro areas, major cities, and counties in Wisconsin.  The estimates include updates for May 2017 and the preliminary estimates for June 2017. These numbers are not seasonally adjusted. In brief, the estimates showed: 

  • Metropolitan Statistical Areas: Preliminary June 2017 unemployment rates decreased in all areas when compared over the year to June 2016. The largest 12-month decline was 1.3 percent in Racine. The rates ranged from 2.7 percent in Madison to 4.2 percent in Racine. 
  • Municipalities: Preliminary June 2017 rates decreased in the state’s 32 largest municipalities when compared over the year to June 2016. The latest rates ranged from 2.7 percent in Fitchburg, Madison, and Sun Prairie to 5.2 percent in Beloit. 
  • Counties: Preliminary June 2017 rates decreased in all 72 counties when compared over the year to June 2016 rates. The largest over the year decline was 2.4 percent in Menominee county. The latest rates ranged from 2.6 percent in Dane and Lafayette to 6.5 percent in Menominee.

The release of the June 2017 local rates follows last week’s release of BLS monthly estimates showing a preliminary seasonally adjusted unemployment rate of 3.1 percent in June 2017, maintaining its lowest rate since October 1999. Data also showed both total labor force and employment in Wisconsin remained at all-time highs in June.

Other indicators of the state of Wisconsin’s economy include:

  • Wisconsin’s labor force participation rate of 68.9 percent continues to outpace the national rate of 62.8 percent.
  • Wisconsin’s total labor force and employment remain at all-time highs.
  • Wisconsin’s seasonally adjusted employment change of 76,500 year over year is the largest since July 1995.
  • Wisconsin’s 3.1 percent unemployment rate for June maintains the lowest rate since October 1999.

I have indicated skepticism in the past with government-generated unemployment figures. The unemployment rate in this state is certainly higher than these numbers would have you believe. However, so is every other state’s and the nation’s unemployment numbers, so as measured by how the feds measure everyone, Wisconsin’s unemployment rate is still lower than most states and the nation as a whole, and that has been the case for the entire Walker administration.

A Walker news release said Foxconn’s $10 billion investment will create, it claims, 13,000 jobs, not counting jobs created by companies supplying Foxconn in LCD Valley, with, according to The Capital Times, $348 million in state and local tax revenues.

It is unfortunate that states and communities must give various incentives to get businesses to locate there. That is the fault of government that is too large, does too much and taxes too much. It’s also true that 100 employers of 100 employees each is preferable to one 10,000-job employer, because when that employer gets a cold, everyone there will get chills. But in our imperfect world, having that employer is better than not having that employer. Democrats know how to grow government, not the economy and not businesses.

The average household income in this state is $66,432, and the median household income is $52,893. The stated average wage of Foxconn jobs will equal the median household income of this state. (Democratic complaints about income inequality in 5 … 4 … 3 …) Those jobs are reportedly costing $100,000 in tax incentives, which would be made up in two years. (“Tax incentives” are another way of saying “cutting taxes you should not have to pay anyway.”) Democrats bitch, as you’ve already read, about insufficient jobs and pay and all that, and then bitch when an employer of vast size comes to the state, since they had nothing to do with that happening. If a Democrat was governor, you would not have read a single word you previously read from Laning, Larson, Shilling or Scot Zero. If only they were unemployed.

 

Coming to Wisconsin?

The Milwaukee Journal Sentinel rereports:

The Wall Street Journal said Monday that Foxconn Technology Group could announce its U.S. investment plans this week, and implied the company will build a display-panel factory in Wisconsin.

Citing three people briefed on Foxconn’s plans, the newspaper said Foxconn is looking at producing display panels for large-screen televisions in Wisconsin.

Strictly speaking, that isn’t new. Other media, including the Milwaukee Journal Sentinel, have reported for weeks that Wisconsin is a leading candidate for factories employing thousands that Foxconn is considering building in the United States.

The Wall Street Journal report, however, suggests that the Taiwanese electronics manufacturer has chosen Wisconsin. The newspaper also said Foxconn is looking at the Detroit area for an additional plant, but the report named none of the other states, including Ohio and Pennsylvania, that have previously been said to be in the running for the billions in investment the firm has said it is contemplating.

Foxconn officials have visited Wisconsin and other states in recent weeks to meet with top elected leaders as they mull their options.

Last week, Wisconsin Senate Majority Leader Scott Fitzgerald (R-Juneau) said Gov. Scott Walker’s administration is working on a memorandum of understanding with the company.

Fitzgerald said he discussed the possibility of the firm coming here with Walker and Assembly Speaker Robin Vos (R-Rochester) last Wednesday as part of budget negotiations over rebuilding I-94 in Racine County.

The Journal Sentinel reported/opined last week that Foxconn’s interest in a U.S. facility might be as much politically driven as driven by business. Donald Trump has huffed and puffed and threatened tariffs on foreign-made products. One way to circumvent that is to make them here, as Volkswagen, Mercedes–Benz, Toyota, Nissan, Honda, Subaru and other manufacturers figured out by building U.S. plants. Beyond a certain cost point, building near your product’s target market can make more sense than building in CheapLaborLand and shipping.

I said on Wisconsin Public Radio Friday that I was a bit skeptical a deal would be made. (And technically I’m not incorrect yet.) That’s because Wisconsin is known for not having very many tax incentive tools, such as tax abatements that Illinois has and we don’t. Wisconsin has Tax Incremental Financing districts, which can get building projects done on blighted or undeveloped land, but that doesn’t reduce a company’s property taxes. (Although the Manufacturing & Equipment property tax exemption would.) The aforementioned Journal Sentinel piece noted that Foxconn demands huge incentives to locate somewhere (though to this point only in other countries), so one wonders what is prompting them to choose Wisconsin.

This comes at an interesting time because Gov. Scott Walker is presumably running for reelection next year. Walker has been hammered by Democrats (though apparently not voters) for failing to meet his 250,000-jobs-created pledge, despite the fact that Wisconsin’s unemployment remains lower than the national average, for which Democrats of course give Walker zero credit. Predictably Democrats will compare the Foxconn jobs, if they materialize, to Third World sweatshop labor because wages won’t be what Democrats think are appropriate. (Whatever that number is.)

One likely Democratic candidate, Mike McCabe, proclaims that Walker’s economic development policies are a failure, and that the state should be targeting companies like Epic Systems. This ignores the facts that (1) everybody wants companies like Epic, (2) Epic moved from Madison to Verona because of the capital city’s failure to provide enough tax incentives, and (3) hitching your wagon to the bazillion-job horse means that if the horse suddenly stops, you might fall off. (Large-screen televisions are not exactly a necessity, so what happens to Foxconn Wisconsin employment in the next economic downturn?) I could have sworn liberals weren’t in favor of company towns either, although now that I think about it they are perfectly fine with company towns as long as the company is one or more units of government.

McCabe’s stated position is rather limousine-liberalish as well in wanting to wash our hands of those icky, dirty manufacturers, despite the historical fact that manufacturing is something Wisconsin has done and continues to do well, and remains Wisconsin’s leading employer. (Read for yourself and decide.) It’s kind of ironic to have Democrats decry jobs for not supporting working families, and yet simultaneously shunning blue-collar jobs, as if every job should involve working in a business-casual office where no one needs to stay after 5 p.m.

Then there’s the premier of the People’s Republic of Madison, Paul Soglin, who thinks he can translate Madison’s economic growth to the entire state, ignoring the fact that a blind monkey as mayor of Madison would have exactly the same economic growth if said blind monkey mayor had both a state capital and world-class university within its borders. There’s also “entrepreneur” Andy Gronik, whose biggest policy pronouncement so far is that public employees should have to pay absolutely nothing for their Rolls–Royce benefits.

The conundrum about job creation is that it requires job creators, which we have too few of in this state, and have had too few of for a long, long time. One reason, I think, is that, perhaps unlike our neighbors in Minnesota, Wisconsin society doesn’t respect those who start new businesses and then fail at them. All of Wisconsin’s anti-Trump types pointed to his four business bankruptcies and not his employment of 23,000 people. That may be because they didn’t like Trump and/or found him unsuitable to be president, but a lot of people in this state seem to believe that people like Diane Hendricks, John Menard, Herb Kohler and others with several digits of wealth stole from or cheated someone to get that wealth, instead of creating products and services to serve customers. And as long as that attitude persists in this state, the state will continue to lag in job and business creation, through no fault of state government.

Even if you don’t make Kohler-level money, the fact is that no one ever gets rich (defined monetarily) working for someone else. There is always risk involved in potential reward. Businesses fail daily, more often than not because of problems running the business, not with the business’ product or service. But business does far, far, far more for this state than government ever has or ever will, something none of the likely Democrats running for governor, including Gronik, will ever acknowledge.

Nonetheless, be skeptical about Foxconn until the jobs show up.  (And preferably somewhere other than the southeastern part of the state, though that appears to be a done deal. Other parts of the state need the jobs more than southeastern Wisconsin.)

 

Two sources, different stories

The Associated Press reports:

A proposal that would require breweries and wineries to stop selling their products on-site and instead work through distributors is probably going nowhere, a key Republican lawmaker said Wednesday.

Craft brewers and wineries were outraged last month when a mysterious memo emerged detailing a plan that would require them to work through distributors rather than sell their products directly to customers in on-site tap and tasting rooms. The brewers and wineries feared the proposal would force them to pay exorbitant fees to distributors and the Legislature’s finance committee would slip the plan into the state budget on its last night of work on the spending plan.

Rep. Dale Kooyenga, a Brookfield Republican who sits on the finance committee, said he doesn’t think the panel will make any changes. The proposal doesn’t make any sense and the committee wants to foster craft breweries’ growth, not hamper it, he said.

“I am 99 percent certain it’s dead,” Kooyenga said.

William Glass, president of the Wisconsin Brewers Guild and Eau Claire brewery the Brewing Projekt, said he hopes Kooyenga is right.

“We’re pretty confident, but until the governor’s signature is dry on the budget bill anything could happen,” he said. “It’s politics.”

It’s unclear who is pushing the changes. The conservative group Americans for Prosperity obtained the memo and leaked it to media outlets in June. The group’s Wisconsin chapter director, Eric Bott, declined then to reveal the document’s source and didn’t immediately reply to an email Wednesday asking again how the group got it.

The memo features the acronyms for the Wisconsin Tavern League, the Wisconsin Beer Distributors Association and the Wisconsin Wine and Spirit Institute, which represents wine distributors, on top of the first page. Despite the acronyms, tavern league lobbyist Scott Stenger said Wednesday that the league had nothing to do with the document and someone must have added the league’s acronym.

Stenger said in June that his members can’t compete with craft breweries that are growing into tourism destinations. He said Wednesday that he meant that the league doesn’t want breweries to obtain liquor licenses, which would give them an unfair advantage over bars.

“That doesn’t mean we’re opposed to Capital Brewery having a tasting room,” Stenger said. “But they shouldn’t be doing what we do.”

Eric Jensen, executive director of the beer distributors association, said in an email that his group wasn’t aware of any plan to force craft brewers to sell through distributors and if any such proposal was dead that would be “great news.”

“We have never sought and would not support any effort to require craft brewers to sell through distributors,” Jensen wrote.

He didn’t immediately reply to a email asking how the association’s acronym got on the memo.

Wisconsin Wine and Spirit Institute lobbyists also didn’t immediately reply to emails seeking comment.

But the River Falls Journal reports:

A proposal that critics say could spell doom for taprooms in Wisconsin breweries remains afloat, according to an Assembly member.

Rep. Shannon Zimmerman refuted a Wednesday, July 12, media report that the proposal — which has not been made public — is effectively dead.

“It is my understanding from information shared with me last night that its inclusion in a 999 motion remains a very real possibility,” the River Falls Republican said Wednesday afternoon of the proposal, which reportedly bans Wisconsin’s alcohol producers from retailing their own products without a distributor.

Zimmerman’s assertion follows a media report that quoted Rep. Dale Kooyenga, R-Brookfield, saying the proposal will not be slipped into legislation by the powerful Joint Finance Committee, of which he is a member.

Zimmerman said he doesn’t doubt Kooyenga’s opposition to the bill, but fears others on the budget committee might feel differently.

The freshman lawmaker said he couldn’t believe his ears when word first circulated about the proposal. And even though the document hasn’t taken the form of drafted legislation, Zimmerman said he’s warning others of its presence.

“It’s a very real document,” he said.

He and others in Madison are concerned the proposal could be slipped into the state’s budget by the Joint Finance Committee as a controversial 999 motion that’s been used in the past to include legislation that didn’t face public debate at the Legislature.

As for the taproom proposal, Zimmerman said there’s no debate in his mind about its possible repercussions.

“This motion is a direct assault on craft brewers, wineries” and other independent alcohol operations, he said.

Zimmerman makes no bones about the fact that he and his wife own a winery, but said he’d oppose the motion regardless.

According to multiple accounts of the proposal, it aims to ban alcohol producers from having retail operations such as taprooms and winery tasting rooms.

The document, Zimmerman explained, would create an “alcohol czar” apart from the state’s revenue department. That new office would have the authority to enforce a rule requiring breweries and wineries to contract with distributors to distribute their own products.

“Multiple groups” are pushing the proposal, Zimmerman said, adding that the Wisconsin Tavern League “had a part in this.”

He said the bill is being pushed by lobbying interests who “believe there is finite alcohol revenue to go around in Wisconsin.” Zimmerman contends that microbreweries, wineries and distilleries are a regional draw that lead to customers spending dollars elsewhere in the Wisconsin communities they’ve come to visit.

“We’re better than this,” Zimmerman said. “We are simply better than these back-office special interests.”

Russ Korpela, owner of Common Man Brewing in Ellsworth, was one of many craft beer retailers voicing opposition to the document. Though his business doesn’t yet brew its own beer, he hopes to one day. And in the meantime, he relies heavily on craft beer — a product his customers demand.

“This is a continuing push by the major domestic brewers in their war on craft beer and they’re taking a different way to go about it,” Korpela said. “I hope a message has been strongly sent that they’re not going to use the rule 999 to insert it into the final state budget.”

The tune didn’t change in Hudson, where Pitchfork Brewing co-owner Mike Fassino said the proposal could be a business killer.

He said about 80 percent of Pitchfork’s business flows through its taproom.

“It would be crippling,” Fassino said. “It would be virtually impossible, I think, to survive.”

Regardless of which story you believe, this is a proposal that should never have been made. There is no good reason to create an “alcohol czar,” nor is there is a good reason to make microbreweries adhere to the same system as MillerCoors and InBev, which is a system that shouldn’t exist anyway.

It also shows how regulated, despite Republicans being in charge of state government, business is in this state.State law mandates the senseless three-tier liquor system. More generally, the state sees fit to regulate what business must charge their customers (the minimum-markup law), and has one of the highest corporate income tax rates in the state. None of those three should exist either.

 

Vos fires, businesses fire back

On Wednesday, James Wigderson, the new proprietor of RightWisconsin, reported:

Last week Assembly Republicans saw their plan to tax heavy trucks shot down by several members of the state Senate and a coalition of business groups. Now Assembly Speaker Robin Vos, R-Rochester, Assembly Majority Leader Jim Steineke, R-Kaukauna, and Joint Finance Committee Member Rep. John Nygren, R-Marinette, are throwing up their hands and asking those business groups to identify how they would solve the transportation funding issue.

In a memo to Wisconsin Manufacturers and Commerce (WMC) and 16 other business organizations, the Assembly Republicans said the business organizations have until Monday to offer their ideas.

“Time is of the essence,” the memo said in bold type. “In order to be considered part of a potential solution, we ask that you please get back to us by Monday, July 10 with how you would propose to close the $1 billion deficit so we can upgrade the roads that you depend on to run your businesses.”

As Bill Osmulski at the MacIver Institute has pointed out, the transportation budget “shortfall” is closer to $449 million, not $1 billion as the memo indicated.

The proprietor of Wigderson Library & Pub reported this Saturday:

Wisconsin Manufacturers & Commerce (WMC) and Walmart are not waiting until a Monday deadline from Assembly Republican leadership to offer their solutions for the state’s transportation budget impasse. WMC and Walmart were two of the organizations that were opposed to a heavy truck tax proposed by Assembly Republicans.

A memo on Wednesday from Assembly Speaker Robin Vos, R-Rochester, Assembly Majority Leader Jim Steineke, R-Kaukauna, and Joint Finance Committee member Rep. John Nygren, R-Marinette, gave the business groups an ultimatum: They either had to offer solutions to the transportation funding impasse by Monday, or they were out of the budget process.

“Time is of the essence,” the memo said in bold type. “In order to be considered part of a potential solution, we ask that you please get back to us by Monday, July 10 with how you would propose to close the $1 billion deficit so we can upgrade the roads that you depend on to run your businesses.”

On Friday, Scott Manley, the Senior Vice President of Government Relations for WMC responded with a three-page letter to Vos, Steineke and Nygren. Manley questioned giving more money to the Department of Transportation (DOT) saying they were “troubled by the findings of the nonpartisan Legislative Audit Bureau report issued earlier this year that found sixteen DOT projects had collectively run over budget by more than $3 billion.”

“The same audit also found that DOT failed to save $289 million by not meeting its own performance goals,” Manley wrote. “This magnitude of fiscal mismanagement is unacceptable to taxpayers, and would never be tolerated in the private sector.”

However, Manley said he was encouraged by the reforms begun under new DOT Secretary Dave Ross. Through his efforts, $65 million in existing funds were re-directed and over $44 million in authorized transportation borrowing has not been issued,” Manley wrote. “WMC is encouraged by these positive developments and we applaud the leadership of Secretary Ross to implement changes to ‘business as usual’ at the DOT.”

Manley’s letter offered seven different ways the DOT and the legislature could save money in the transportation budget, starting with a full repeal of the state’s prevailing wage law. “Wisconsin’s prevailing wage law artificially inflates wages above the market rate for state transportation building projects,” Manley wrote.

Manley also suggested consolidating the projects where federal funds are used to reduce the effect of the Davis Bacon law, the law regarding wages on federal projects.

Other suggestions from Manley include eliminating 400 DOT engineers, move to a “practical design” standard to stop over-building on projects, and aligning federal and state environmental reviews to streamline the process.

As far as increasing revenue, Manley said, given the opposition from Governor Scott Walker and Senate Republicans, “WMC does not believe revenue enhancements are politically viable in this budget cycle.”

However, WMC does endorse raising the gas tax five cents per gallon and raising auto registration fees by $25. They also suggested using the two cents per gallon currently collected for the Petroleum Environmental Cleanup Fund Award (PECFA), saying the remaining costs of the program could come from other sources. PECFA is scheduled to end in 2020.

Finally, Manley suggested moving more funds from the general fund “either by increasing the current 0.25% transfer, or transferring a portion of the sales tax from motor vehicle sales and/or motor vehicle parts and accessories.”

Lisa Nelson, the director of public affairs for Walmart, suggested coupling raising the gas tax with eliminating the minimum markup on petroleum products, currently at 9.18 percent. “We are in alignment with WMC’s stated support of an increase in retail gasoline taxes up to five cents per gallon,” Nelson wrote. “But only if the consumer impact of such an increase is mitigated by the simultaneous elimination of the minimum markup on motor vehicle fuel.”

“None of the funds from this markup go into the transportation fund and support our roads,” Nelson wrote. “ Unlike gasoline taxes, none of the markup pays for Wisconsin’s infrastructure. It’s an onerous big-government mandate that hurts consumers.”

The Associated Press previously reported Neal Kedzie, president of the Wisconsin Motor Carriers Association, said Vos knows the organization is in favor of raising the gas tax and taking 100 percent of the sales tax on rental cars and auto parts for the transportation budget.

I will always take the side of business against politicians, so you can guess where I stand on this. I would extend Manley’s idea to devote all sales tax proceeds from motor vehicle and vehicle parts sales to transportation. It represents a serious lack of leadership on Vos’ part to (1) not acknowledge that Wisconsin is still one of the highest taxed states in the nation and (2) to not be willing to do something positive about that.

 

Wisconsin economic development from south of the state line

The Illinois Policy Institute:

Members of the Illinois House of Representatives passed into law the largest permanent income tax hike in state history July 6, successfully overriding Gov. Bruce Rauner’s July 4 veto of a larger budget package.

The override vote with respect to Senate Bill 9, the revenue portion of the budget that includes a tax hike, passed on a 71-42 vote. Ten House Republicans voted yes.

The override passed the Senate July 4 on a 36-19 vote, with one Republican voting yes, state Sen. Dale Righter from Mattoon. Righter also voted in favor of the tax hikes in order to send the bill to the governor in the first place.

The budget package will now become law despite Rauner’s veto.

The personal income tax rate will increase to 4.95 percent from 3.75 percent and the corporate income tax rate will rise to 7 percent from 5.25 percent, retroactive to July 1.

Moody’s Investors Service has indicated that even with the budget deal, Illinois is likely to become the nation’s first junk-rated state.

Despite a 32 percent income tax hike, the budget package is devoid of any structural spending reforms to slow growth in the cost of government: It lacks comprehensive property tax reform, major pension reform, collective bargaining reform, reforms to Medicaid and more.

Illinoisans may recall the 2011 temporary income tax hike, which also took a tax-hike-without-reform approach. Despite $32 billion in extra tax revenue, the state’s unpaid bill backlog only declined by $1.3 billion (to $6.6 billion from $7.9 billion), and pension debt rose by $25 billion.

statewide poll conducted in May by Fabrizio, Lee & Associates and commissioned by Illinois Policy revealed nearly two-thirds of Illinoisans surveyed opposed a budget that included a state income tax hike.

In comparison, Wisconsin has four income tax rates, ranging from 4 percent (to $14,180 in taxable income for a married couple filing a joint return) to 7.65 percent (beyond $336.320). Wisconsin’s corporate income tax rate is also higher than Illinois’ rate, 7.9 percent. If ever there was a reason for immediate state income tax cuts, this is it.

Evidently not everyone in Illinois opposes this ridiculous tax increase. This is an actual tweet from Illinois state Rep. Chris Welsh (D–Chicago) …

… that demonstrates the state of Illinois schools’ math instruction.

Readers may recall that some derided Lt. Gov. Rebecca Kleefisch for recruiting businesses from Illinois during Recallarama. I certainly hope she’s on the phone today and henceforth. This state would even take Bears and Cubs fans.

 

Taxes and workers

Former Blue Cross–Blue Shield United of Wisconsin CEO Tom Hefty:

Employers are struggling to find workers. A regional newspaper’s front-page headline screamed, “WANTED: MORE WORKERS.” Politicians have jumped on the bandwagon, proclaiming Wisconsin’s new goal is “workforce, workforce, workforce.”

Unemployment in Wisconsin is at record lows. Workforce participation rates are among the highest in the country. Wages are rising. Things are getting better.

A June op-ed in the Milwaukee Journal Sentinel by a conservative economist from the Manhattan Institute celebrated the state’s job growth and concluded, “Wisconsin essentially has run out of people who are unemployed.”

So why are people leaving Wisconsin in record numbers? The U.S. census ranked Wisconsin 39th in net migration to other states — losing over 12,000 people in each of the past three years. At the current rate, people are leaving Wisconsin in numbers equivalent to losing the population of Green Bay every decade.

The Milwaukee rankings on out-migration are even more troubling. In the March 2017 U.S. census report, Milwaukee had the sixth-highest domestic out-migration of any major metro area in the United States. Milwaukee County lost over 13,000 people. Worse yet, the rate of out-migration from the county doubled from 2012-’13 to 2015-’16.

Building a workforce requires people — the natural growth of the population, attracting residents from other states and internationally, and keeping existing residents here. Claiming to have a workforce strategy without a real strategy to attract and retain people makes little sense.

People move for a variety of reasons: jobs, family, weather, quality of life, schools, housing costs and taxes. Although academic studies differ on the level of importance, every study finds that taxes are one reason that people move. Sometimes, taxes are found to be the significant reason for migration to another state. Taxes have been found to affect even the location of star university scientists.

Some of the potential reasons for the growing out-migration can be eliminated. Many things haven’t changed in Wisconsin. The winters are still cold. Family and in-laws are the same as ever. The quality of life is good in every national survey. Housing costs are below the national average.

During the 1990s, Wisconsin gained residents in state-to-state migration. However, in the past 20 years, Wisconsin went from attracting people from other states to exporting people to other states.

What changed?

Wisconsin taxes today are relatively higher for upper-income individuals and on all investment gains. Those tax increases took effect during the Doyle administration and have not been reversed. Other states have cut taxes across the board. Wisconsin has not focused on individual tax cuts but rather on business tax cuts.

The specific driver on out-migration is the tax burden for middle- and upper-income families in Wisconsin. The state ranks seventh-highest for income taxes on middle-class families. The 2017 ranking for property taxes for a middle-class home is fourth-highest in the country, costing Wisconsin residents more than twice what average homeowners pay across the country.

What does this mean to a middle-class family in Wisconsin? The difference is more than $5,000 per year — comparing Wisconsin income and property taxes to the median among the states. Property taxes are $3,248 for the median-priced home in Wisconsin, double the national average.

A closer look at who is leaving Wisconsin confirms the conclusion. As a Princeton University study in 2008 pointed out, Wisconsin attracts low-income individuals with lower levels of education — and Wisconsin loses upper-income individuals with higher levels of education. Wisconsin already had the third-worst migration pattern in the country in 2008. (See WPRI article “Wisconsin Flunks Its Economics Test.”)

In 2014, a presentation to the Wisconsin Economic Development Association by a University of Wisconsin-Madison business school professor made the same point. Wisconsin attracted individuals from other states with lower levels of education — a net inflow of over 2,700 low-income individuals per year from 2008 to 2012. In that same period, Wisconsin lost 14,000 college graduates each year — the much discussed “brain drain” from the Badger state.

A 2016 report to the Future Wisconsin Summit by another UW-Madison professor repeated the point in comparing those leaving Wisconsin and Minnesota. Over half of those leaving Wisconsin are ages 26 to 65. Over 60 percent of those leaving Wisconsin have incomes above $25,000.

Naysayers might blame Act 10 — the 2011 Wisconsin law that sharply curtailed collective bargaining for most public employees — but the data contradicts that argument. Madison, the metro area most affected by Act 10 with its high proportion of government workers, continues to gain population.

In contrast, Milwaukee, the metro area with no major state government offices, has a growing out-migration. Milwaukee ranks 48th out of 53 major metro areas in out-migration.

Some reports show a declining Wisconsin tax burden, but those compare total taxes collected from all sources to total personal income. By looking at total taxes collected, equal weight is given to selective special interest tax breaks as to across-the-board tax cuts — changes that would attract and retain workers. The bulk of recent tax changes in Wisconsin did not go to middle-income families, the ones who are leaving the state.

What does the future hold for the Wisconsin workforce? Natural population growth is not going to solve the problem. The number of individuals 17 and younger is down by 3 percent since 2010. The natural population pipeline is dry.

Unless out-migration is reversed — or newcomers are attracted — Wisconsin will face growing workforce shortages in the years ahead. The Wisconsin Taxpayers Alliance did an excellent summary of the issues in “Wisconsin’s Migration Challenge” in July 2016.

There are two fundamental policy directions to address workforce shortages.

• Increasing state spending on workforce development and education. That increased spending puts pressure on raising taxes. Wisconsin already spends generously, ranking 12th in per-capita spending on post-high school education.

• Cutting taxes to reduce out-migration and to attract new residents. The fastest-growing states have lower taxes than does Wisconsin.

However, there is a third, middle-of-the-road choice: changing how Wisconsin’s taxing and spending decisions are made.

Ten years ago, Wisconsin debated a Taxpayer Protection Amendment, often referred to as a taxpayer bill of rights, or TABOR. The amendment to the state constitution would have capped all state and local taxes and required voter approval for tax increases and for major spending projects.

Wisconsin rejected the amendment after an assault on the concept by public spending groups in Madison.

But Wisconsin does have half of a taxpayer bill of rights. For local government and school spending, tax increases and bonding require a local referendum. And those taxes are tied to schools. Local taxes can be increased by referendum, but there is no similar taxpayer power to cut other local taxes. There is no TABOR on state taxes. Wisconsin had a one-way TABOR — up — and only for some local taxes.

Colorado adopted TABOR 20 years ago. Taxes are low. The economy is booming. That state is attracting strong in-migration. TABOR voters are smart — voting for increased spending on K-12 education, for the arts, light rail, airport expansion and even for taxation of legalized marijuana.

Why not give Wisconsin voters the same opportunity to make the decision?

Other states have begun looking at the competitive impact of state taxes. All of the Midwest faces demographic challenges. This is not to argue for simply slashing taxes. But it is time to address the growing workforce shortages and the out-migration causing those shortages. And it is time to move from a top 10 ranking in family taxes to a more competitive position for Wisconsin workers. A taxpayer bill of rights may be an alternative worth consideration.

In June 2017, a more liberal commentator — Urban Milwaukee’s Bruce Thompson — published an article noting the growing Wisconsin out-migration and asked, “Who is leaving Wisconsin?” He did not consider tax burden but noted that middle-aged workers were leaving. His conclusion was, however: “There are more mysteries than answers.”

Wisconsin is losing its workforce — a trend noted by conservative and liberal commentators alike. It is time to find out why. Let’s survey former state residents and ask them.

A TABOR-like device is grossly overdue in this state, regardless of which party is in power. The state Constitution needs to include these things:

  • Requirements that all units of government, including state government, balance their budgets by Generally Accepted Accounting Principles. (All units of government except state government are now required to GAAP-balance except for state government, which is only required to cash-balance.)
  • Limits on spending for all units of government, including state government, to inflation plus population growth.
  • Required voter approval for all tax increases, including such spending projects as schools and municipally-built buildings.

In a previous mention of TABOR I got the comment that fiscal policy should not be part of the state Constitution. However, Article VIII covers public finance, including requirements that taxation be uniform. Elsewhere in the Constitution includes a ban on taking private property for public use without “just compensation,” and Article I section 22:

The blessings of a free government can only be maintained by a firm adherence to justice, moderation, temperance, frugality and virtue, and by frequent recurrence to fundamental principles.

Without a Taxpayer Bill of Rights in the state Constitution, government is arguably violating the state Constitution.

 

I will not drink to this

The MacIver Institute reports:

A high-profile meeting last Thursday attended by many – but not all – of the stakeholders affected by proposed changes to the system regulating Wisconsin’s alcoholic beverage industry ended with very different accounts of what transpired and more questions than answers, multiple sources tell MacIver News Service.
Attendees agreed to return to the table as soon as next week for further discussions.
There is a push by the state’s alcohol distributors and the Wisconsin Tavern League to tweak the current three-tier regulatory system of the production, distribution and sale of alcohol by creating an Office of Alcohol Beverages Enforcement, appoint a new ‘alcohol czar’ and hire an additional six enforcement officers with more authority to crack down on violations.
State Rep. Rob Swearingen (R-Rhinelander) said he organized the meeting “to address the misinformation in the media,” about the draft proposal.
“It was a working document,” Swearingen said, adding that one of the top priorities for the meeting was to explain the proposal’s implications to the various stakeholders.
Swearingen owns a restaurant and is a member and former president of the Tavern League.
According to Swearingen, the list of attendees included representatives from the newly formed Wisconsin Craft Beverage Coalition: the Wisconsin Brewers Guild, the Wisconsin Distillers Guild, and wineries; lobbyists Eric J. Peterson and Scott Stenger; and Reps. Rob Brooks (R-Saukville), Shannon Zimmerman (R-River Falls), Rep. Dale Kooyenga (R-Brookfield) Swearingen, Rep. John Nygren (R-Marinette) and Assembly Speaker Robin Vos, R-Rochester.
“Once people from the wine and beer wholesalers explained the proposal, the group almost came together for the most part,” Swearingen said.
Others who attended had a different assessment of the meeting.
Brian Samons, president of the Wisconsin Distillers Guild, said the proposed changes to an incredibly complicated body of laws and codes are moving too fast. And too many stakeholders are being left out of the discussion, he said.
“There’s no need to rush, if we’re talking about making good policy, and I hope we are,” Samons said. “We’re not against enforcement of the rules and rules that make sense, good public policy. The problem is when it’s neither clear or good policy.”
The big concern is that the crafters of the “drafting instructions” will try to sneak the changes into the budget through a “999 motion,” or concluding wrap-up motion that dodges public scrutiny.
William Glass, president of the Wisconsin Brewers Guild, said he was disturbed by the number of lawmakers in the room who seemed satisfied with tacking the measure onto the end of the budget process.
“The problem is there are still people not in this room debating this bill,” he added. “The special interests are trying to force an issue without having the proper avenue to vet it.”
But Swearingen said the Legislature is not prepared to act unless all the stakeholders can reach a consensus about what steps the state should take.
If that happens, it could either be part of the budget or separate legislation.
Swearingen led the discussions, but sources said Vos was very involved in the meeting, which some attendees described as “uncomfortable,” and “heated” at times.
Kooyenga said the meeting was a “huge step forward.”
“For many years there has not been a representative from the wineries, the distillers, or the small brewers in the room,” he said.
Vos’ office did not return an email request for comment Thursday or Friday. Kit Beyer, Vos’ spokeswoman, told MacIver News in a story Wednesday that the speaker was “asked to join the group.”
“Rep. Swearingen, as chair of the Assembly State Affairs Committee, is holding the meeting to see if there are things that all sides can agree on,” she said.
Beyer made clear that Vos “does not support the three-tier proposal.”
Sources said Vos urged the participants at Thursday’s meeting to voice their support of the long-standing three-tier regulatory system, however.
Glass said the proposal seems to run afoul of free-market principles. He said he was heartened when one lawmaker raised the same point.
“John Nygren did make a comment in the meeting about how this does not politically align with conservative values,” Glass said. “He said, ‘We’re not for growing government or restricting entrepreneurs but that’s what we’re talking about here.”
The Prohibition-era system in general aims to keep alcoholic beverage makers, wholesalers and retailers, including restaurants, bars, and liquor stores, out of each others’ businesses. The law has long aimed to stop monopolies and protect smaller operators, but it has locked entrepreneurs out and carved out protections for established players.
“Breweries, wineries, and other alcohol-beverage producers can distribute their products only to independent, licensed wholesalers (also called distributors). These wholesalers then distribute the products only to independent, licensed retailers. Only licensed retailers can sell the products to the public. Thus, under a strict three-tier system, alcohol beverages must pass through both a licensed wholesaler and a licensed retailer before reaching the consumer,” a State Bar of Wisconsin piece summed up.
There are many exceptions to the rules, and apparently that’s what the “drafting instructions” look to clarify.
Americans for Prosperity-Wisconsin and other critics are warning that the plan is to beef up the onerous “three-tier restricting” law.

Beer and cookies

There is good news and bad news on the food freedom front.

First, the good news, from Matt Kittle:

The latest version of Wisconsin’s “Cookie Bill,” legalizing the sale of home-baked goods, passed – again – in the Senate this week.

But thanks to a southwest Wisconsin judge, a free-market law firm and some very persistent “cookie ladies,” small bakers of brownies, muffins and cookies no longer have to fear going to jail or paying big fines for selling their goods.

On Friday, Lafayette County Judge Duane Jorgenson signed an order finalizing his decision last month that declared unconstitutional the state’s ban on the sale of homemade baked items.

The judge did so after the state Department of Agriculture Trade & Consumer Protection told a home baker she would not be protected under the court ruling, according to Erica Smith, attorney for the Institute for Justice, which represented three Wisconsin women in the case against the state.

Smith said the department told the woman that the ruling only applied to the three plaintiffs.

“We did a brief with the court, and the court just today signed an order putting an end to it,” the attorney said.

“Wisconsin is a lot freer today than it was last month,” she added.

Jorgenson ruled that anyone in the state can bake and sell without an artificial cap on sales, as long as the goods are not considered potentially hazardous. Cookies, cakes, breads, muffins fit the nonhazardous column.

Wisconsin residents Lisa Kivirist told the Washington Times in 2016 that she and her family serve muffins and other baked goods to the guests of their Inn Serendipity Farm and Bed and Breakfast near Monroe, but they face fines and jail time if they sell them, under the state ban.

“It’s not clear to me why I can serve you this muffin legally, but I cannot sell you this muffin legally,” she told the publication.

Kivirist, Kriss Marion, and Dela Ends sued the state. It was their last resort.

For years, the Wisconsin women have begged legislators to change the law. They had success on two separate occasions in the Senate, but reform bills died in the Assembly. Speaker Robin Vos, owner of a popcorn business, opted not to bring the bills to the Assembly floor.

The Rochester Republican has said the legislation would have created an unequal playing field, with homemakers getting a break on the costs of regulations licensed businesses are required to pay.

Smith and other free-market advocates say the state’s restrictions on cottage baked goods is driven by special interests that want to lock competitors out.

Jorgenson agreed, ruling that there is no connection to the commercial baking complaint that lifting the ban would present public health concerns.

“I think if we (the Institute for Justice) hadn’t been suing the government for 25 years and seeing how outrageous government can be, we would have been shocked that there is such a thing as a law against selling home-baked goods,” Smith said. “This was another instance of special interests shutting out competition and that’s not what America is all about.”

Just days after the court ruling, Vos began circulating the Bakery Freedom Act in the pursuit of sponsors. The proposal does away with licensure requirements for commercial bakeries, and eliminates health safety inspections. The bill, Vos said, would “level the playing field” in the wake of Jorgensen’s decision.

The Senate bill, its third try at reforming a law now deemed unconstitutional, allows entrepreneurs to sell up to $25,000 in homemade goods per year before being subject to licensing and the accompanying requirements.

“There is good news for home bakers in Wisconsin! The cookie bill passed the state senate,” Sen. Howard Marklein (R-Spring Green) declared in a press release.

“I know there are many home-based bakers who are ready to share their talents and delicious products with consumers and I am proud to have supported this bill,” the senator said.

Kit Beyer, Vos’ spokeswoman, said the speaker does not support the Senate bill. She said the Bakery Freedom Act, introduced by Vos and state Rep. Michael Schraa “levels the playing field, allowing every baker to sell their product under the same standards.”

The Institute for Justice’s Smith said passage of a “Cookie Bill” is unnecessary now that the court has decided the ban on the sale of homemade goods is unconstitutional.

The Wisconsin Department of Justice, however, is considering appealing the ruling.

I am unclear why Vos and his sycophants are not on the side of free enterprise. You know what they say about power corrupting.

Now, the bad news, from Chris Rochester:

Americans for Prosperity is warning lawmakers about a possible plot by anonymous special interests to push small breweries, wineries and artisan distilleries out of business.

AFP has a draft proposal they say came from lobbyists who want to prevent microbreweries, wineries, and distilleries from operating taverns and selling their products to wholesalers, which is currently common practice.

This would mean beefing up an onerous “three-tier restricting” law where producers, wholesalers, and retailers are all separate entities. AFP says this would involve creating a new bureaucracy, an Office of Alcohol Beverages Enforcement in the Department of Revenue to enforce the new law.

Mark Garthwaite, executive director of the Wisconsin Brewers Guild, says the three-tier system is archaic and overreaching.

“I see no need for erecting these barriers,” Garthwaite told the MacIver News Service, adding that other states use less burdensome regulatory systems that serve the public just fine. Craft brewers support reasonable regulations that protect the public, but not protectionist ones meant to benefit particular special interests, he said.

Eric Bott, AFP-Wisconsin State Director, sent a letter on Thursday to Sen. Alberta Darling and Rep. John Nygren, co-chairs of the budget-writing Joint Finance Committee, detailing what he’s learned about the effort. AFP got its information from small businesses that would be affected and from sources in the Capitol.

Larger, well-established alcohol producers would have a much easier time complying with the strict three-tier system than smaller producers like microbreweries, small wineries, and boutique distilleries that have become increasingly popular. That increasing popularity also poses a competitive threat to larger alcohol producers.

According to Garthwaite, Wisconsin has 131 active craft brewers that produced 500,000 barrels of beer in Wisconsin in 2016, 10 percent of the overall beer market. In 2011, Wisconsin had 73 craft breweries, according to the Brewers Association.

Garthwaite also said craft breweries have a significant economic impact, both statewide and locally. “Customers like to go to the places where their beer is made.” The proposed regulations “fail the consumer” in favor of entrenched interests, he said.

The economic impact of craft breweries in Wisconsin exceeded $1.7 billion in 2014, according to the Brewers Association.

The regulations would certainly have a negative impact on the craft brewing industry, and would essentially halt the formation of new microbreweries or brewpubs – an increasingly popular phenomenon – by forbidding businesses that produce alcoholic beverages from also operating bars and restaurants. “It would kill off a lot of startups,” Garthwaite said.

AFP believes the draft proposal could be slipped into the budget’s “999” motion. That’s historically the final action JFC takes on the budget, and it’s where many policy items can be attached to the budget anonymously and at the last minute, often before even lawmakers have time to review them.

“When government takes the next step of attacking individual small business owners in secret to help the politically connected it rises to a new level of repugnancy. It’s no wonder the proponents of this motion conduct their work in the shadows,” Bott wrote to Darling and Nygren in the letter.

The Capital Times reported the proposal was supported by the Tavern League of Wisconsin, the Wisconsin Beer Distributors Association and the Wisconsin Wine and Spirits Institute. All three support the anti-competition status quo. None of the three deserve your business if this bill becomes law.

 

The personal is political, consumer edition

Virginia Postrel:

After 20 years, the big Outdoor Retailer trade show is leaving Salt Lake City — not because it ran out of space or got a better deal elsewhere but because Utah lawmakers opposed an expansion of the industry’s biggest federal subsidy.

To most Americans, national parks and monuments are places to enjoy the outdoors while preserving natural and historical treasures. To the Outdoor Industry Association, they’re also a business necessity. It calls public lands “the backbone of the industry’s sales.”

“Utah elected officials do not support public lands conservation nor do they value the economic benefits — $12 billion in consumer spending and 122,000 jobs — that the outdoor recreation industry brings to their state,” Rose Marcario, the president and chief executive of Patagonia, declared in a statement announcing that her company would no longer attend the Salt Lake City show. Other industry leaders, including Polartec LLC and Arc’teryx Equipment Inc., quickly joined in. Then last Thursday, after a conference call with Utah Governor Gary Herbert that ended on a “curt” note, the show’s organizers said they’ll go elsewhere when their contract expires next year. Colorado is campaigning for their business.

At issue is the December designation of 1.35 million acres of federal land as Bears Ears National Monument. How to preserve the area has long been a contentious subject in Utah. President Barack Obama’s late-term action thrilled environmentalists and tribal leaders, upset ranchers and other rural residents, and thwarted oil and mineral development and the blue-collar jobs it might mean. The Republican governor, legislature, and congressional delegation all opposed the designation. In response, the legislature passed a resolution calling on the Trump administration to reverse Obama’s decision. When the governor signed it, calls for the boycott began.

Since it frankly acknowledges that its sales depend on public lands, is the outdoor industry applying a moral veneer to its quest for profits? Or is it using a corporate fig leaf to promote managers’ political views? The two motives are in fact impossible to separate.

When it comes to public lands, the outdoor industry shares the view of pioneering labor leader Samuel Gompers: “We do want more, and when it becomes more, we shall still want more.” As with the union movement, the industry’s financial interests are inextricable from its social values.

As I’ve previously written, the industry is one example of a much larger cultural and economic phenomenon: the shift from function to meaning as a source of economic value and, with it, the melding of consumption, politics and identity. What we buy increasingly expresses who we are.

Brands built on specific political or cultural values will inevitably take public stances, using their economic clout to influence public policy, whether out of genuine conviction, cold-eyed market positioning, or both. It’s not surprising that Patagonia Inc., the outdoor apparel brand most prominently built on its political stances, led the anti-Utah charge.

The bigger question is whether in the Trump era brands that aren’t traditionally political will feel forced to choose sides. Overtly political shopping is on the rise. Every week seems to bring a new boycott: against North Carolina over its bathroom bill, Nordstrom Inc. stores because they carry — or discontinue — Ivanka Trump’s merchandise, Kellogg Company for dropping ads on Breitbart News, Under Armour Inc. for its chief executive’s nice words about Donald Trump, Starbucks Corporation for pledging to hire refugees, and on and on. Wegmans Food Markets Inc. recently sold out of Trump Winery products in Virginia. The reason: calls for the chain to drop the wines, which produced a pro-Trump backlash.

Wine, breakfast cereal, workout clothes and business apparel aren’t inherently political goods. Brand choices choices may reflect largely unconscious tribal affinities, but they allow some play. You can eat organic food and vote Republican or drive an SUV and vote Democratic. Conservatives can enjoy Meryl Streep and liberals can esteem Clint Eastwood. “Vote right, live left,” an urbanite conservative advised me many years ago. Despite Trump’s frequent attacks on Jeff Bezos, Americans of all stripes like Amazon.com Inc.

Now, however, that pluralism is at risk. We seem headed toward an economy of red brands and blue brands, red employers and blue employers, with no common ground. In this context, the outdoor industry’s action is a disturbing bellwether, as is the increasing partisanship of once-evenhanded fashion magazines like Vogue. Outdoor activity appeals to Americans of all political persuasions, and the country’s western landscape has long helped define the national identity. People can disagree over how best to enjoy and protect that landscape, and how to weigh preservation against other values, while still sharing much in common. Enforcing the party line by declaring an entire state off limits is an extreme step.

Writing with the memory of religious wars, Voltaire in 1733 offered a peaceful alternative. “Go into the London Stock Exchange — a more respectable place than many a court — and you will see representatives from all nations gathered together for the utility of men,” he wrote:

Here Jew, Mohammedan and Christian deal with each other as though they were all of the same faith, and only apply the word infidel to people who go bankrupt. Here the Presbyterian trusts the Anabaptist and the Anglican accepts a promise from the Quaker. On leaving these peaceful and free assemblies some go to the Synagogue and others for a drink, this one goes to be baptized in a great bath in the name of Father, Son and Holy Ghost, that one has his son’s foreskin cut and has some Hebrew words he doesn’t understand mumbled over the child, others go to their church and await the inspiration of God with their hats on, and everybody is happy.

Once the great solvent of difference, commerce threatens to become its enforcer. And everyone is unhappy.

Wisconsinites know we’ve already had that here. Read the list from the Scott Walker Watch website of companies whose employees and/or management committed the unforgivable crime of giving money to Walker’s campaign, including Kwik Trip, Johnsonville Sausage and Georgia–Pacific, owned by The Evil Koch Brothers. At least two advocated boycotting the entire state.

That prompted an Isaac Newton-like “buycott,” where Walker supporters encouraged themselves and others to buy from companies whose employees and/or management contributed to Walker’s campaign. On the one hand, Walker has been reelected twice since the boycott attempt, and on the other hand, I believe no company on the boycott list has gone out of business, and Wisconsin appears to have survived. The political fortunes of those supporting boycotts have sunk like a Chicago Bears football season.

This is nearly all the fault of liberals. The phrase “the personal is political” came from neither conservatives nor libertarians; it came from a feminist, Carol Hanisch. There are a few liberals (this writer and the late Christopher Hitchens, for two) who understand how vapid that assertion is, but in our hyperpolitical times, now some conservatives are touting boycotting New Glarus Brewing, Penzey’s Spices, Madison and the musical “Hamilton.”

Part of the problem is that many people don’t grasp that for nearly every business (and I have yet to find one beyond one or two employees for which this is not the case) employee pay (including benefits) far exceeds that business’ profits. So if you think your not purchasing something from a company will hurt the owners, you’re wrong; it will hurt that company’s employees first and foremost. The American Enterprise Institute provides this chart …

… that shows how ignorant Americans are about business.

 

The Trump economy, farm state edition

One reason I did not support Donald Trump for president was because his trade policies would be highly damaging to this state’s agricultural economy, which makes up one-third of the state’s economy.

Sure enough, the Wall Street Journal reports:

This year the U.S. is expected to export $134 billion in agricultural goods, from pork to nuts to corn and much more. Exports contribute about 20% of U.S. farm income, and U.S. agriculture ran a $19.5 billion global trade surplus in 2015. The No. 1 state for exports is California, which is home to high-value crops like lettuce and grapes. But Mr. Trump carried 11 of the top 15 exporting states, including Iowa, Nebraska, Indiana and Texas.

The nearby table shows how much American farmers rely on exports. Some 72% of U.S. tree nuts are exported, and roughly half of all rice, soybeans and wheat. Rice is grown in solid Republican states such as Arkansas, Louisiana and Missouri; soybeans are cash cows for Illinois, Iowa and Minnesota. Root plants like ginseng are exported from Michigan and Wisconsin, mainly to China.

The second table shows that Mr. Trump’s protectionist threats are aimed at countries that are the biggest buyers of U.S. farm products. Of the top 11 U.S. export destinations, seven are in Asia and Japan and Vietnam are part of the Trans-Pacific Partnership that Mr. Trump abandoned in his first week. The Farm Bureau says that pact would have raised U.S. farm incomes by $4.4 billion by reducing trade barriers in these and other markets. Japan, with its high incomes and 19% average tariff on U.S. farm goods, is a particular lost opportunity.

Mr. Trump also says he might impose tariffs on China, which could invite retaliation. In 2015 China bought nearly $21 billion in U.S. agricultural goods, up 200% since 2006 and almost 15% of total U.S. farm exports.

Then there’s his threat to renegotiate the North American Free Trade Agreement, though U.S. farm exports have quadrupled to Canada and Mexico since Nafta took effect in 1994. The irony here is that Mexico made farm-trade concessions because it was so desperate for access to U.S. markets. A Nafta redo may be less favorable to Americans.

It isn’t clear if Mr. Trump will withdraw from Nafta, but recall what happened when the U.S. violated the deal in the past. When the U.S. closed the southern border to Mexican trucks in 2009, Mexico retaliated with tariffs that hit U.S. fruit and vegetable exporters hard. Growers lost market share and income until the truck dispute was settled.

Dairy exports to Mexico alone support some 30,000 American jobs, according to the U.S. Dairy Export Council, and many are manufacturing jobs in rural areas. Americans who lose their jobs in a Trump trade war may have a hard time understanding how this helps the working class.

Global competition has forced U.S. farmers to become efficient and productive, but the reality is that other countries have arable land and willing labor. They can replace U.S. agriculture in a tariff war. Australia has a trade deal with Japan, and exports Down Under will have an advantage over American beef and wheat. U.S. beef imports to Japan will face high tariffs that the Trans-Pacific deal would have phased out or reduced. Mexico has bilateral trade deals with Chile, the European Union and others, and may buy more from Canada.

The bigger political picture for the Trump White House is that U.S. agriculture is already struggling amid a strong dollar and declining export volumes. Net farm income dropped 15% to about $68 billion last year, the lowest since 2009, according to the Agriculture Department. Unless Mr. Trump wants to compensate with more taxpayer subsidies, the best way to boost incomes is to let farmers sell in more markets, not fewer.

One reason the U.S. benefits from free-trade deals is that America has among the lowest import barriers on earth (5% average for agriculture), so new agreements tear down levies abroad and open new markets. President Trump should consider that reality before escalating on trade—and betraying the Farm Belt voters who are relying on him to bring growth and opportunity.