Category Archives: Economy

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.

Public input on the next state budget

My column for the Washington County Daily News is in print and online. Go get a copy! Here’s a taste:

Gov.-elect Tony Evers and Lt. Gov.-elect Mandela Barnes have announced they will hold four public listening sessions before Christmas to get the public’s input on the upcoming state budget. The four sessions will be today in Green Bay, Wednesday in Wausau, Dec. 18 in La Crosse and Dec. 19 in Milwaukee.

Since all four sessions begin during working hours and, like most tax-paying Wisconsinites, I work for a living, I will not be able to attend and give the incoming administration my thoughts in person. This column will have to suffice.

As the Legislature and governor begin the process of crafting the next state budget, they must do so with the understanding that Wisconsin is not immune from the economic winds blowing across the nation. While the underlying economic metrics remain strong, several leading indicators, including the wild movements in the stock market, foretell a looming recession within the next year or two.

Since Wisconsin uses a biennial budget, it is likely the next recession will come during the budget our elected officials are about to write. They must write that budget understanding recessions always lead to a decrease in state tax revenue while making higher demands on state services like welfare and Badger-Care. To that end, the overriding objective of the next state budget should be to reduce spending, reduce taxes and continue to pump money into the state’s rainy day fund, because rainy days are in the forecast.

From a revenue standpoint, the state of Wisconsin is in great shape. Thanks to the series of tax cuts that Gov. Scott Walker and the Republican legislators have delivered over the past few years, tax revenue is flowing into state coffers at historic levels. There is no shortage of money for politicians to spend.

While the Republicans have done a tremendous job in the previous few budgets, they have failed to reduce spending. Despite claims to the contrary, every single state budget for the last generation or more has spent more than the previous budget. Granted, the Republicans did not increase spending as much as the Democrats wanted to, but they increased spending nonetheless.

The vast majority of state spending is spent on a handful of budget priorities. One cannot seriously reduce spending without looking to the big budget items. The first area Evers and the Legislature should look is at education spending.

Commuter Rail Coming to Southeast Wisconsin?

Here’s an interesting idea.

A New York capital raising firm is helping a Wisconsin company attempt to raise more than $1.4 billion to support a private commuter rail project in metro Milwaukee along with related real estate development.

The project by Transit Innovations LLC would use existing freight lines to create the commuter system, called E-Way. The company says it would build 21 new stations and use two existing ones along 55 miles of track across Milwaukee and Waukesha counties.

[…]

Most of the capital, around 70 percent, would actually be used for real estate developments near the stations. Transit Innovations says developments would include market-rate housing, multifamily, retail, office, training facilities, mixed-use and manufacturing. The group estimates 7,000 units of new multi-family housing would be constructed.

Transit Innovations, which was created in 2017 and is registered to a Brookfield address, is working with New York based Castle Placement LLC to raise the funds. An investor presentation estimates $571 million will come from real estate investors, $300 million from rail investors, $35 million from partners and local private equity and $550 million from a construction loan.

I don’t know if it’s viable, but at least if it fails, it’s not my tax dollars being thrown down the tracks.

Foxconn’s “Smart Cities, Smart Futures” Competition Draws 325 Entrants

Awesome.

The first round of Foxconn Technology Group’s Smart Cities, Smart Futures competition prompted 325 entries from students, faculty and staff at higher education institutions in Wisconsin.

Foxconn announced earlier this year it would provide up to $1 million in awards over three years through the competition, soliciting entries from the University of Wisconsin System, Wisconsin technical colleges and private colleges and universities.

Entries for the first round were submitted in October and up to 100 winners will be selected to receive a $500 cash prize and an invitation to the competition’s second round. Around $200,000 in prizes will be awarded over three rounds of competition.

Submissions in the first round included ideas to use technology to address challenges in education, health care, transportation and housing, a company press release said.

Foxconn Denies Recruiting Chinese Workers

Frankly, I hope that they are.

Technology supplier Foxconn denied reports Tuesday that it is considering staffing its planned Wisconsin facility with Chinese workers due to the tight labor market in the state.

“We can categorically state that the assertion that we are recruiting Chinese personnel to staff our Wisconsin project is untrue,” Foxconn, which is based in Taiwan, told The Wall Street Journal in a statement.

Sources familiar with the matter had told the Journal that Foxconn may bring in personnel from China to staff the facility, given the tight American labor market.

Particularly, the source said, Foxconn Chairman Terry Ghou is searching out company engineers that would be willing to move to Wisconsin.

Ghou is reportedly struggling to find employees who would relocate so far away and is frustrated by it.

We have a labor shortage in Wisconsin. The best way to fix that is to recruit people from other states and countries to move to Wisconsin to fill those jobs, thus creating more Wisconsinites who live, work, and play in our state. It is a good thing if people want to move here – not a bad thing.

Governing is harder with diverse opinions

My column is in the Washington County Daily News today. First, go vote. Second, tomorrow we have to start governing again. Here’s a taste.

When it comes to the economy, as with most things, the best government is the least government. As the state’s politicians enter the new year, they must not act to disrupt the economic policies that are working by introducing higher taxes, more regulations, or fostering an adversarial relationship with businesses. Instead, they should focus on the economic issues that need addressing, like attracting more workers to move to Wisconsin.

Most of all, as Wisconsin’s freshly elected politicians settle into their jobs, they must remember that not every problem requires a government solution. Most of the time, the best solution is for government to get out of the way.

More Jobs and Higher Wages

We are finally seeing wages rising as a result of the tight labor market. Great news!

Job growth blew past expectations in October and year-over-year wage gains jumped past 3 percent for the first time since the Great Recession, the Labor Department reported Friday.

Nonfarm payrolls powered up by 250,000 for the month, well ahead of Refinitiv estimates of 190,000. The unemployment rate stayed at 3.7 percent, the lowest since December 1969.

The ranks of the employed rose to a fresh record 156.6 million and the employment-to-population ratio increased to 60.6 percent, the highest level since December 2008, according to the department’s household survey. That headline jobless number stayed level even amid a two-tenths of a percentage point rise in the labor force participation rate to 62.9 percent.

Those counted as outside the labor force tumbled by 487,000 to 95.9 million.

But the bigger story may be wage growth, which has been the missing piece of the economic recovery. Average hourly earnings increased by 5 cents an hour for the month and 83 cents year over year, representing a 3.1 percent gain. The annual increase in wages was the best since 2009.

Expect inflation to creep up next as a natural result of wage growth. Let’s hope that the Federal Reserve doesn’t overreact to inflation and crimp the employment and wage growth we are enjoying.

Google Walkout

Good for them.

Staff at Google offices around the world are staging an unprecedented series of walkouts in protest at the company’s treatment of women.

The employees are demanding several key changes in how sexual misconduct allegations are dealt with at the firm, including a call to end forced arbitration – a move which would make it possible for victims to sue.

Google chief executive Sundar Pichai has told staff he supports their right to take the action.

“I understand the anger and disappointment that many of you feel,” he said in an all-staff email. “I feel it as well, and I am fully committed to making progress on an issue that has persisted for far too long in our society… and, yes, here at Google, too.”

A Twitter feed titled @googlewalkout has documented the movement at Google’s international offices.

 

Booming Economy Results in Fewer Medicaid Recipients

Excellent.

The booming U.S. economy appears to be reducing dependence on federal health insurance for the poor.

Medicaid enrollment fell for the first time since 2007, declining by about 0.6 percent in fiscal year 2018, and states don’t expect to see much growth in enrollment next year, according to a Kaiser Family Foundation report released Thursday.

States are budgeting for a “minimal” increase of 0.9 percent in 2019, Kaiser said in its annual 50-state survey of Medicaid.

“States largely attribute the enrollment slowdown to a strengthening economy, resulting in fewer new low-income people qualifying for Medicaid,” said Kaiser, a nonprofit group that focuses on health care and health policy.

While crediting the strong economic growth during the Trump presidency, the report also pointed out that the administration is urging states to “add work requirements to Medicaid that are likely to result in enrollment declines.” Some of the work requirements approved by the administration have resulted in some Medicaid recipients losing coverage.

I would love to see the Republicans, or Democrats for that matter, run on the issue of imposing stricter work requirements for Medicaid and welfare. In an age of sub-3% unemployment, there is no excuse for every able-bodied person to not be working.

Record Employment

Wow

The unemployment rate for the La Crosse metropolitan area hit a new low in September, coming in at 2.0 percent for the first time, according to the U.S. Bureau of Labor Statistics preliminary estimates released Wednesday.

The city of La Crosse was ranked fourth in the state with an unemployment rate of 2.2 percent in September, down from 2.9 percent in August. The estimated rates, which are not seasonally adjusted, were celebrated by the Department of Workforce Development.

“It’s great news for all the people in the state of Wisconsin, because it means they have the opportunity to have family-sustaining jobs,” Wisconsin DWD Secretary Ray Allen told the Tribune.
[…]
September marks the eighth consecutive month in which Wisconsin’s unemployment has been 3 percent or less. The record lows have been driven by strong economic development policies in the state, said Allen, saying positive changes are driving opportunities, such as Foxconn’s new facility.

Bernie Evers Wants $15 Minimum Wage

Minimum!

MacIver News Service | Oct. 22, 2018

By Bill Osmulski and Chris Rochester

MILWAUKEE – Tony Evers stole Bernie Sanders’ socialist spotlight in Milwaukee on Monday when he told supporters that when it comes to the minimum wage “we’re going to $15 an hour minimum. Minimum.”

Sanders was in Milwaukee to rally the Democrat base around the party’s top candidates in next month’s election. Tony Evers, Gwen Moore, Randy Bryce, Tammy Baldwin, and Mandela Barnes were all there at the UWM student union. Several hundred people attended.

Given the location at one of the UW System’s top universities, Evers thought it was also a good time to admit being on the board of regents is “the worst part of my job.”

Nothing says “economic growth” like bone-crushing government regulations.

Amazon Shifts Compensation Model

Heh. So the liberals got what they wanted.

The company announced Tuesday that it will raise its minimum wage to $15 an hour for all US employees. But tucked away in the announcement was the fact that Amazon will phase out its bonus and stock award programs for its hourly workers. The change was first reported by Bloomberg Wednesday.
The company maintains that workers will make more money under the new system. All hourly workers will get a bump in pay, even if they are already making $15 an hour.
“The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and RSUs [restricted stock units],” a spokesperson said. “In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable.”
Surely, the primary reason that Amazon increased its starting wage is because the labor market is tight and the natural economic force of demand requires them to do so. But I’m sure that Bezos, a liberal himself, also felt the pressure from Bernie and the other socialists. Well, they got what they wanted.
But while Amazon hourly employees are getting a raise, they are missing out on one of the most important wealth creators in the history of mankind – ownership. For the employees who received Amazon stock, it’s gone up about 600% in the last 5 years. There’s a lot to be said for taking the cash up front in the form of hourly wages, but it’s no substitute for the wealth creation that ownership gives.