Category Archives: Economy

Summit Credit Union Sues Equifax

It’s tough to see how Equifax survives this. But it is also an important message to businesses that they must take data security seriously.

It states that Equifax was negligent in securing its website from the hacker intrusion, in failing to detect the intrusion for weeks and in failing to notify consumers of the breach for nearly six weeks. Equifax also knew or should have known that its data security measures were inadequate, the lawsuit states.

Summit, with $2.6 billion in assets, 34 locations in Wisconsin and more than 162,000 members, is asking for orders temporarily and permanently barring Equifax from negligent business practices that are alleged in the lawsuit, along with unspecified costs, restitution and damages.

“Financial institutions often incur the costs of fraud due to others’ data breaches,” Summit said in a statement issued Friday. “Equifax may be the largest compromise in U.S. history, and we believe Equifax should cover any losses incurred due to their breach.”

On another note, if you want a job right now, get into IT security.

Walker Signs Foxconn Deal

Excellent.

STURTEVANT — Gov. Scott Walker signed a $3 billion incentive package Monday for Foxconn Technology Group to build a flat-screen plant in southeastern Wisconsin, a deal he says will provide thousands of jobs for generations.

The governor signed the bill during a packed ceremony at Gateway Technical College in Sturtevant in Racine County, where the plant likely will be located. Legislators from around southeastern Wisconsin attended the signing. So did dozens of supporters.

“This is about far into the future,” Walker said. “This is about ensuring our children and our children’s children will have generational opportunities. This is one of those things that’s transformational.”

The governor told reporters after the signing that next steps call for the Wisconsin Economic Development Corporation to finalize a contract with Foxconn to execute the provisions in the bill. WEDC’s board is scheduled to meet Sept. 28 to approve the agreement. Foxconn executives will then likely reveal the precise location for the plant before the contract is signed in early October.

Walker told WTMJ-AM radio on Monday morning that he expects groundbreaking this spring. Foxconn hopes to open the plant in 2020.

Sharing Wealth and Risk in the Gig Economy

It does take two to tango… even in an employment relationship.

First, job insecurity is has always existed; it was once the historical norm. The construction industry has always been project-based and seasonal like agriculture; seafarers were traditionally hired for a voyage. The entertainment industry was literally the “gig economy”. These are among the industries that routinely discarded workers when the job was done.

What is new is the extension of insecure work into industries where it was not previously common. This has been facilitated by new technology and the widespread use of contractual arrangements that seek to limit workers’ rights.

Second, the vision of a brave new world of portfolio, boundaryless, and protean careers was intended for professionals who could sell high-value parcels of work. It suits those with enough economic confidence to fly without the safety net of a regular income. These ideas were not dreamed up for the bicycle courier, the taxi driver or the peripatetic care worker, and certainly not for those trapped in a low-pay, no-pay cycle.

Third, the career management rhetoric lost sight of the distinction between is and should. Growth in atypical working patterns does not imply a moral imperative that workers should facilitate this development by shaping themselves into the desired mould. Particularly where some employers might be seeking to offload responsibility for sick pay, holiday pay, and travel between jobs.

Flexibility in human resources allows employers to scale operations up and down rapidly, and with minimal cost. This is not just about keeping wage bills down, but also about employers reducing levels of economic risk, while workers increase their share of risk bearing. The challenge of global competition may be inevitable, but an unquestioning compliance with employer regimes for sharing wealth and risk is not.

Cashless in Somaliland

I’ve wondered about the slow adoption of this technology in America. Apparently, we just need to rapidly devalue our currency to encourage people.

No cash is transferred, and there’s not a credit card in sight. But customers haven’t got their daily khat fix for free; they’ve paid using their mobiles, transferring money on the sandy Somali street in seconds with little more than a mobile phone and a few numbers.

There are not many things tiny Somaliland can claim to be a world leader in, but cashless payments might be one.

Cashless Somalia

One US dollar equals 9,000 Somliland shillings – the currency is so devalued, shoppers wander markets with wads of the paper money thrown in their bags (Credit: AFP/Simon Maina)

The self-declared country, which broke away from Somalia in 1991 but remains unrecognised by the international community, has become something of a wild frontier for cashless payments as it charts a trajectory towards creating the world’s first cashless society.

Whether in a shack on the side of a road or a supermarket in the capital of Hargeisa, mobile payments are fast becoming the standard in the country.

There are not many things tiny Somaliland can claim to be a world leader in, but cashless payments might be one

“Most people are paying by mobile now,” Omar says, as he processes a payment on his mobile in one hand. “It’s so much easier.”

While developed and developing countries alike have been moving toward cashless payments with phones or contactless cards, Somaliland’s motivation is unique.

This shift away from cash is in part due to the rapid devaluing of the Somaliland shilling, the breakaway republic’s own currency which now trades at around 1 USD to 9,000 shillings. A few years ago it was just half that.

Menstrual Leave

Here’s the next front in the “War on Women.”

Menstrual leave, a policy that affords women suffering extreme period pain one or two days off work, already exists in several countries around the world, but has been widely criticised as counterproductive, often reinforcing negative stereotypes of female workers.

A large number of workers worldwide experience regular disruptive pain, but stigma can prevent problems being addressed (Credit: Getty Images)

In some Asian countries, including Japan, Indonesia, Taiwan, South Korea and certain Chinese provinces, women are allowed to stay home for a designated part of their monthly periods. Few take advantage of it, though, many citing fear of sexual harassment or perceptions of weakness.

And when the Italian parliament considered introducing national period leave in March, many wondered whether eligibility for three paid days a month off risked discouraging employers from hiring women in the first place.

Here’s how this will go down… liberals will demand that employers offer menstrual leave. Then they will accuse anyone who opposes this of being sexist and misogynist. Then they will cite this issue to raise money to help elect Democrats. Rinse. Repeat.

This is in the fringe now. I give it about 10 to 14 months before it becomes an issue – right around election time.

 

Rise of Bitcoin

The rise of alternative currency is fascinating.

You may have noticed reports about Bitcoin’s value recently – its price is headed into the stratosphere.

The crypto-currency’s recent meteoric price rise over the summer has seen one Bitcoin go from being worth $1,500 in early May to more than $5,000 over the weekend, before dropping to $4,654 at the time of publication.

What this represents is a collapse in the people’s trust of government. For the past 150 years or so, national governments have had an almost exclusive power and responsibility to create a common unit of exchange – currency. Prior to that, it was far more common to have individual banks, private businesses, or other local entities create a certificate of exchange or barter methodology. Over time, national governments gradually took over that responsibility. The rise of Bitcoin represents the people’s increasing distrust in the underlying value of national currencies and a move toward a common unit of exchange that is decoupled from the regulatory control of any specific government.

No Substitute for Competition

Still relevant after Andrew Carnegie wrote it in 1889.

The price which society pays for the law of competition, like the price it pays for cheap comforts and luxuries, is also great; but the advantages of this law are also greater still, for it is to this law that we owe our wonderful material development, which brings improved conditions in its train. But, whether the law be benign or not, we must say of it, as we say of the change in the conditions of men to which we have referred: It is here; we cannot evade it; no substitutes for it have been found; and while the law may be sometimes hard for the individual, it is best for the race, because it insures the survival of the fittest in every department. We accept and welcome, therefore, as conditions to which we must accommodate ourselves, great inequality of environment, the concentration of business, industrial and commercial, in the hands of a few, and the law of competition between these, as being not only beneficial, but essential for the future progress of the race.

Google Flexes Muscle to Squash Speech

Good thing we don’t do Google ads around here.

On Tuesday evening, Google sent a conservative website an ultimatum: remove one of your articles, or lose the ability to make ad revenue on your website. The website was strong-armed into removing the content, and then warned that the page was “just an example and that the same violations may exist on other pages of this website.”

“Yesterday morning, we received a very bizarre letter from Google issuing us an ultimatum,” Shane Trejo, media relations director of the Republican Liberty Caucus of Michigan, wrote on The Liberty Conservative. “Either we were to remove a particular article or see all of our ad revenues choked off in an instant. This is the newest method that Big Brother is using to enforce thought control.”

The ultimatum came in the form of an email from Google’s ad placement service AdSense. The email specifically listed an article on The Liberty Conservative’s site, stating that the article violated AdSense’s policies.

This is a shift because it isn’t the advertisers objecting to the content and pulling their advertising. That has happened forever and is fine. This is an advertising distribution service threatening to pull other people’s ads from websites they disapprove of.

Report: Nearly 45 percent of Milwaukee millennials struggle to pay rent

That’s the headline. Here’s the story:

Nationally, 46.5 percent of those in the millennial generation struggled to afford rent.

[…]

Nationally, about 45 percent of Generation X and 49 percent of Baby Boom renters had trouble paying for rent.

So… Millennials are in the middle of generational burden. The report is actually more balanced, generationally speaking, but the media decided to hype the number for Millennials.

Also bear in mind that the threshold for when the report considers a person struggling is arbitrary. They set the threshold that if a person spends 30% or more on rent, then they are burdened. But that doesn’t take into lifestyle choices. For example, a person who lives in Manhattan and spends 40% of their income on rent, but doesn’t have any vehicle or commuting expenses, may find that their rent is a bargain.

In any case, whenever reading a story like this, I try discern why it is in the news. Am I supposed to be concerned about how much money people are paying for rent? Why? It’s an interesting demographic artifact, but it doesn’t seem to warrant the alarm that the media report suggests.

Wisconsin Border Counties Doing Well

This is an interesting look.

bordercounties

Wisconsin Coalition Supporting the Foxconn Deal

It’s a lengthy list.

 

Close the Deal

My column for the Washington County Daily News is online. Here you go:

After weeks of wrangling and a few modifications, the Wisconsin State Assembly passed a $3 billion incentive package for Foxconn to build a massive new plant in Wisconsin. Now it is up to the State Senate to follow the Assembly’s lead and bring Foxconn to Wisconsin.

To fiscal conservatives who desperately want a small, inexpensive, unintrusive government, the thought of massive corporate welfare to incent businesses to locate in Wisconsin is rather repugnant. Ideally, Wisconsin’s government would create an environment of low taxes, reasonable regulations, good infrastructure, etc., to make Wisconsin such an attractive place for business that taxpayer incentives would be rendered unnecessary.

But that is not the state we live in yet and the taxpayers have shown time and time again that they are willing to dole out corporate welfare if it for the overall betterment of Wisconsin. The measure has long since ceased to be, “should government do it?” It is now, simply, “is it a good deal for taxpayers?” The deal that Gov. Scott Walker and his staff negotiated with Foxconn and which was substantially passed by the State Assembly, is a good deal.

The structure of the Foxconn deal is relatively simple if the numbers are enormous. In exchange for Foxconn investing $10 billion in construction costs and eventually employing up to 13,000 people, Wisconsin taxpayers will give the company up to $2.85 billion in income and franchise tax credits and an additional $150 million in sales tax relief for construction materials. The total “cost” to taxpayers would be about $3 billion in waived taxes over 15 years.

In order to analyze any deal, you must weigh cost against benefit. In this case, the cost for taxpayers is $3 billion in waived taxes over the next 15 years. That is only really a cost in the eyes of a politician. Remember that if Foxconn does not build in Wisconsin, it will never buy the construction materials for which the state would have received $150 million in sales taxes. And if Foxconn does not build in Wisconsin, it will never generate the net income that would generate the $2.85 billion in income taxes. If Foxconn does not build in Wisconsin, the $3 billion in waived taxes will never exist. The only way that anyone can claim waived taxes to be a “cost” is if they presume that it was the government’s money in the first place.

The one caveat to that is that the bill passed by the Assembly does permit the state to grant tax credits to Foxconn in the form of a refund even if Foxconn does not have a tax liability. In this way, the incentives wouldfunction much like the Earned Income Tax Credit.

If this happens, it would indeed be a cash outlay from the taxpayers to Foxconn. We must demand vigilance from the state administrators of this deal to watch Foxconn closely to ensure that they are meeting their obligations to receive tax credits.

On the other side of the ledger, what benefit does Wisconsin get for its $3 billion in waived taxes? Foxconn is committing to spend $10 billion in construction costs to build a massive new facility. Most of that money will be spent in Wisconsin and employ thousands of Wisconsinites. After the facility is built, Foxconn will continue to spend hundreds of millions every year in Wisconsin to maintain and run the facility.

Foxconn also plans to directly employ 13,000 people at the facility at an average wage of $53,900. A facility of this size would also generate an estimated 22,000 supporting jobs. That is a tremendous number of Wisconsinites earning a family supporting wage. That is an enormous number of people buying homes, buying cars, buying groceries, going to entertainment events and spending money to live their lives in Wisconsin. The return on investment should not be measured in cash paid to the tax collectors, but in the cash put in the pockets of tens of thousands of Wisconsinites.

Beyond the direct investment by Foxconn, this deal would facilitate the transformational introduction of an entire industry to Wisconsin. Wisconsinites can reasonably expect that other manufacturers and supporting industries will follow in Foxconn’s wake to locate in Wisconsin. Wisconsin is standing at the precipice of a generational economic boon if we only have the courage to jump.

Is the Foxconn deal a risk? Of course it is. Any commercial enterprise is a risk. Wisconsin’s government must be vigilant in holding Foxconn to their commitments, and the deal is structured to cease taxpayer support if Foxconn reneges. But the cost of doing nothing is far greater for the future of Wisconsin than the cost of this deal.

The State Senate must step forward with their colleagues in the Assembly and close this deal. Wisconsin is waiting.

Report: Foxconn Could Return $3.90 for Every $1 in Subsidy

Indeed.

A massive manufacturing complex planned by Foxconn Technology Group could generate broad gains for Wisconsin “that go far beyond the direct job estimates and tax revenue costs which have dominated the recent discussion,” according to a report by a UW-Madison economist released Monday.

If the Taiwan-based electronics manufacturer employs 13,000 people in the state, the ripple effect could spawn an additional 19,000 to 26,000 jobs through growth from the company’s suppliers and other businesses in the region, said Noah Williams, director of the Center for Research on the Wisconsin Economy.

That could mean a return of $3.90 for every $1 in state subsidy costs spent to lure Foxconn and its planned investment of up to $10 billion, Williams said in his report, which was commissioned by the Wisconsin Technology Council.

Getting Back to Mining

Good!

Two Wisconsin lawmakers on Thursday introduced a controversial proposal to repeal state law requiring mining companies to demonstrate that they have operated without polluting before they are permitted to extract metals here.

“People want to make things in America again,” said Sen. Tom Tiffany, R-Hazelhurst. “Our neighbors, Minnesota and Michigan, have placed their shovels in the dirt of America’s future. It is Wisconsin’s turn to do the same.”

Tiffany, who was instrumental in a 2013 law relaxing state iron mining regulations, has been talking for months about lifting the so-called “moratorium” on mining for sulfide metals such as copper and gold.

By its very nature, mining is an intrusive process. But it can be done in a way that minimizes the long term damage. As long as we humans insist on using natural resources, I would rather mine it in Wisconsin where Wisconsinites can enjoy the economic benefit while also ensuring it is done as safely as possible.

Assembly Debates Foxconn Deal

Get ‘er done!

Calling the Foxconn vote “one of the most important votes in Wisconsin history,” Vos said the Assembly’s actions today “will speak louder than the ugly words from hate groups.”

“We will approve legislation that will give hope to all Wisconsin families by providing a future that’s rich with career opportunities and a strong, healthy economy,” he said.

Expanding in Wisconsin

Excellent!

TOWN OF ONALASKA — Dynamic Recycling is expanding for the fifth time in a decade.

Company officials celebrated a visit by Gov. Scott Walker on Monday that highlighted a 140-000-square-foot expansion project that began in May. The extra space will boost the processing capacity for scrap and electronic recyclables, as well as provide additional office space for the company.

Company CEO Miles Harter said the hope is for the new facility to come online in early 2018, as the company already has outgrown its current space. The expansion is expected to add 150 jobs, nearly doubling the workforce of Dynamic Recycling, which also has facilities in the Twin Cities and Nashville, Tenn.

“We can do good while making a profit doing it,” Harter said. “We have a goal of recycling more than 100 million pounds next year.”

Generac To Expand

Good news!

Generac Holdings Inc. is planning a $73 million in an expansion plan that will include several Wisconsin facilities, and is projected to create 400 jobs in the next five years, the Wisconsin Economic Development Corp. (WEDC), the state of Wisconsin’s lead economic development agency, said Monday.

Waukesha-based Generac, a manufacturer of generators and small engines, could receive up to $10 million in Enterprise Zone Tax Credits from the WEDC through 2021.

Assembly Pushes Forward With Foxconn Bill

I’m glad to see some urgency on the part of the Assembly.

Assembly lawmakers on Monday will cast the first votes on a package of incentives designed to convince Taiwanese electronics manufacturing giant Foxconn to build its first U.S. plant in Wisconsin.

Lawmakers on the Assembly Committee on Jobs and the Economy will vote Monday afternoon to advance Gov. Scott Walker’s bill that provides Foxconn with nearly $3 billion in tax credits, exempt the company from a number of environmental regulations and spend $20 million in state funds on job training to ensure the state’s workforce is prepared. The full Assembly is scheduled to vote on the package Thursday.

But a leader of the state Senate said Monday the Assembly’s action this week is “largely irrelevant” and that changes recently made to the bill by Assembly Republicans on Friday may not have the support from Walker or Senate Republicans.

Senate President Roger Roth, R-Appleton, told conservative talk radio show host Jerry Bader on Monday that the speed at which the Assembly has pushed the Foxconn bill has the Senate on the outside looking in.

It worries me that the Republicans running state government can’t seem to get their acts together on this. Why is it so difficult to get in a joint committee, hash out the details, and get this thing done? The answer is that it isn’t difficult – if they wanted to do so. Several Republican leaders appear to be using the Foxconn package as a political football for other agendas. In doing so, they risk fumbling it after Walker got it to the goal line. (yes, I’m ready for some football)

Milk Shortage in Europe

This is a fascinating study of a market correcting after years of government control.

Here’s the basic story:

Overproduction was a problem in the EU’s early days too, until the Commission in 1984 brought in milk quotas — caps — as a way of stabilizing ballooning production. A wave of market-oriented reforms in EU agricultural policy over years committed the bloc to ending them. In 2003, the Commission said it would lift milk quotas in 2015 — in theory leaving farmers ample time to adjust their business models.

But geopolitical events wrecked those best-laid plans. By the end of the quota system in March 2015, the Russian food embargo — retaliation for EU sanctions enacted after the annexation of Crimea — had already been in place for five months.

Russia bought 13 percent of EU milk exports before the ban, according to Commission data. For milk products such as cheese and butter, the EU’s stake in the Russian market was far higher: The country bought 32 percent of EU-produced cheese, and 24 percent of butter, before the ban.

“A huge market … was literally wiped off the grid,” European Council of Young Farmers President Alan Jagoe said. “It turned a problem into a crisis.”

Almost simultaneously, the U.S. shale-gas boom accelerated oil production and triggered a decline in crude-oil prices. In a remarkable example of economic interconnection, this has a major effect on milk yields. Animal feed costs fall with dropping crude oil prices, said David O’Neil, director of dairy commodity trading house Dansko Foods, and low feed costs encourage farmers to add use more feed — which leads to larger milk yields.

“The flip side of this is that the major oil-producing countries have less buying power as their GDP falls, therefore they buy and consume less dairy products,” O’Neil said. “This leads to an oversupply, lower-demand scenario which leads to a lower milk price.”

That story was from last year. Since then, many milk producers have exited the market (by choice or otherwise) and there is a shortage:

The EU would go on to intervene in the market, but many dairy farmers went out of business. Over 1,000 stopped production in the U.K. alone, according to Moreau.

The looming shortage

The next worry is a shortage of butter in Europe.

Butter production slumped 5% in the year to May 2017. Meanwhile, butter stockpiles have plunged 98% in a year, according to the European Commission’s Milk Observatory.

“While supplies remain tight and demand has increased, there has been a shortage of butter in the EU, causing prices to soar as buyers try to lock into contracts to obtain stocks,” said Michael Liberty, dairy market analyst at Mintec.

Peder Tuborgh, CEO of U.K. dairy giant Arla, warned the BBC last month that there might not be enough milk and cream to go around at Christmas.

Unfortunately, these kind of wild swings are normal as a market adjusts from one of central control to more free market. If left alone, it will continue to take more, but increasingly smaller swings until it reaches equilibrium. In the meantime, can Wisconsin export some butter to the EU? There’s a market opportunity there.

Walker Signs REINS Act

Great!

WAUSAU – Governor Scott Walker today signed the REINS (Regulations from the Executive in Need of Scrutiny) Act into law at the Wausau Region Chamber of Commerce. The bill makes various changes regarding administrative rules and rule-making procedures.

“One of our top priorities for Wisconsin is ensuring government services are effective, efficient, accountable, and operate at good-value for the citizens of our state,” Governor Walker said. “This bill allows for more input from citizens and stakeholders before a new rule is drafted, ensures expensive or burdensome rules are subject to legislative scrutiny and approval, and creates additional oversight over state agencies. I thank Senator Devin LeMahieu and Representative Adam Neylon for taking the lead on this protaxpayer reform. ”

Senate Bill 15 – makes several changes to the administrative rulemaking process, specifically the preparation of scope statements, economic impact analysis, approval of rules, promulgation of emergency rules, and certain hearings on proposed rules. The bill requires the Department of Administration to complete an initial review of proposed scope statements from agencies and determine if an agency has the explicit authority to promulgate the rule, prior to submitting the scope statements to the Governor for approval. Authored by Senator Devin LeMahieu (R-Oostburg) and Representative Adam Neylon (RPewaukee), the bill passed the Senate with a vote of 19-14 and was concurred by the Assembly with a vote of 62-34. It is Act 57.