Category Archives: Economy

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


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


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


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


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.

Al Gore to Run Tesla?

It’s starting to look like Mark Belling was a genius for shorting Tesla stock.

Former US Vice President Al Gore could be a good fit to replace Elon Musk as chairman, according to one longtime tech analyst.

Gene Munster, venture capitalist at Loup Ventures, said Gore would be able to use the role to get Musk, who is still CEO of Tesla, in line.

Musk agreed to resign as Tesla chairman within 45 days as part of his settlement with the SEC.

Munster said Gore would be a worthwhile candidate as he has served on Apple’s board of directors since 2003 and is a prominent figure in the alternative energy industry.

‘The open board chairperson role creates an opportunity for Tesla to potentially put someone in place that is capable of influencing Musk and helping Tesla reach sustainability,’ said Munster, who is a noted Tesla bull.

A Winning Trade Deal

It will take some time to ferret out all of the details in the new trade deal between America, Canada, and Mexico , but so far it looks good – especially for Wisconsin.

In a win for the United States, USMCA will open up some of Canada’s dairy market to US farmers. The issue was a big sticking point between the two negotiating teams.
Under the original NAFTA, Canada limited how much milk, cheese and other dairy products could come in from the United States.
But under the updated agreement, Canada will set new quotas for the United States. It will increase market access for US dairy, poultry and eggs. In return, the United States will allow more Canadian dairy, peanuts and peanut products, and a limited amount of sugar to cross the border, according to a document from US Trade Representative’s Office.
Canada has also agreed to end a system that had kept the price of some milk products, including milk protein, low. This change will also allow more US dairy products to enter the Canadian market.
The new trade agreement aims to support American workers in several ways.
Most notably, it requires that 40% to 45% of car and truck parts be made by workers earning at least $16 an hour. The goal is to level the playing field between American and Mexican auto workers and to incentivize manufacturers to build more in the United States. One of the main criticisms of NAFTA is that it prompted American car makers to shift production south of the border, where workers earn much less than their US counterparts.
The deal also mandates that 75% of a vehicle’s parts must be made in North America, up from the current 62.5% rule. The Trump administration argues that this will help incentivize billions in new auto sector production in the US.
Also, Mexico has committed to recognize workers’ right to collectively bargain, and the three countries agreed to enforce rights recognized by the International Labor Organization.
Overall, it doesn’t look like there’s anything hugely transformational for good or bad, but the agreement moves the needle a little further in America’s favor. I’ll take it.

Komatsu to Build New HQ in Milwaukee


In a huge boost to Milwaukee’s redeveloping Harbor District, Komatsu Mining Corp. will create a new corporate campus on a desolate former industrial site — with around 1,000 jobs that include 600 local employees who will move there.

Komatsu’s future $285 million development will house manufacturing operations now based at 4400 W. National Ave., West Milwaukee, as well as corporate offices at Honey Creek Corporate Center, 135 S. 84th St., on Milwaukee’s far west side.

They will move by 2022 to a 60-acre site overlooking the inner harbor at the end of East Greenfield Avenue, it was announced Thursday by company executives and state and local officials.

It’s the largest development site in the Harbor District, where work is underway to convert vacant lots and underused buildings into a hub of industrial jobs, housing, retail space and other new uses.

Kingdom Invests in Tesla Rival


Saudi Arabia’s sovereign wealth fund invested over $1 billion Monday in American electric car manufacturer, Lucid Motors.

That’s bad news for Tesla, as it signals that the kingdom may be moving in a different direction, just weeks after CEO Elon Musk claimed the fund would help his own firm go private.

The Public Investment Fund (PIF), which invests on behalf of the Saudi government, said the infusion would go toward launching the Lucid Air electric sedan by 2020.

Walker Calls for Senate to Vote on KC Incentive

I don’t think they should pass it, but I do think they should call it for a vote. Kimberly-Clark deserves an answer either way.

Wisconsin Gov. Scott Walker wants members of the state Senate to convene this month to approve a $100 million tax incentive package designed to keep hundreds of paper company jobs in Wisconsin, but it’s not clear whether the proposal has enough support to pass.

“We need support from both Democrats and Republicans in the Senate to save these good-paying Wisconsin jobs,” Walker tweeted on Thursday.

He told reporters in Milwaukee he’s working to secure the 17 votes needed to approve the bill in the Senate, which would need to return in an extraordinary session in order to give it a vote.

Senate Majority Leader Scott Fitgerald, R-Juneau, said he’s working to find Republican votes to support the bill, which aims to prevent paper company Kimberly-Clark from closing two plants located in Neenah and Fox Crossing at a loss of 610 jobs.

Keep the Walker economy going

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

Labor Day, the unofficial end of summer in Wisconsin, has come and gone. The kids are back in school. Even some of the more eager leaves have begun to turn as a reminder that winter is looming on the horizon. Also looming is the November election, when Wisconsin’s voters will decide whether to change the direction of our state or stay the course.

Gov. Scott Walker has a great case to make for his re-election, but many voters have become complacent after so many years of success. Too often, politics is about “what have you done for me lately.” Walker and the legislative Republicans have made tremendous improvements in preserving and expanding civil rights, protecting life, education reform and many other areas of government. But with the limited space available in this column, let us look deeper at Wisconsin’s economy under Walker.

In 2010, the year that Scott Walker was elected as governor, Wisconsin’s unemployment rate stood at 8.7 percent. Over a quarter-million Wisconsinites were looking for work and could not find it. Per capita income had fallen to $38,598. Businesses were fleeing Wisconsin due to the inflexible regulatory climate, a hostile government and oppressive taxes. The state budget was running yet another massive deficit and voters were facing another round of tax increases.

Fast forward to July 2018 — after almost two full terms of Walker. Wisconsin’s unemployment rate stands at 3.1 percent — a rate below what many economists consider full employment. There are more than 300,000 more Wisconsinites working now than there were in 2010, and they are earning more. Per capita income in 2016, the most recent year for which figures are available, is up to $46,762 — an increase of more than $8,000 per person and the most recent economic data coming from federal number crunchers indicates that income growth is accelerating with sustained high employment.

One might be tempted to dismiss these economic comparisons as unfair given the entire nation’s economy is booming. That is true and a reason that voters should also return Republican majorities to the Congress, but Wisconsin is even doing better under Walker than most other states.

According to the United States Bureau of Labor Statistics and the Wisconsin Department of Workforce Development, Wisconsin’s percent growth in privatesector jobs in July ranked seventh nationally and first in the Midwest. Our state’s July unemployment rate tied for the seventh lowest in the nation. In the manufacturing industry, Wisconsin ranked fifth nationally in percent growth in jobs over the last year and gained the second-most manufacturing jobs in the last six months.

The evidence is clear that while the nation’s economy is enjoying fabulous growth in jobs and wages, Wisconsin is one of the states leading the pack.

The vast majority of Wisconsin’s economic success is due to the millions of Wisconsinites who work hard, build businesses and create value in the global market. State government’s policies can either retard the innate economic prowess of Wisconsin’s people or help create an environment where that prowess can be let loose. The policies that Walker enacted during his first two terms have enabled Wisconsinites to flex their economic muscles.

For example, Walker set about immediately cutting state regulations and reining in the fearsome Department of Natural Resources. He signed the law making Wisconsin a right-to-work state, thus freeing the people from forced unionization. Walker cut taxes and improved Wisconsin’s transportation infrastructure.

Perhaps most importantly, Walker’s pro-business attitude has permeated state government. During the Jim Doyle era, Wisconsin had a well-earned reputation for being hostile to business. Companies that dared to open in the state were threatened with costly regulations, a DNR that would deny permits and slam them with fines for the most inconsequential infraction and politicians who would cluck their tongues if they were not the “right kind” of jobs.

Under Walker, the state has struck a better regulatory balance that protects the interests of all Wisconsinites — including those who want to work. State agencies still enforce all of the laws and regulations, but do so by helping businesses comply instead of crushing them with fines. When businesses run into some problem with state government, a state regulator is more likely to pick up the phone and ask, “How can I help?” That matters to business owners who are just trying to grow their businesses the best they know how.

Finally, unlike the previous governor, Walker actively recruits businesses to move to Wisconsin. There is no doubt that had it not been for Walker aggressively recruiting Foxconn, that multibillion-dollar investment would have gone to another state. Walker not only asked for the business, he closed the deal. A lesser governor would not have succeeded.

Wisconsin’s economy has made a complete turnaround under Walker and is heading in the right direction. It is a mistake to think that the state’s economy will continue in that direction under Tony Evers. Leadership matters and Wisconsin’s economy needs Walker to remain at the helm.

Keep the Walker economy going

My column for the Washington County Daily News is in the paper today. Go buy a copy, but here’s a snippet:

Finally, unlike the previous governor, Walker actively recruits businesses to move to Wisconsin. There is no doubt that had it not been for Walker aggressively recruiting Foxconn, that multibillion-dollar investment would have gone to another state. Walker not only asked for the business, he closed the deal. A lesser governor would not have succeeded.

Wisconsin’s economy has made a complete turnaround under Walker and is heading in the right direction. It is a mistake to think that the state’s economy will continue in that direction under Tony Evers. Leadership matters and Wisconsin’s economy needs Walker to remain at the helm.

Evil Walmart Forces Cash into Employees’ Pockets


WEST BEND — More than 915,000 Walmart associates across the country received a share of more than $200 million in cash bonuses based on their stores’ second-quarter performance, the company announced Friday.

The bonuses were included in associates’ paycheck Thursday.

In Wisconsin, hourly associates received $4.33 million.

According to a news release, these bonuses came on the heels of the best performance for Walmart U.S. in more than 10 years — with comp sales growth (excluding fuel) of 4.5 percent — along with an increase in customer traffic of more than 2 percent.

Perhaps more interesting is that Walmart seems to be bucking the trend to online shopping while other brick-and-mortar retailers are dying. Or are all stores seeing a boost in this booming economy? It will be interesting to see the performance of other stores over the next few quarters.

Opioid Crisis Linked to Decreased Labor Force Participation

Speaking of West Virginia

The opioid crisis appears to be contributing to decreased labor force participation, especially in certain U.S. states, according to a chart by Deutsche Bank’s Torsten Slok.

Opioid use has been one of many driving forces behind higher disability rates, Yahoo Finance previously reported, which leads to more people being out of the labor force (even when the overall economy is humming).

West Virginia, Mississippi, Alabama, and Arkansas are seeing a particularly high correlation between opioid prescriptions and lack of labor market participation, as indicated by this chart:

Torsten Slok / Deutsche Bank Research