Current Job Drought is disastrous for economy, Wisconsin…and disproves Walker, GOP ideology

Wisconsin lost 11,700 private sector jobs in June. Including 1,500 jobs lost  in the Government Sector, the total is a dismal 13,200 – the most in 11 months. The unemployment rate is poised to rise from 6.8% to 7.0%:

The report clearly had an impact on the Walker Administration. Department of Workforce Development (DWD) Secretary Reggie Newson sent a letter to Bureau of Labor Statistics Commissioner John Galvin, blasting the agencies accounting methods – in essence, because they make the Walker Administration look bad:

“From the college graduate contemplating which state to launch a career to the business owner analyzing whether to expand at home or elsewhere, people across our state and nation are making major life decisions based on this information and, collectively, these decisions have an impact on our overall economy.”

Walker, his administration, and Conservative Republicans will never solve this unemployment or economic crisis. They will instead continue to distract; casting doubt about the survey methods previously heralded by Walker, when those numbers makes him look good. The facts, however, are this – Walker and conservatives nationwide are staking their economic policy about job creation on a lie. The result will be a deepening economic, and worse, unemployment crisis.

The economic myth that says “lower taxes on the job creators” will result in job creation is at the forefront of GOP campaigns this year. US House Majority Leader Eric Cantor has the claim on the “jobs” page of his website:

Fix the Tax Code to Help Job Creators:

  • Increase American competitiveness to spur investment and create more American jobs by streamlining the tax code and lowering the tax rate for businesses and individuals including small business owners to no more than 25%.

The right-wing answer to our chronic jobs problem is to cut the top rate to 25%. Here’s the problem – tax rates for the wealthy and “job creators” have been decreasing for decades. This writer (and other’s) question to conservatives…Where the h*ll are the jobs? There can be no more doubt that this economic philosophy is a failure.

In a recent blog, Paul Krugman summarizes the fundamental issue:

Tax rates for the super-elite, the top .01%, have fallen in half since Mitt Romney’s father ran for president; or to put it differently, after tax income for this group has doubled due to policy alone. And bear in mind that the US economy flourished just fine under those 60-70 tax rates

A table from a 2007 study published in the “Journal of Economic Perspectives” shows the “job creators” benefitting from decreased progressivism in the tax code:

Noteworthy is while the top tax rates have been cut nearly in half, the tax rate for the middle 60-90% (the functional middle class) has INCREASED by 25-33%. In Wisconsin, Scott Walker made tax cuts for the wealthy and corporations his first priority as Governor. With all this additional income in the hands of the “job creators,” where are the jobs? Wisconsin in particular has had a trend of lowering tax rates on top-tier earners. The top marginal personal income tax rate from 1979 – 1985 was 10%. In 2009, the rate was 7.75% (Legislative Fiscal Bureau). This represents a combined (state and federal) 42.25% tax cut for the top-tier earners since 1979.

The current unemployment situation reflects that additional income in the hands of top-tier wage earners has done nothing to spur job creation – in fact, in Wisconsin, there is virtually zero growth in jobs. Evidenced by the recent BLS data, there are 15,200 fewer people employed from May 2011-May 2012; and only 8,000 more than May 2010:

State employment 2010-2012

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 2716.9 2714.5 2718.0 2725.3 2728.0 2723.0 2727.2 2731.5 2729.4 2740.9 2743.0 2740.8
2011 2744.8 2750.2 2754.5 2753.4 2751.5 2742.5 2738.8 2729.0 2734.0 2731.2 2719.4 2719.8
2012 2725.0 2735.1 2737.9 2733.7 2736.3

 The unemployment rate ticked up to 6.8% in May, and as reported above, to preliminary 7.0% in June:

State unemployment rate 2010-2012

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 9.2 9.1 9.0 8.8 8.6 8.4 8.3 8.2 8.1 8.0 7.9 7.8
2011 7.7 7.6 7.6 7.5 7.6 7.6 7.6 7.6 7.4 7.3 7.1 7.0
2012 6.9 6.9 6.8 6.7 6.8

The Walker Administration has pointed to the decline in the RATE as being the benchmark that his policy is  “working”, but there is data which disputes their claim. The “Labor Force” data points to a bigger problem – chronic long-term unemployment. People dropped from the system due to benefits expiring; or those who do not qualify for benefits are not reported in the unemployment rate. The Labor Force data for Wisconsin shows this is a real and persistent problem. Since 2010, the number of people in the eligible workforce has remained basically flat. There have been modest gains and losses, but no expected trend upwards:

State Labor Force 2010-2012

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 3096168 3099651 3099906 3096209 3089619 3082208 3075845 3071277 3068599 3067648 3067750 3068342
2011 3069656 3070780 3070312 3067707 3063898 3060386 3058088 3057357 3057366 3057248 3056534 3056367
2012 3054610 3059442 3064447 3069130 3075391

Wisconsin averaged a .9% annual increase in workforce population over the past two years (US Census Data), roughly 1%. A drop in labor force of over 14,000, when population increases would predict an increase of 60,000 means one thing – more people are dropping out of the workforce, and are not reported in the unemployment rate. Any job growth is not keeping up with the increase in workforce, and it leads to one conclusion.

The arrogance and ideology of Scott Walker and the conservative Republicans are preventing them from admitting to economic policy failure. The reduction of taxes for the “job creators” has been occurring for decades. High taxes on “job creators” is not our problem. As previously stated by economists worldwide, the deficit is not our primary problem – weak consumer demand and unemployment are our problems. Put people back to work and increase demand for goods among the middle class, and the economy will recover; deficits will decrease, the economy will recover.

A note to Walker and his allies. You can’t run government like a business. Managing a “micro” economy like a corporation (no matter how large) is no comparison to running a complex, interconnected, “macro” economy of a state or national government. Many people have trouble grasping the difference in complexity between even the largest business and a national economy.

The U.S. economy employs 120 million people, about 200 times as many as General Motors, the largest employer in the United States. Yet even this 200-to-1 ratio vastly understates the difference in complexity between the largest business organization and the national economy. A mathematician will tell us that the number of potential interactions among a large group of people is proportional to the square of their number. Without getting too mystical, it is likely that the U.S. economy is in some sense not hundreds but tens of thousands of times more complex than the biggest corporation. (Harvard Business Review, January/February 1996)

Stop fighting about the numbers and govern…but we won’t hold our breath. We’ll be looking for your replacements.

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3 thoughts on “Current Job Drought is disastrous for economy, Wisconsin…and disproves Walker, GOP ideology

  1. Scott, jobs are directly tied to NAFTA and CAFTA and all of the other corporate giveaways by politicians with their hands out. Jobs is the symptom of a bigger disease. A little fire that diverts us from the bigger fire, our corrupt political system. In my view Walker is part of the problem, spending $35 million of special interest dollars to keep his job.

    • I agree that bad free trade deals have contributed greatly to this problem…a part of the flawed “free market” philosophy that has sanctified the new era Robber Barons as “job creators”…ignoring historical and factual precedent. Thanks for the great comment. I’d encourage you to listen to my recent interview on the “Wisconsin Insurgent Radio Network” (link on blogroll) with Tim Harcourt (the airport economist). Harcourt promoted Australian free trade deals that protected labor and social support programs – including universal healthcare.

  2. Here’s Wisconsin’s job ranking (not unemployment, but jobs… two different counts)… For the month of June: 50th. For three months (March through June): 46th. 2012 to date: 40th. Year over year: 49th. From the “trough” of the recession in early 2010: 46th. From the time Obama took office: 49th. From December 2010 (about the time Walker took office): 50th. (Wisconsin was 32nd from the time Obama took office until December 2010, just about the time Walker took over.)

    Now, NAFTA and CAFTA may contribute to the jobs problem nationwide, but the Wisconsin problem probably belongs to Walker and his friends. There are states that are doing much, much better than Wisconsin over the past few years; in fact, there are between 45 and 49 states doing better than Wisconsin despite NAFTA and CAFTA.

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