Until Scott Walker became governor, economic development was the province of the state Department of Commerce.

That model proved flawed in the late 2000s not only because of logic — similar to the Federal Aviation Administration, the same agency that regulated business also promoted business — but because of ineffectiveness. Government is bad at running businesses, and bureaucrats aren’t in business.

Collin Roth points out the DOC failures during the administration of James Doyle, for whom Mary Burke was Commerce secretary:

A television ad launched earlier this month from Gov. Walker’s campaign exposed a deal gone bad from 2006 where a company called Abbott Labs was given $12.5 million in taxpayer dollars but failed to develop a vacant lot – or create any jobs. Then-Commerce Secretary Mary Burke approved a deal.

The story got worse for Burke when the Milwaukee Journal Sentinel reported that the federal Department of Housing and Urban Development (HUD) was demanding that the state repay $12.3 million for the failed deal. …

The Walker team bounced back this week by documenting how Mary Burke’s Trek Bicycle received $875,000 in taxpayer loans in 1995 before closing plants and outsourcing the vast majority of their manufacturing overseas.

“Mary Burke claims to want to help bring more jobs to Wisconsin, but her own company received taxpayer money and then outsourced jobs to China,” Walker Communications Director Tom Evenson said. “Mary Burke can’t be trusted on jobs and her hypocrisy on the issue is unbelievable.”

A blistering new television ad accompanied the attack.
https://www.youtube.com/watch?v=wGhFTBVv5S8

Trek Bicycle had an answer for the TV ad …

… which, you’ll notice, doesn’t mention Mary Burke.

The solution, or so the Walker administration thought, was to create the Wisconsin Economic Development Corp., the statewide model of the numerous regional economic development corporations.

Yes, but, WKOW-TV in Madison reported …

In 2011, WEDC awarded Eaton Corp. with up to $1 million in tax credits if the company met job creation and retention goals at its manufacturing facility in Menomonee Falls. WEDC officials say the company has received $190,000 in tax credits so far.

In April of 2013, Eaton laid off 163 employees at its Cooper Power Systems plant in Pewaukee and announced it was moving those jobs to Mexico. Less than a year later, WEDC awarded Eaton Corp. with up to $1.36 million in additional tax credits for a proposed $54 million expansion at that same Pewaukee plant. But on Wednesday, WEDC Spokesperson Mark Maley told 27 News Eaton Corp. “recently notified WEDC it will not seek any tax credits for this project.

Eaton Corp. is based in Dublin, Ireland, but has numerous offices and interests in the United Kingdom, United States, Indonesia, Singapore, France, Germany and Mexico.

WEDC awarded Plexus Corp. of Neenah with tax credits of up to $2 million in 2011 and up to $15 million in 2012. Maley says Plexus has received $4.7 million in tax credits to this point.

In July of 2012, Plexus announced it was laying off 116 workers from its Neenah facility. The U.S. Department of Labor has since ruled those employees, as well as all Plexus employees laid off since December of 2011, are eligible to receive federal Trade Adjustment Assistance (TAA) benefits. Those benefits are only available to employees who were laid off because their jobs were outsourced to foreign countries.

Plexus Corp. did not identify where it relocated those jobs to in 2012, but also has offices and interests in the United Kingdom, China, Germany, Romania, Malaysia and Thailand.

Is it possible that both approaches are wrong? Roth continues:

Politics aside, the central theme running through each of these stories is the often misguided and wasteful attempts by the government to use taxpayer dollars to “create jobs.”

Mary Burke previously served as Jim Doyle’s Commerce Secretary and as Walker’s ad on Abbott Labs reveals, she doesn’t exactly have a perfect record. Furthermore, Burke’s “Invest for Success” jobs plan is chock-full of more government sponsored financing and loans to “industry clusters.”

Gov. Walker on the other hand dumped the Department of Commerce in favor of the quasi-public Wisconsin Economic Development Corporation (WEDC). WEDC was supposed to be more nimble in helping businesses, but has had a myriad of problems like millions of dollars in “lost” loans and the case of companies taking money and outsourcing jobs.

Perhaps instead of debating who has lost more public money in failed business ventures, the candidates ought to take a look at the very idea of handing out public dollars to businesses in the first place.

After all, if conservatives don’t believe government should pick winners and losers, they should act like it. And if conservatives don’t believe government creates jobs – they shouldn’t try.

So who’s right — Walker or Burke or Roth? The short-term answer is based on the evidence in front of your eyes. No, Walker won’t get close to his 250,000-jobs-created pledge, but jobs are being created, and the state’s unemployment rate is below the nation’s. That was not the case during the Doyle administration, when job losses exceeded the ability to blame them on a bad national economy, and for the first time in many years the state’s unemployment rate was higher than the national average.

The long-term answer depends in large part on the difference between theory and practice. There are two reasons for government to be active in economic development. The first is, of course, that your neighbors — truthfully, every state and every metropolitan region of any size — are, so you had better be.

The second reason for government to be active in economic development is to attempt to counteract bad economic policy. The U.S. has the highest corporate income tax rate in the world, and Wisconsin has one of the highest corporate tax rates in the U.S., which means Wisconsin has, adding federal and state taxes, one of the highest corporate tax rates in the world. That is something the Walker administration has done nothing about, by the way, nor has the Obama administration since Japan cut corporate income tax rates to make the U.S. number one.

The state’s only tax incentive worth mentioning is the Tax Incremental Financing district, in which is more a funding mechanism than a tax break. TIF districts fund construction of infrastructure of a blighted or undeveloped area, with the increased property taxes from the developed property paying for the infrastructure. TIFs are useful for their purpose, though the units of government that get no immediate benefit from TIFs — namely, schools, technical college districts and counties — don’t like them because they don’t get the increased property tax revenue from the improved property until after the project is paid off.

TIFs, however, don’t overcome the state’s bad business tax structure, including but not limited to corporate income taxes. Businesses organized as subchapter-S corporations aren’t assessed income taxes, but their owners are. Businesses also are assessed personal property taxes on their buildings and equipment, though machinery, equipment and computers are exempt. And if business owners pay high personal income taxes, their high-paid employees pay them too.

Burke has made the incredible (not as in “I can’t believe you said that!”, but as in the opposite of “credible”) claim that Trek has never considered taxes in making business decisions. Taxes are a major cost of doing business. If Trek was unconcerned with business costs, Trek wouldn’t have outsourced manufacturing of its bikes. (One reason to outsource, by the way, has little to do with taxes — the cost of getting product from manufacturing plant to customer.)

Wisconsin also is a master at overregulation, thanks to Burke’s own Department of Commerce (now the Department of Regulation and Licensing, and what a business-friendly name that is), Damn Near Russia — I mean, the Department of Natural Resources — and other shining state and local examples of what government does to business instead of for business.

The business boosters accentuate the positive, of course, pointing to our schools and quality of workforce and life. Several surveys of those who make location decisions indicate that schools and quality of life are far down on the list of criteria for deciding where a business’ next expansion is located if that business isn’t located in this state already.

As for the workforce, a Wisconsin Taxpayers Alliance report predicts future economic problems due to a shrinking workforce. I am also somewhat surprised that no one has observed the economic damage the Act 10 controversy and Recallarama has done to this state’s economy. It’s not because the purchasing power of government employees has been trimmed by making them pay for some of their employee benefits; it’s because the coast-to-coast video of the protesters may well have given the impression that Wisconsin workers are more concerned about their benefits than actually working.

The owners of businesses that were created in this state usually decide to stay here for subjective reasons, or because shutting the doors and moving everything elsewhere would be too costly and too disruptive. That probably describes Trek Bicycle, though not entirely, since, again, Trek makes most of its bicycles outside Wisconsin. Such businesses would certainly take tax breaks or tax cuts, but they may not be the deciding factor. Businesses that were not created in this state, and businesses with facilities in Wisconsin and elsewhere (for instance, Abbott, Eaton,  Plexus and Trek) have to be convinced to come here or expand here, and on those objective, bottom-line criteria — particularly in our historically high taxes — when competing against other states with not just lower taxes but more incentives to offer business, Wisconsin usually loses.

Other than deny the reality of all of this, what would Mary Burke do about that? What would Walker, who hasn’t pushed business tax cuts, do about that? Incentives don’t overcome bad business policy.