Marketplace of Ideas Blog

From the March 16 Marketplace

This issue of Marketplace is dated 231 days before the Nov. 2 election for, among other races, governor and the state Legislature.

Eight years ago, the candidates for governor, acting Gov. Scott McCallum and Attorney General James Doyle, released dueling economic development plans — McCallum’s “Build Wisconsin” and Doyle’s “Grow Wisconsin.”

Now that Doyle isn’t running for reelection, four of the candidates — Republicans Scott Walker, Mark Neumann and Mark Todd and Democrat Tom Barrett — have released what they propose to do to improve the state’s business climate. (Which, as you know from reading the Marketplace of Ideas blog, isn’t very good when compared to other states by various organizations that compare states’ economic climates.) The plans, of Walker, Neumann and Barrett, such as they are eight months before the election, can be read here.

As of now, here’s what we know about their plans, none of which so far have a marketing-friendly name:
Barrett “would look at unspecified revisions to the state’s tax code. He also said his administration would examine state business development programs that work, and ‘put meat in their bones,’ and scrap those that don’t.”
Walker wants to cut state income and “employer” taxes, freeze property taxes, and phase out income taxes on retirees. Walker also proposes reducing state regulations and giving the UW System a larger role in economic development.
Neumann favors state spending controls and giving schools greater authority, using the spending controls and economic growth to fund unspecified tax cuts. (Neumann also said Walker’s ideas “appeared similar to ones Neumann laid out months ago.”)
Todd wants to “welcome good businesses to Wisconsin with appropriate incentives for them,” and adds, “Any way that I can responsibly and prudently reduce taxes (for individuals and businesses) and make the state more self-sufficient, I will.”

As with Doyle’s “Grow Wisconsin” and McCallum’s “Build Wisconsin” plans, one could put together a better plan by taking pieces of candidates’ plans. Certainly the next occupant of the Executive Residence should examine which economic development programs work and which don’t. There are, in fact, economic development programs all over state government, which may be one of the problems with state economic development.

One idea that surfaced eight years ago and then promptly disappeared because of its potential for incumbent embarrassment was an economic scorecard to measure how Wisconsin’s economy is doing. That should have been in place years ago and should be in place now to measure not just how Wisconsin is doing vs. a year ago, but also how Wisconsin is doing compared to its neighbors and other less tax-, spending- and regulation-happy states, regardless of the potential embarrassment to incumbent legislators and the governor.

The fact that taxes need to be cut is inarguable. The correct rate for corporate income taxes is zero, and individual income taxes need to be cut as well. Doyle’s $2 billion tax increase of a year ago increased taxes specifically on this state’s wealth generators — that is, the readers of Marketplace — which, as Wisconsin’s high tax rates of the early 1980s did, will delay and dampen the state’s economic recovery, even though the economy of most of Wisconsin hasn’t gotten as bad as in other states.

The only way taxes can be cut in a state that has a balanced-budget requirement (on a cash basis instead of a GAAP basis, as most states have) is to cut spending, of course. Despite our high taxes, we have a structural deficit (the two-decade-long practice of specifying spending for the next budget cycle), a GAAP deficit, and, because of our habit of spending more than we actually have and then using various accounting tricks to hide that fact, perpetual budget crises.

Those who complain that candidates who tout budget cuts rarely specify what budget cuts they prefer have a point. Candidates are loath to cite specifics other than the AutoText entry “cut waste and fraud.” But particularly in the Republican primary (the state GOP has seven candidates for governor and four candidates for lieutenant governor), voters need to be able to distinguish among candidates by ways other than their campaign advertising. (Hint to candidates: The biggest state government expense is personnel costs.)

The other mantra you’ll hear in the next few months is the word “jobs.” About that, Bill Kraus, one of the people involved in the insurgent Lee Dreyfus campaign for governor in 1978, notes that “Government doesn’t, can’t, won’t, shouldn’t participate in the risky, uncertain, wholly un-bureaucratic business of creating new businesses, new jobs or a new economy. What government can do is create incentives and rewards for those who will do what the government doesn’t know how to do, can’t, won’t, and shouldn’t do.”

Stay tuned. In our rapidly changeable political climate, 7½ months is an eternity.