Saturday, August 30, 2014

How to create jobs in Wisconsin: increase demand, reduce burdens for consumers

The Walker administration has slowed growth by refusing to acknowledge that capitalism requires strong consumer base

What creates jobs? That question is likely to be on the minds of several Wisconsin voters this fall.

Gov. Scott Walker, who promised at least 250,000 jobs created in his first term in office, is well short of his pledge (that’s a generous conclusion -- he’s not even halfway there). Whether voters will hold him accountable to that number or find the number Wisconsin has created as acceptable is yet to be seen.

Tax breaks (on their own) fail to create jobs
As far as how to create jobs, however, the governor has missed the ball. In his quest to create more work for Wisconsin, Walker has sought and passed into law tax breaks for corporations that number in the billions.

The idea was twofold:

First, that the tax cuts would lure businesses to the state. That hasn’t happened -- in fact, in order to make himself look like a “business creator,” Walker has had to inflate new business numbers by counting Girl Scout troops, condo associations and Little League teams as “corporations.”

Second, that tax breaks for businesses (real ones) would encourage growth as capital would be added. But that hasn’t happened either...nor should we have ever expected it to have.

Businesses, large or small, need two things to create a job: the capital to pay for it, and the need for the job in the first place. The first part of that equation might have been fulfilled by the large tax breaks to some corporations, but until those businesses had a need for a new job, they weren’t going to create one.

And why would they? Think about it: what would you do if, as a business owner, someone handed you thousands of dollars? Would you use it to create a job you didn’t quite yet need, or would you simply hold onto it?

It makes better business sense to do the latter. The only way jobs, in mass quantities like Walker promised, will ever be created will be if demand goes up as well. If a product or service is being bought in higher quantities than before, then the need for more labor to keep up with demand is generated.

Tax cuts for families are too small to make a real difference
The consumer class is the real job creator. When the consumer class is empowered, they make more purchases, and thus generate greater demand for labor. Has Walker done anything to help them?

He would likely point out to his tax cuts as evidence that he has. But while tax breaks can help in some ways, the ones put out by the governor have hardly made a dent in creating a stronger consumer base. The median household income in Wisconsin is $50,000. At that rate, Wisconsin families will see a tax cut of about $197 -- about $16 per month, hardly enough to generate a huge financial boom in Wisconsin.

At the same time, the Walker administration has increased taxes for several poorer Wisconsin families by eliminating benefits paid out through the Earned Income Tax Credit and other programs meant to help. More than 140,000 families will see their taxes go up, according to PolitiFact Wisconsin, amounting to a cut of $56 million to the EITC program.

Also, Walker’s decision to reject federal funds for BadgerCare booted tens of thousands of families from the program. In doing so, household funds that could have been used to make additional purchases for these families’ budgets -- driving consumerism in the state -- are instead dedicated to burdensome health costs.

How to empower the working class
That’s one way that Wisconsin could empower its consumer class of citizens. If less strain were placed on health care costs for these thousands of families (estimates are that around 90,000 citizens affected), countless dollars that would have been dedicated towards insurance could instead be used elsewhere -- say, buying that new TV or video game system for the kids, or buying more Wisconsin-based groceries at the supermarket, or so on and so on.

Another way to grow the consumer base? Increase the minimum wage. While businesses would have to pay their workers more, the payout for them would be greater as more consumers would be able to buy their products or services. This would lead to greater demand of their product, which would require more workers to provide for that demand.

Some have said that raising the minimum wage would decrease job growth. Among those critics, Gov. Scott Walker specifically has called the move to raise the wage “nothing more than a misguided political stunt.”

Someone needs to tell the governor, however, that nine of the 13 states that have raised the minimum wage in 2014 are seeing faster job growth than Wisconsin. If raising the minimum wage is so bad for job growth, how can he account for growth in states where the wage has gone up alongside jobs?

Turning things around in Wisconsin
The candidates for governor are going to spend much of the rest of the campaign arguing the best ways to grow jobs in the state. That debate ought to be rigorous and full of ideas worth debating.

But there can be little debate about this: the way we’ve gone about creating jobs so far under Gov. Scott Walker has failed to produce a sizable number of new jobs. We have seen some increases, but the numbers are slower than what was promised, and slower than what we could create.

Empowering the working class of the state is the best way to ensure a strong growth of jobs. Under this governor, we have seen laws that have reversed the purchasing power of workers, including Act 10 which reduced the purchasing powers of state workers.

If we start ourselves on a track of increasing wages and reducing burdensome costs of workers, both private and public, we will surely see a growth in Wisconsin’s economy, and with that a growth in demand and jobs overall.

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