Category Archives: Economy

“Huge, big numbers” for Foxxconn Subsidies

One wonders what the package will be.

MADISON, Wis. (AP) — A Republican state senator says the state may reach a deal with Taiwanese manufacturer Foxconn by the end of the month and budget talks are being delayed as an incentive package is worked out.

Sen. Luther Olsen tells The Associated Press on Thursday that talks are ongoing about what incentives the state may have to offer to get the iPhone manufacturer to commit.

Olsen says, “I think we should hold off on settling the budget until we know what’s going on with this.”

Republican Senate Majority Leader Scott Fitzgerald tells AP that “huge, big numbers” are being talked about to help land Foxconn. But he says he hasn’t discussed them yet with his caucus.

I am not opposed to sensible subsidies to lure large businesses to Wisconsin. The economic impact of something like Foxconn would be huge, so I would expect the incentives to be huge. As long as the benefits to the taxpayer outweigh the costs, let’s get this deal done.

What is more interesting is how this is impacting the debate over the state budget. Some folks are convinced that we need to hold off on a budget to see what the plan is while others are convinced that we need to get the budget done to demonstrate the state’s fiscal solvency. The fact that the Foxconn negotiation is impacting our state budget to this extent indicates just how big it is.

Ethanol Research Grants Coming to an End

This is a revealing story.

A UW-Madison research center that has used the university’s largest-ever federal grant to develop ethanol technology over the past decade will shift its focus to other alternative fuels after winning another major award from the U.S. Department of Energy.

The Great Lakes Bioenergy Research Center will use the five-year grant to learn more about how to sustainably produce energy from switchgrass, poplar trees, sorghum and other dedicated bioenergy crops — those that, unlike ethanol, are not also used for food, director Tim Donohue said Monday.

The center received $267 million over 10 years from the Department of Energy for its ethanol research, which Donohue said will wind down over the next six to 18 months.

[…]

Ethanol has been embraced by the energy industry over the years, Donohue said, and putting greater emphasis on research to develop other biofuels fulfills the center’s mission “to generate next-generation technologies.”

Donohue said the Department of Energy encouraged the shift, pushing researchers to focus on potential fuels that would not be grown on land that is now used for agriculture, or compete with other uses for crops such as corn — what he described as a “food-vs.-fuel” issue.

The other biofuels could also have greater potential than ethanol when it comes to replacing fossil fuels across different transportation industries, said Donohue, a professor of bacteriology.

It is a maxim of employee compensation models that people will do what they are paid to do. It is a nod to human nature that people will usually act within their own self interests. That is not a bad thing, but it is something that one must acknowledge and understand when crafting policies. It is something that our Founders understood when creating our Constitution based on competing self interests instead of appealing to people’s idealistic nature.

Many of us have long argued that a significant amount of the “science” that supports some political initiatives like global warming policies or ethanol subsidies are the result of the fact that the scientists are being paid to have those opinions. Look at this story as an example of that. For a decade, the researchers at  Great Lakes Bioenergy Research Center received hundreds of millions of dollars in taxpayer money to conduct research on the use of ethanol as a fuel. Accordingly, they have spent the last decade telling us that ethanol is great and a wonderful fuel alternative.

Now they will receive a ton of money to study other biofuels. And right on cue, here is the director telling us that “other biofuels could also have a greater potential than ethanol…” Of course they could, because that is what he is being paid to study. The money would dry up pretty quickly if he said, “nah, ethanol is still the best.”

People do what they are paid to do.

New Business and Jobs are Bad

This has to be one of the stupidest editorials I’ve read in a long time.

The sudden influx of 10,000 jobs in Janesville could only be a good thing, right?

Not necessarily.

News of Foxconn considering and then passing up Janesville as the site of a $10 billion expansion project might have left some people feeling disappointed. But we know from experience the pitfalls of allowing one company and industry to dominate the local economy.

The GM plant closing happened not even 10 years ago. Let’s not forget with its closing came the sucking sound of hundreds of people’s livelihoods disappearing. When a community relies on a big employer, its fortunes rise and fall with that employer, too. The car industry is notoriously cyclical, and Janesville endured many ups and downs through the years before the bottom finally fell out in 2008.

[…]

Sure, we’re puckering a little, here, from sour grapes, but winning 10,000 Foxconn jobs wouldn’t be a perpetual party for the economy. It would come with a hangover.

Their argument is basically that having a business open in town and create thousands of jobs is a bad thing because that company may leave one day and the jobs will go with it. In their view, unemployment is better because at least that can be perpetual.

What they ignore is the fact that GM created jobs, employment, and a good lifestyle for thousands of people for generations in Janesville. Yes, they eventually left and Janesville misses GM, but they are taking the wrong lesson from that experience. The lesson is that the city must diversify its economy to mitigate the negative effects of business closings. The lesson is NOT that they should eschew big businesses moving to town unless the business can guarantee that jobs will last for eternity.

Illinois Rooting for Foxconn in Wisconsin

Even the FIBs are rooting for it.

Southeastern Wisconsin is in the running to land a behemoth electronics manufacturing facility that could bring 10,000 jobs, a potential game-changer for the region if the deal goes through.

Taiwan-based Foxconn Technology Group, a major electronics manufacturer well known for making Apple’s iPhones, has announced plans to invest $10 billion to expand U.S. operations, and although it has not announced where or how that money will be spent, Wisconsin officials have let slip that their state is a top contender.

Illinois Gov. Bruce Rauner reached out to Foxconn earlier this year to make his own pitch for the project and the state “will continue to stay in contact as Foxconn works to consider locations and opportunities in the Midwest,” according to an emailed statement Friday from governor’s spokeswoman Eleni Demertzis.

But Foxconn appears to be zeroing in on a swath of Wisconsin just north of the border, which would still likely benefit Illinois as the company builds its workforce and supply chain.

Foxconn Considers Wisconsin

This would be a monumentally positive economic development for Wisconsin should it come to pass.

If Foxconn Technology Corp. builds a multibillion-dollar “smart factory” in southeastern Wisconsin, it could mean the equivalent of creating an industrial complex not seen since the heydays of A.O. Smith and Allis-Chalmers.

At their peak in the last century, each of the legendary Milwaukee-area industrial behemoths employed 10,000 workers or more.

Neither of their campuses exist any longer. And neither do the sort of rank-and-file lunch pail jobs that those titans once championed.

Foxconn is expected to require troops of high-end systems engineers who can operate robots, artificial intelligence and state-of-the-art automation systems.

If a Foxconn deal moves ahead, the region would need to move with Manhattan Project-like urgency to mount a come-from-behind retraining and recruitment campaign for automation-savvy workers, according to a consensus of workforce experts. Southeastern Wisconsin already labors under such an acute shortage of digital-age workers that incumbent manufacturers often cannot find qualified candidates.

True, Wisconsin doesn’t have the workers to fill these jobs. They would have to move to Wisconsin or a good number of Wisconsinites would have to retrain. Either way, it would be a boon for the state and undoubtedly launch thousands of other satellite and support businesses. One would hope that with Trump, Priebus, Ryan, and Walker all pushing for it, Wisconsin stands a pretty decent shot.

Milwaukee Ranks High

And not in a good way.

Below – from most to least awful – are America’s worst cities to live in, according to 24/7 Wall St.

The site used 2015 data classed into nine major categories: crime, demography, economy, education, environment, health, housing, infrastructure, and leisure.

It then examined specific elements within those categories – such as unemployment levels, availability of public transportation and mortality rates due to illness – to create total scores for the cities.

Only cities that had populations of more than 65,000 in 2015 were included in the list.

  1. Detroit, Michigan

  2. Birmingham, Alabama

  3. Flint, Michigan

  4. St Louis, Missouri

  5. Memphis, Tennessee

  6. Milwaukee, Wisconsin

Tribe Withholds Payment to State

Heh.

A Native American tribe in northern Wisconsin is following through on its promise to withhold nearly $1 million in casino revenue from the state. The payment of $923,000 dollars is due today.

The Stockbridge-Munsee Band of Mohican Indians is withholding the money because of the expansion of a nearby casino in Wittenberg run by the Ho-Chunk Nation, according to tribe President Shannon Holsey.

“What I’m saying is until our dispute can be resolved, we have the ability to withhold it within our gaming compact and that’s what we intend to do,” Holsey said.

Wisconsin’s racist laws toward gambling are outdated and counterproductive. In Wisconsin, it is illegal to operate a gambling establishment – unless you are a Native American tribe… then it’s OK. They get a pass and they do not have to pay taxes on their profits. Instead, they pay an agreed-upon tribute in lieu of taxes that they can withhold at whim, as these folks are doing now. The state has almost no recourse to force them to pay like every other profitable Wisconsin business.

Wisconsin’s ban on gambling is rendered completely meaningless in the presence of giant Native American casinos and a state-sanctioned lottery. Let’s just abandon the ridiculous pretense and legalize gambling for anyone. That way, at least, the competition will serve as a check against behavior like this.

Minumum Wage Hike Hurts Lower-Income Workers

If only someone could have predicted this

A new study published by University of Washington economists found that, as conservatives long argued and as basic economics would seem to have predetermined, Seattle’s unprecedented minimum-wage hike actually hurt the very workers it sought to help.

Specifically, the economists found, as businesses were forced to devote more of their revenue to payroll, they scaled back workers’ hours by nearly 10 percent.

So even though the minimum wage had ticked up from $11 to $13 — on its way to $15 in 2021 — Seattle’s low-income workers ended up bringing home $125 less each month in 2016.

It’s worth noting that these findings are preliminary, not yet subjected to the scrutiny of peer review.

Uber Implements In-App Tipping

I don’t like this at all (from the email).

In-app tipping is here. From 5-star ratings to compliments, and now with tipping, our app gives you many ways to say thanks. To ensure a smooth, uninterrupted ride, you can tip drivers after your trip at a time when it’s convenient for you. Tips go directly to drivers; Uber takes zero service fees.

I am a frequent Uber user. One of the selling points for it is the ease of use and the fact that I can grab a ride without the need to carry cash or tip. I did occasionally tip, but only if the driver did something out of the ordinary (like stop at a shop or run through a drive through for me). There was never, however, any expectation of a tip.

The problem is that while Uber has a rating system where I can rate the driver, it also has a rating system where the driver can rate the passenger. The intent of that is that if a passenger is abusive, messy, drunk, or just gross, a bad rating will discourage other Uber drivers from having to put up with a bad passenger. Eventually, bad passengers will never be able to get an Uber ride.

Now that there is tipping, however, there is an incentive for the passenger to give big tips – even when it is undeserved – just to prevent being blackballed by bad ratings from grumpy drivers. Uber should have one or the other. Either have tipping or do away with the passenger rating system. Having both promotes undeserved tipping. It also increases the overall cost of using Uber versus other transportation alternatives.

Amazon Redefining Retail

What an amazing development

Online retail giant Amazon is making a bold expansion into physical stores with a $13.7 billion deal to buy Whole Foods, setting the stage for radical retail experiments that could revolutionize how people buy groceries and everything else.

Amazon could try to use automation and data analysis to draw more customers to stores while helping Whole Foods cut costs and perhaps prices. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the U.K. could be turned into distribution hubs — not just for delivering groceries but as pickup centers for online orders.

“The conventional grocery store should feel threatened and incapable of responding,” Wedbush Securities analyst Michael Pachter said.

Moody’s lead retail analyst Charlie O’Shea said the deal could be “transformative, not just for food retail, but for retail in general.”

Amazon’s online business model has contributed to the destruction of brick and mortar retail, and now they are pivoting into main street retail? Fascinating.

Unique Paths for Unique People

She is absolutely right. People are different and have different aptitudes and ambitions. We should embrace a diversity of choices and not assume that college is the best option.

White House counselor Kellyanne Conway said Saturday “not everyone is college material” while urging for workforce development courses to be made available at technical colleges.

“Not everyone is college material,” Conway told host Jeanine Pirro on Fox’s “Justice with Judge Jeanine.” “Not everyone has to graduate from a four year college with a mountain of debt and very few prospects.”

Conway pointed to a trip President Trump and his daughter and special counselor Ivanka Trump will be making to Wisconsin for ‘Workforce Development Week.’ There, the president will visit a technical college along with Gov. Scott Walker (R) and Secretary of Labor Alex Acosta.

“They’ll be going there to talk at a technical college and really see what’s going on there and get some best practices as Ivanka’s been doing for these roundtables and these listening sessions,” Conway told Pirro.

“This involvement in workforce development means that if people want a vocational educational — technical educational — skills certificate they should have access to that,” she added.

Conway said skills-certificate programs that make people “employable” need to be valued in the U.S.

House Passes Regulatory Reform

It’s nice to see a little work being done in Washington.

On Thursday, House Republicans passed the crown jewel of their regulatory reform package: the Financial Choice Act, which undoes many of the regulations in the 2010 Dodd-Frank law that was intended to reform Wall Street after the financial crisis. The bill, which guts one of President Barack Obama’s legislative legacies, will soon head over to the Senate for consideration.

Connecticut Can’t Tax Its Way Out

High earners are incredibly mobile and every taxpayer has their decision point. Wouldn’t it be nice if some of these folks could flee to no-income-tax Wisconsin?

Now he tells us. Gov. Malloy has spent two terms treating business as a bottomless well of cash to redistribute to public unions. Now that his state is losing millionaires and businesses, he has seen the light. But the price of his dereliction will be steep.

Last month the state Office of Fiscal Analysis reduced its two-year revenue forecast by $1.46 billion. Since January the agency has downgraded income-tax revenue for 2017 and 2018 by $1.1 billion (6%). Sales- and corporate-tax revenue are projected to fall by $385 million (9%) and $67 million (7%), respectively, this year. Pension contributions, which have doubled since 2010, will increase by a third over the next two years. The result: a $5.1 billion deficit and three recent credit downgrades.

According to the fiscal analyst, income-tax collections declined this year for the first time since the recession due to lower earnings at the top. Many wealthy residents decamped for lower-tax states after Mr. Malloy and his Republican predecessor Jodi Rell raised the top individual rate on more than $500,000 of income to 6.99% from 5%. In the past five years 27,400 Connecticut residents, including Ms. Rell, have moved to no-income-tax Florida, and seven of the state’s eight counties have lost population since 2010. Population flight has depressed economic growth—Connecticut’s real GDP has shrunk by 0.1% since 2010—as well as home values and sales-tax revenues.

Corporate revenues also took a hit after General Electric relocated to Boston. Mr. Malloy then offered tax breaks to hedge funds and companies to stay in Connecticut, which has further eroded revenue.

The Governor—a slow learner—seems finally to have accepted that raising taxes on the wealthy is a dead fiscal end.

German Auto Makers Worry About Staying Competitive

Huh. You mean that the Paris Accord would have imposed massive extra costs on U.S. auto makers, thus making them less competitive?

Germany’s powerful car industry said Europe would need to reassess its environmental standards to remain competitive after the United States said it would withdraw from the Paris climate pact.

President Donald Trump said on Thursday he would withdraw the United States from the landmark 2015 global agreement to fight climate change, drawing anger and condemnation from world leaders and heads of industry.

“The regrettable announcement by the USA makes it inevitable that Europe must facilitate a cost efficient and economically feasible climate policy to remain internationally competitive,” Matthias Wissmann, president of the German auto industry lobby group VDA, said in a statement on Friday.

“The preservation of our competitive position is the precondition for successful climate protection. This correlation is often underestimated,” Wissmann said, adding that the decision by the Unites States was disappointing.

The VDA said electricity and energy prices are already higher in Germany than in the United States, putting Germany at a disadvantage.

U.S. Withdraws From Paris Accord

Excellent. It is refreshing to see a president putting America’s interests first again.

Washington (CNN)President Donald Trump announced his decision to withdraw the US from the Paris climate accord Thursday, a major step that fulfills a campaign promise while seriously dampening global efforts to curb global warming.

The decision amounts to a rebuttal of the worldwide effort to pressure Trump to remain a part of the agreement, which 195 nations signed onto. Foreign leaders, business executives and Trump’s own daughter lobbied heavily for him to remain a part of the deal, but ultimately lost out to conservatives who claim the plan is bad for the United States.
“In order to fulfill my solemn duty to protect America and its citizens, the United States will withdraw from the Paris climate accord but being negotiations to reenter either the Paris accord or an entirely new transaction under terms that are fair to the United States,” Trump said from the White House Rose Garden.
“We’re getting out. And we will start to renegotiate and we’ll see if there’s a better deal. If we can, great. If we can’t, that’s fine,” he added.

U.S. Expected to Withdraw From Paris Climate Accord

Another rumor from more unnamed sources, but hopefully this one is true.

Washington (CNN)President Donald Trump is expected to withdraw from the Paris climate agreement, two senior US officials familiar with his plans told CNN Wednesday.

The decision would be a significant foreign policy break with nearly every other nation on earth and a major reversal of the Obama administration’s efforts on climate change.
Trump met Tuesday with a key voice advocating for withdrawal, Environmental Protection Agency Administrator Scott Pruitt. He meets Wednesday with Secretary of State Rex Tillerson, who supported remaining in the deal.
The precise mechanism for withdrawal hasn’t yet been determined, but Trump has made clear he plans to fulfill his campaign promises to withdraw.
A formal announcement is expected at some point this week. The officials cautioned the plans could change until Trump makes his decision public.

NRA Moves Heavy Into Insurance

This has huge implications for West Bend’s own Delta Defense, which has been selling insurance to concealed carry holders for years and just built a new headquarters.

Enter the National Rifle Association. Stories like Balistreri’s have motivated some gun owners to purchase insurance policies that could cushion their financial burden in the event that they shoot someone. Such policies have been available for years, but last month the NRA announced a new insurance product, Carry Guard, which they marketed to their millions of members online and at their annual meeting in Atlanta. The idea of firearms liability insurance has been previously championed by gun safety advocates on the left, who envisioned insurance as an instrument of public safety that could encourage safer guns and safer behavior. As implemented by the NRA, though, firearms liability insurance has a different function—to insulate gun owners from the expense and other possible consequences of a shooting.

“We live in a litigious society,” explains Josh Powell, chief of staff and executive director of general operations for the NRA. “The bad guys come to your house and you gotta use your gun and then you end up paying a hundred thousand dollars to protect yourself.”

Powell explains that Carry Guard was created to accommodate the needs of a changing culture in the U.S., where more people carry concealed weapons. “There’s just been this incredible carry revolution that’s taken place over the past eight years, and you know, the NRA started it. We started this in Florida 35 or 36 years ago, passing the first concealed carry bill. And so this is really a response to that movement and our members saying ‘Hey, we need you guys to be the gold standard for training, liability insurance— everything concealed carry.’”

With similar language, the marketing campaign for Carry Guard emphasizes the “two pronged program” that offers “America’s most comprehensive coverage and training for those who carry a gun.” The campaign features a studio portrait of NRA spokesperson Dana Loesch, staring down the camera with glinting eyes, holding up her Carry Guard insurance card like an officer flashing a badge. “I will never carry a gun without carrying this,” the adjacent text proclaims. In an article for the NRA publication America’s First Freedom, Loesch recounts her memories raising young children in crime-ridden St. Louis. She says her neighbors were grateful that she always carried a gun while supervising the children outside, and often inquired about how they could also legally carry and join her in “standing watch” over the neighborhood. “If only NRA Carry Guard existed back then,” Loesch laments. “There was no one-stop training option I could recommend.” Moreover, “Without proper coverage, my neighbors risked very real financial and legal consequences if they were ever forced to the pull the trigger in self-defense, even if they did everything right.”

Women Dropping out of Work in India

Fascinating.

But they may not be the only reasons. Marriage, for example, does affect the rate of participation of women in the workforce. But in villages, the workforce participation rate of married women has been found to be higher than that of unmarried women – whereas in the cities, the situation is reversed.

Significantly, rising aspirations and relative prosperity may be actually responsible for putting a large cohort of women out of work in India.

Remember, the largest drop has been in the villages.

After calculating the labour force participation rates and educational participation rates (young women in schools) the researchers believe that one plausible explanation for the drop in the participation rate among rural girls and women aged 15-24 is the recent expansion of secondary education and rapidly changing social norms leading to “more working age young females opting to continue their education rather than join the labour force early”.

The study says there has been a “larger response to income changes among the poor, rather than the wealthy, by sending children to school”.

Also, casual workers – mainly women – drop out of the workforce when wages increased for regular earners – mainly men – leading to the stabilisation of family incomes.

Dakota Oil Pipeline Opens

And the jobs start coming.

BISMARCK, N.D. (AP) – North Dakota is experiencing an uptick in oil activity after the state’s unprecedented oil boom cooled a few years ago.

The completion of the Dakota Access pipeline is among factors that has the oil industry newly optimistic.

Industry officials say the pipeline could open markets abroad where premium prices are typically fetched.

The price for North Dakota sweet crude has risen about $10 a barrel from a year ago. About 50 drill rigs were working in the state last week. That’s up more than 80 percent from the same time last year.

The increase in drilling activity has created a big workforce shortage. Officials say there are 500 more jobs listed in the heart of the state’s oil patch than one year ago.

Obamacare Still Collapsing

Ahem… Senate? This is still a problem.

Aetna’s withdrawal is the latest in a series of insurers leaving Obamacare. The exodus began last year, when several carriers announced they were exiting or downsizing in 2017 after suffering large losses. Humana (HUM) already announced it is completely abandoning the individual market in 2018. UnitedHealthcare (UNH) pulled out of Virginia, and Wellmark Blue Cross Blue Shield said it would stop selling individual policies in Iowa in 2018.

Several insurers remaining in Obamacare are requesting big rate hikes for next year. CareFirst BlueCross BlueShield is looking for an average rate increase of 52% for its individual market plans in Maryland. It also requested hikes of 35% in Virginia and 29% in Washington D.C.

In Virginia, Cigna wants to raise rates by an average of 45%, while HealthKeepers, an affiliate of Anthem Blue Cross and Blue Shield, is looking for an 38% increase.