Wednesday, December 21, 2011

Tax cuts, Walker's attacks on the middle class, expectedly hurts job growth

When it comes to jobs, Wisconsin is the worst since Walker budget passed in June

Over at Jake's Economic TA Funhouse (I'll never tire of that title), there's even more evidence that Gov. Scott Walker's jobs initiative is failing our state. Not only was Wisconsin the biggest loser of November, but ever since Walker's budget passed, no other state has lost as many jobs as Wisconsin -- in fact, our state is more than four times greater than second-place Georgia in terms of job loss:
...despite Barca's misspeak about [Wisconsin being the jobs loss leader] for the second straight individual month (we're back at 1 month of "leadership"), he's right on another point. WISCONSIN KEPT ITS POSITION AS NUMBER 1 FOR JOB LOSS SINCE WALKER'S BUDGET WAS SIGNED IN JUNE. And no other state is close to how bad we've been.

U.S. job change June 2011- November 2011
Wisconsin -34,900 (-1.26%)
Georgia -8,600 (-0.23%)
Missouri -8,200 (-0.31%)
Minnesota -7,200 (-0.27%)
Montana -2.400 (-0.55%)
With numbers like those, even if the Department of Workforce Development's criticisms of preliminary numbers are valid, we're still the worst state in the union.

So why is Walker's jobs plan failing so miserably? Shouldn't billions of dollars in corporate tax cuts be creating jobs for the state? To put it bluntly, no: tax breaks for corporations don't create any incentive for job creation, at least on their own. At best they provide a means for companies that have demand but no capital to take a chance. But tax cuts won't create jobs without that demand being added.

Companies create jobs when they need to provide "more" of something -- more products, more services, etc. The greater need for this "more" creates a burden of extra work required for the business, which can be alleviated through hiring more workers. This is usually the result of greater demand on the part of those making purchases -- e.g. the consumers. Fortunately, with more demand also comes more capital, so the hiring of workers is usually a profitable, cost effective endeavor.

But direct tax breaks to corporations won't create that demand. Instead, they reward companies for doing what they've already done. They do NOT incentivize what we want them to do, which is create more work for those looking for it, because there's absolutely no reason to do so.

So we have to ask ourselves this singular question: when corporations are essentially handed money for doing nothing, is there any reason that they should create jobs, which will cost more capital, just for the sake of doing so? Of course not. The increase in capital for companies that have that demand, yet lack the ability to create more of a product, would make sense. But a blank check to corporations in the hopes that they will engage in a rare moment of benevolence is laughable -- they're looking out to increase their profits, won't add jobs just for the heck of it.

Yet Walker is putting his chips "all in" with the hopes that the $2.3 billion he's given to corporations through tax cuts will pay off. For some small businesses, it might...but only if they have demand for jobs and no resources. The vast majority of corporations in our state won't have that problem.

It's not surprising, then, that jobs in Wisconsin have failed to materialize. And with more and more consumers having less and less capital in their pocketbooks, it's equally unsurprising that job totals in the state are actually decreasing. Without that consumer spending, after all, there's no growth in demand, and thus no growth in the need for more labor.

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