Where Will Walker, Evers Take Economy?
State in slow growth mode. Two candidates have very different approaches to this.
How to move the Wisconsin economy forward over the next decade or two is emerging as the overriding issue in the contest for governor, now only two months away.
Wisconsin has ridden the 10-year upswing in the national economy to a very low unemployment rate, but it still lags the national averages on pay and job growth. That slow-growth pattern has been around for five decades, through the regimes of Republican and Democratic governors. Only during the Tommy Thompson years did we gain ground on the rest of the states.
Bearing in mind that governors and legislative leaders have less to do with our relative prosperity than do national trends and the entrepreneurs who reinvent the economy, there is still a role for political leaders to play in building a prosperous state.
Agree or not, Gov. Walker has a Republican game plan and a track record. It revolves around recruiting businesses to the state, topped off by the potential Foxconn win, job training and tax cuts.
As an example of the lack of a pro-growth plan, Evers recently floated the idea of eliminating the Wisconsin Economic Development Corporation (WEDC), which was at the center of the action on putting together the $4 billion state and local subsidy package for Foxconn, along with lesser packages.
Evers offered no clear alternative, other than the possibility of returning to the old Department of Commerce (DOC), which was also controversial before it was replaced by the WEDC public-private collaboration.
The concept and support for the creation of WEDC was bipartisan when it was created in 2011, but drew partisan fire when it made some bad calls early on and had some management growing pains. Most of the controversies have faded from the headlines in recent years as management was tightened up.
Note that any agency that makes decisions on loans, grants and tax credits will always catch some flak when some deals go south. The business world is very dynamic, with many businesses doing well and some failing. As any lender or investor knows, you win some, lose some and hope the winners far outweigh the losers. (Disclosure: my company won some job tax credits several years ago, but never used them.)
Despite the criticisms, WEDC has done some things very well.
It administers effectively the Act 255 tax credits for investors in early stage, high-growth companies. Those 25 percent de-risking credits have been pivotal in ramping up the Wisconsin startup economy. (Disclosure: my angel investing fund has used those tax credits to help start 12 companies.)
More than a half billion dollars has been invested in new ventures in the state in the last two years, a huge jump. Both governor candidates should run with that winner program and consider raising the credit to 40 percent. It’s working and is unique among the states.
Further, it is now established economics that entrepreneurs create most of the net new jobs in the country.
The WEDC board, mostly business leaders, has also led the way on the development of economic clusters. For example, it supported with seed money the emerging Fresh Water Technology cluster in Milwaukee and the organization of the Food and Beverage cluster in Southeastern Wisconsin.
It and its predecessor DOC have long been there for companies trying to expand their exports. The global trade world is in turmoil as President Trump tears up trade treaties and slaps tariffs on incoming goods. But Wisconsin still exports more than $20 billion per year, accounting for more than 100,000 jobs in the state.
How the president’s trade policies will play out is anyone’s guess.
Like his policies or not, the governor has made big bets. His notorious Act 10 kept property taxes down by allowing management of employee benefits at the local level.
And, clearly, the governor and his administration have doubled down on manufacturing. Even before the Foxconn bet, the Republicans virtually eliminated the state income tax for manufacturers and agri-business. That’s another big bet. It certainly had something to do with attracting Haribo, a candy maker, into the state.
Neither manufacutring nor agri-business can be counted on for major job growth going forward. They both have become uber-efficient.
Economic strategists would argue for more diverse bets, such as support for the health care industry and for the insurance and financial management cluster, both long suits for Wisconsin. The former is growing so voraciously that labor supply is its main issue. The latter mainly needs pragmatic regulation at the state level. Note: the spectacular Northwestern Mutual headquarters expansion in Milwaukee got far fewer subsidies than will Foxconn as it creates jobs.
So, bottom line, Gov. Walker has made some bold wagers, and we know his game plan.
Further, it’s a given that government, like education, has a role to play in the modern economy and the state’s prosperity.
That leaves this major question before the house: what moves would Gov. Evers make regarding the state’s economy, besides getting raising the gas tax for more road building, finding more revenue for schools and getting rid of WEDC?