Category Archives: Economy

Wisconsin Unemployment Rate Dips on Flat Job Growth

Good news!

Wisconsin’s unemployment rate dipped below 3 percent in February, even as net private sector employment was essentially unchanged during the month.

The seasonally adjusted unemployment rate in Wisconsin was 2.9 percent during the month, the first time it has been below 3 percent since February 2018.

Private sector employment was down by 300, according to data released by the state Department of Workforce Development. Total nonfarm payrolls were down 3,400, led by a 3,100-job drop at the local government level.

Foxconn Plant To Be Operational By 2020

Great!

Electronics maker Foxconn Technology Group said Monday it will begin construction this summer on a display-screen manufacturing hub near Racine, with plans for production to start by the end of 2020.

A company statement said the construction marks the next phase of Foxconn’s overall blueprint for its campus in Mount Pleasant.

It underscores the company’s manufacturing plans at the site, weeks after reports and statements by Foxconn officials suggested the company was scaling back or changing its plans to build display screens in Wisconsin.

If the plant is operational by fall 2020, it also could give political fodder to one of its top cheerleaders, President Donald Trump, who has touted Foxconn’s plans as heralding a renaissance in U.S. manufacturing.
This will be hard for Wisconsin’s Democrats. Will they celebrate this great economic boon to Wisconsin or will they continue to carp and moan because Trump celebrates it? In other words, will Democrats prioritize partisan politics over celebrating Wisconsin’s success? I think we know the answer to that.

Foxconn Complies With Wisconsin’s Environmental Regulations

There you go.

A top aide to Gov. Tony Evers said Thursday he believes all of the state permits issued to tech giant Foxconn have been reviewed by the state Department of Natural Resources and deemed appropriate.

But the damage to the relationship with Foxconn is done. Despite having gone through the process and received the appropriate permits, they were forced deal with regulators again and wait to see if they would pass the new administration’s test. Inconsistent treatment, uncertainty, and the arbitrary application of regulations kills businesses.

U.S. Becomes World’s Largest Petroleum Exporter

Huzzah, huzzah.

New York (CNN Business)Move over, Saudi Arabia. America is about to steal the kingdom’s energy exporting crown.

The United States will surpass Saudi Arabia later this year in exports of oil, natural gas liquids and petroleum products, like gasoline, according to energy research firm Rystad Energy.
That milestone, driven by the transformative shale boom, would make the United States the world’s leading exporter of oil and liquids. That has never happened since Saudi Arabia began selling oil overseas in the 1950s, Rystad said in a report Thursday.
“It’s nothing short of remarkable,” said Ryan Fitzmaurice, energy strategist at Rabobank. “Ten years ago, no one thought it could happen.”

Restaurant Jobs in NYC Disappear After Arbitrary Wage Floor Imposed

Governor Evers wants this in Wisconsin.

Data show that following the labor movement’s “Fight for $15” victory, which imposed steep annual increases in mandatory wages for workers, New York City experienced its sharpest decline in restaurant jobs in nearly 20 years.

Restaurants tend to operate on famously low profit margins, typically 2 to 6 percent. So a 40 percent mandatory wage increase over a two-year period is not trivial.

In response to the minimum wage hikes, New York City restaurants did what businesses tend to do when labor costs rise: they increased prices and reduced labor staff and hours.

For example, Lalito’s, a popular restaurant on Bayard Street, recently raised its menu prices 10-15 percent, Eater New York reports.

A New York City Hospitality Alliance survey also showed that three out of four full-service restaurants said they planned to reduce employee hours. Nearly half of those surveyed said they planned to eliminate some job positions in 2019.

Work is Good

Yes it is. And Rep. Brandtjen wonders why Governor Evers is against it.

It didn’t take long after Tony Evers was elected governor to signal that he may remove the work requirements for able-bodied, childless adults receiving Medicaid benefits.

This is an inexcusably horrendous idea. What’s wrong with requiring able-bodied people to work for taxpayer- provided benefits? Work is good. People are much happier when they feel a sense of purpose. Why in the world would Tony Evers want to remove incentives to work? It’s almost criminal. Work determines who we are and who we become, it’s our identity; our contribution to ourselves and the greater community. Work should be encouraged because it’s healthy. The Robert Wood Johnson Foundation reports that being employed reduces a wide variety of health risks including stress, heart disease and stroke.

[…]

Why wasn’t this issue brought up during the campaign? It’s simple; no one supports encouraging people to fail. This is just another example of the soft bigotry of low expectations. If Tony Evers can justify this position I’d love to hear his rationale.

It seems to me Democrats simply do not value work, jobs or anything else that might make their voters freefrom the economic chains of government programs. It certainly would explain their vehement opposition to the Foxconn project, which would bring thousands of jobs to Wisconsin. Where am I wrong?

Student Debt Delinquencies Peak

I blame the students who took on odious amounts of debt for degrees that offer little opportunity to repay the debt and the adults who enabled the kids to take on the debt.

Student-loan delinquencies surged last year, hitting consecutive records of $166.3 billion in the third quarter and $166.4 billion in the fourth.

Bloomberg calculated the dollar amounts from the Federal Reserve Bank of New York’s quarterly household-debt report, which includes only the total owed and the percentage delinquent at least 90 days or in default.

That percentage has remained around 11 percent since mid-2012, but the total increased to a record $1.46 trillion by December 2018, and unpaid student debt also rose to the highest ever.

States Consider Colluding Against Corporate Handouts

Interesting.

This, as the End Corporate Welfare Act is circulating in several states, including New York. The bill would essentially call a cease-fire on awarding tax incentives to certain companies by creating an interstate compact of states that agree to end the practice.

New York’s bill is being sponsored by Assemblyman Ron Kim and state Sen. Julia Salazar, who have criticized the state’s deal with Amazon for months. “We are definitely glad our organizing has paid off,” says Michael Carter, a spokesman for Salazar. “This is not the first [corporate welfare] deal and it certainly won’t be last. But maybe now companies will think twice about pursuing one of these deals in the state of New York.”

A similar version to New York’s bill is also making its way through the Arizona and Illinois legislatures, while lawmakers in other states, including Connecticut, Florida, Massachusetts and New Jersey, are considering introducing such legislation.

From a philosophical standpoint, I get it. It is frustrating that some businesses shop their stuff around looking for the best corporate handout. The problem is that it will never work. With 50 states and hundreds of cities, it only takes one to cave to break the cartel. Plus, with business increasingly global, there is no way that we can prevent other nations from incenting businesses to locate there.

Amazon Changes Mind About New York

Wow. Wisconsin should take note. Big, global businesses can locate anywhere. *cough* Foxconn *cough*

New York (CNN Business)Amazon is ditching its plans to build a new headquarters in New York after facing backlash from members of the community.

“After much thought and deliberation, we’ve decided not to move forward with our plans to build a headquarters for Amazon in Long Island City, Queens,” Jodi Seth, an Amazon spokeswoman, said in a statement.

In the statement, Amazon noted that “a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City.”

Amazon selected New York City and Northern Virginia in November to split duty as its second headquarters (nicknamed HQ2) after a year-long search. Each city was expected to have more than 25,000 workers over time.

At least Queens won’t be gentrified with all of those good jobs and better standard of living.

 

Study Says Transition to Renewable Energy Would be Swell

LOL

Moving away from fossil fuels could create thousands of jobs, improve public health, and increase overall economic activity by nearly $14 billion in Wisconsin, according to a new study.

[…]

The study, done at the request of La Crosse County, is hypothetical and doesn’t address technological challenges.

“The impetus for this whole study was just to figure out whether producing our energy in-state would be beneficial to the economy and people and the environment of Wisconsin,” said David Abel, a UW energy researcher and lead author of the study.

Ahhh, to be an academic…

Evers Badgers Foxconn about Environmental Regulations

Gee, is there any wonder why Foxconn might be getting cold feet when this is the first thing they hear from the new governor?

Gov. Tony Evers says he’s confident Foxconn’s leaders understand his concerns around the manufacturer’s environmental impact in Wisconsin.

Addressing RENEW Wisconsin’s Renewable Energy Summit yesterday in Madison, the guv said he spoke with Foxconn’s Louis Woo Wednesday night. The special assistant to Foxconn CEO Terry Gou told Evers about the company’s plans to keep the waters of Lake Michigan clean.

“I know we’re always concerned about the environmental issues as it related to Foxconn,” Evers said. “I feel confident going forward that they get it, and that we’ll have a good partnership there.”

Still, he said, “we have some things to check up on though.”

Wisconsin Adds More Jobs

Excellent!

MADISON – The Wisconsin Department of Workforce Development (DWD) today released the U.S. Bureau of Labor Statistics (BLS) preliminary employment estimates for the month of December. The data showed Wisconsin added 48,300 total non-farm jobs and 44,900 private-sector jobs from December 2017 to December 2018. Construction jobs increased by 8,500 and manufacturing jobs increased 17,800 over the year. The December unemployment rate remained at 3.0%.

Homelessness Swells in Liberal Cities

Correlation or causation?

Alexander Casey, a policy advisor on Zillow’s Economic Research team, explained to Yahoo Finance that “15% of the U.S. population lives in areas where a staggering 47% of the homeless population lives. And these are areas where rents are 29% higher on average than the rest of the U.S. And most of these communities are already past this 32% tipping point.”

Zillow researchers clustered different communities together based on “how they’re experiencing rising poverty rates, existing homelessness, homelessness rates, and declining affordability.” The places where people are most at risk of homelessness, according to the study, included New York, Los Angeles, Seattle, and Boston, “which all have crossed the 32 percent affordability threshold.”

The three U.S. cities with the most homeless people in 2018 were New York (78,676), Los Angeles (49,955), and Seattle (12,112), according to the most recent HUD data. A 2016 Wall Street Journal report highlighted that while overall homelessness in America was declining, the homeless population in these cities and others had risen rapidly since 2010.

Income Mobility

When people gripe about “the 1%,” do they even know who that is? Income mobility is far more important than income distribution.

Some 94 percent of Americans who reach “top 1 percent” income status will enjoy it for only a single year. Approximately 99 percent will lose their “top 1 percent” status within a decade.
Now consider the top 400 U.S. income-earners—a far more exclusive club than the top 1 percent. Between 1992 and 2013, 72 percent of the top 400 retained that title for no more than a year. Over 97 percent retained it for no more than a decade.
HumanProgress.org advisory board member Mark Perry put it well in his recent blog post on this subject:
Whenever we hear commentary about the top or bottom income quintiles, or the top or bottom X% of Americans by income (or the Top 400 taxpayers), a common assumption is that those are static, closed, private clubs with very little dynamic turnover … But economic reality is very different—people move up and down the income quintiles and percentile groups throughout their careers and lives.

City Leaders Express Regret for Funding Brainstorming Project

I remember casting an askance eye at this when it happened. I don’t remember if I wrote about it. Essentially, they paid $10,000 to have a bunch of college kids brainstorm ideas for our downtown. Of course, they don’t have any grounding in business, finance, etc. It was just a bunch of young adults sitting around saying, “wouldn’t it be cool if there was…” fill in the blank. I’m far more interested in the ideas from people who live and work in our downtown and would directly benefit/lose from the decisions made. Skin in the game and whatnot…

WEST BEND — Members of the Downtown West Bend Business Improvement District expressed some buyer’s remorse when they reviewed some of the ideas the high school and college students generated as part of The Commons group.

“I would just like to echo the thought that I think we overpaid in hindsight for this opportunity and that we should be more careful next time that we consider this sort of brainstorming activity,” Alderman Michael Christian said, who is also a member of the business improvement district.

Officials paid almost $10,000 for the opportunity to host students to develop ideas for improving the downtown. The idea was borne from a meeting during the first months of 2018 when board president Mike Husar requested Economic Development Manager Adam Gitter obtain a record of the vacant spaces, along with the businesses that occupied the buildings in the downtown.

That idea morphed into a more comprehensive project to generate general ideas for improving the downtown.

Mexico Cuts Taxes to Spur Economy and Discourage Emigration

Even leftist bullies know that lower taxes spur economic growth.

MEXICO CITY (Reuters) – Mexico’s new leftist President Andres Manuel Lopez Obrador on Monday decreed tax cuts for northern states that he says will help power economic growth and deter migration to the United States.

An executive order in the government’s official gazette granted lower rates for both value-added and income taxes in more than 40 municipalities bordering the United States, an area that has become a flashpoint over U.S. President Donald Trump’s policies to deter immigrants, including building a wall.

Lopez Obrador’s tax cuts could reduce government tax income during 2019, when he will implement a budget that seeks to use spending cuts to help fund new social welfare and infrastructure projects.

Big Busigov

On the one hand, it is not unusual in government or private industry for a potential vendor to have relationships and try to influence an upcoming RFP. It is also not necessarily unethical. It can also be valuable for the government or business requesting the products or services by providing education and direction in a complex technology sector. On the other hand, this is a good reminder that big businesses love big government because they always have a seat at the trough.

A top Amazon executive privately advised the Trump administration on the launch of a new internet portal that is expected to generate billions of dollars for the technology company and give it a dominant role in how the US government buys everything from paper clips to office chairs.

Emails seen by the Guardian show that the Amazon executive Anne Rungcommunicated with a top official at the General Services Administration (GSA) about the approach the government would take to create the new portal, even before the legislation that created it – known to its critics as the “Amazon amendment” – was signed into law late last year.

Amazon and the Trump administration appear to have an antagonistic relationship because of the president’s frequent Twitter attacks on the Amazon founder, Jeff Bezos, who also owns the Washington Post. But the behind-the-scenes lobbying by Amazon officials underscores how the company has quietly amassed an unrivalled position of power with the federal government.

The 2017 correspondence between Rung – a former official in the Obama administration credited with transforming the federal government’s procurement policies before she joined Amazon – and Mary Davie at the GSA, offers new insights into how Amazon has used key former government officials it now employs – directly and as consultants – to gain influence and potentially shape lucrative government contracts.

Market Turmoil

Merry Christmas. It’s probably too strong to call it a crash, but it is certainly a fender bender.

The Dow Jones Industrial Average traded sharply lower Monday after U.S. Treasury Secretary Steven Mnuchin shocked investors worldwide over the weekend by tweeting that he had spoken to the CEOs of the six largest U.S. banks to ensure they were liquid.

The Dow was down 1.6 percent to midway through an abbreviated trading session ahead of the Christmas holiday. The losses added to last week’s crushing performance, the index’s worst week in 10 years — since the 2008 financial crisis. The tech-heavy NASDAQ was also getting crushed, trading 3.8 percent lower.

It crossed into bear territory last week for the first time since the 2008 recession, which means it is down more than 20 percent from its record high on Aug. 29.

Everyone will circulate their own perception of causes. In my opinion… we are in the midst of a general global downturn where America’s economy is fighting an uphill climb. Meanwhile, the tariffs and Fed machinations are like loose gravel under America’s feet.

Wisconsin Taxes Drop to Lowest Level in 50 Years

As a percentage of income

MADISON—Wisconsin’s tax burden in the fiscal year ending June 30, 2018 fell to its lowest level in nearly 50 years, according to a new report by the nonpartisan, independent Wisconsin Policy Forum.

In the latest edition of The Wisconsin Taxpayer, “State and Local Tax Burden Falls,” WPF researchers found Wisconsin’s tax burden dropped to 10.5% this year from 10.6% last year. The tax burden, defined as state and local taxes as a share of income, has declined every year since 2011, when it was 11.7%. The 2018 share marks the lowest year on record in WPF data going back to 1970.

As in recent years, the decline was driven primarily by personal income rising faster than state and local tax collections. State and local tax revenues rose 2.3% in fiscal year 2018, while federal tax collections in Wisconsin grew 0.7%. The tax burden fell “mainly because total personal income grew more quickly at 3.6%,” the report notes.

Thank you Governor Walker and the Republicans in the legislature.

Avoid the pension bomb

Here is my full column that ran in the Washington County Daily News yesterday.

Last week, this column advised that the next state budget strengthen the state’s financial foundation by moving state government employees from a defined benefit (pension) plan to a defined contribution (401(k) or IRA) plan. This week, let us delve deeper into why this would be good for state employees and Wisconsin’s taxpayers.

One of the great ticking budgetary time bombs in our nation is the looming unfunded pension obligation. State and local politicians have promised government retirees much more money than they have actually budgeted. In total, the unfunded pension debt for all state and local governments is almost $1.4 trillion, based on research by the Pew Charitable Trusts.

This means that taxpayers around the nation are on the hook for $1.4 trillion to be paid to retirees that has not been set aside. That bill will come due and taxpayers will be forced to pay the debt by raising taxes, reducing government services, reneging on their promise to retirees, or, most likely, all of the above. Out-of-control pension debt has already bankrupted several cities, including Detroit, and is pushing several states, like Illinois, New Jersey and Connecticut, to the brink of insolvency. Pension plans are a relic of the past. They are from a time when it was difficult for regular people to access the investment markets and people living to 80 was unusual. Pension plans have bankrupted some of America’s largest companies and are now impacting governments. That is why only 19 percent of private-sector workers still have a pension while 87 percent of government workers have one.

Thanks to the sound budgetary management of Wisconsin’s politicians of both parties, Wisconsin is not facing an immediate crisis. As of 2016, Wisconsin’s pension obligation is about $93 billion and the Wisconsin Retirement System is about 99 percent funded, leaving a relatively small deficit of $853 million.

It is precisely because Wisconsin is in a fiscal position of strength that we should make changes for the future now. Remember that every pension bomb is the result of people with good intentions making bad decisions. Wisconsin is not immune from the blowback of human nature. Waiting until we are in a crisis before making changes will only lead to poor decisions and bad consequences.

The benefits to taxpayers of moving Wisconsin’s government employees to a 401(k)-style retirement plan are huge. First and foremost, it eliminates the potential of the pension bomb blowing up Wisconsin’s budget. Since the pension fund is almost fully funded, it will take some sound management to make sure it is properly drawn down to pay out the pensions of everyone currently under it. Meanwhile, taxpayers will not have any unfunded obligations to new employees or employees who choose to switch to the new plan.

Second, eliminating the pension will help encourage a healthy turnover of employees. Since a retiree’s pension is calculated based on their final average earnings and years of service, too many government employees hang on long after their passion for the work has waned. At the other end of the scale, Wisconsin’s pension plan allows employees to retire as early as age 50 with full benefits. This leaves taxpayers paying for a retiree for another 30 to 40 years while also paying a replacement employee. A 401(k) plan, in which the employee owns their retirement fund and can take it with them whenever they want, is a benefit to taxpayers and the employee.

For Wisconsin’s government employees, moving to a 401(k) or IRA plan has even more benefits. Perhaps the greatest benefit is that employees would own their retirement funds and not be subject to the problems of future politicians. The possibility of having benefits reduced or eliminated due to lack of money is not a hypothetical scenario. It has happened to thousands upon thousands of workers in our nation as private and public pension plans have slipped into insolvency. By taking ownership of their own retirement funds, employees are only subject to the amount of risk they choose to take on.

Furthermore, government employees would no longer feel a need to be a slave to their pension. They are free to move on to a different job in the private sector whenever they choose without negative consequences. Employees will also be able to choose the investment portfolio that most closely matches their tolerance for risk. If they want to be super safe, that’s great. If they want to risk for potentially more return that’s great, too. Government should always lean in favor of empowering individuals to make their own choices.

Also, unlike pensions, 401(k) and IRA plans have the ability to create generational wealth. Pension benefits cannot be passed on to the next generation. When the employee and their spouse die, the pension dies with them. The unused balance of 401(k) and IRA plans can be passed on when the owner dies. This helps facilitate generational wealth creation for Wisconsin families.

By moving Wisconsin’s government employees to a 401(k) plan now, the state can honor its obligations to employees and retirees under the current pension plan, provide a fantastic benefit for new employees, and protect future generations of taxpayers from a debt bomb exploding in their wallets.