Friday, January 20, 2012

Walker's "tools" cost more jobs; austerity does not work

Wisconsin lost 3,900 private sector jobs in December according to data released Thursday by the state Department of Workforce Development. In the same month, the United States gained an estimated 212,000 jobs.
In the public sector, government agencies at the state level shed jobs last month while city and county employers showed job gains. Losses in the private sector and changes in government staffing left the state with an estimated net loss of 1,700 non-farm jobs for December. .

Wisconsin has lost jobs for six consecutive months and has lost more jobs than any state in the nation since Governor Scott Walker's budget went into effect in July 2011. The graph by the Philadelphia Reserve Board below documents this.

Wisconsin is continuing to hemorrhage jobs because of Governor Walker's one-sided reliance on spending cuts to balance the state budget. That is because demand creates jobs.  Consumers account for almost 70 % of the economy. Yet Walker's budget cuts have caused the demand for goods and services to decline in Wisconsin.

Wisconsin shed more state government jobs than any state in the nation in 2011. When workers lose their jobs, their incomes decline and they buy less. In addition, the disposable incomes of virtually all of Wisconsin's public workers declined as health care premiums increased and pension contributions increased to 5.8% of income. The result a decline in aggregate demand that has caused Wisconsin to shed jobs even as the national economy is adding them.

The lesson of Walker's first year is that you cannot cut your way to job growth and prosperity.

Austerity has been a failure where ever it has been tried. 

In a recent paper for the International Monetary Fund, Laurence Ball, Daniel Leigh and Prakash Loungani look at 173 episodes of fiscal austerity over the past 30 years—with the average deficit cut amounting to 1 percent of GDP. Their verdict? Austerity “lowers incomes in the short term, with wage-earners taking more of a hit than others; it also raises unemployment, particularly long-term unemployment.”

Let's take a quick  look at the unemployment rates in those nations that have responded to budget deficits with austerity. In Ireland the unemployment rate has soared to 14.3%. It would be even higher but tens of thousands have migrated abroad. England's unemployment rate is 8.4%, the highest in sixteen years and Spain's has soared to 22.9%.

As Reuter's reports: "Europe's worsening sovereign debt crisis and governments' tough cost-cutting response appear to be driving the 17-nation currency bloc back into recession following the 2008-2009 global financial crisis, while the number of people out of work is rising."

Austerity does not promote growth or job creation. Walker's tools are not working. It is time for a new approach in Wisconsin.


Anonymous said...

Hmm...Wisconsin's unempolyment rate just dropped to 7.1 percent. It was 7.5 percent when the Governor took office...seems your shedding of jobs numbers are not adding up.

Anonymous said...

The private sector WILL suffer losses until this recall business has run its' coudse. This is the second consecutive year of this nonsense. Who in his right mind would hire more help without knowing the political / economic climate 18 months out?

Anonymous said...

Correction on the typo: COURSE

Small Biz said...

We've finally seen some legislation that makes sense. This is tn the liability and tort reform area. Now that one can make a living again, work will return. It won't happen overnight, but it will happen.

Anonymous said...

The unemployment rate does not include discouraged workers who have stopped looking for a job, so Wisconsin both lost jobs AND had large numbers of workers "leave the workforce" due to lack of job opportunities. The numbers add up just fine and they all say the same thing: Walker's policies are a disaster for Wisconsin.

Jim Rosenberg said...

Thanks for putting it out there for people. Once again today, I received something in the mail from the GOP crowing about how "Wisconsin's Economy is Finally on the Right Track." It's total bullpucky. Wisconsin has lost jobs in EVERY SINGLE MONTH since the Walker budget went into effect July 1. As support for their fictious statement, the Republican Party of Wisconsin cites a survey made up largely of people who put Scott Walker in office and quote the CEO of Wisconsin Manufacturers and Commerce. There is a reason that there are a million signatures on file at the Government Accountability Office and it is because this state is on the right track.

Michael Rosen said...

The reason Wisconsin's unemployment rate dropped is that 1million workers dropped out of the labor market. They are no longer exist as unemployed persons even though they do not have jobs.

The writer who blames Wisconsin's abysmal economic performance on the recall effort is wrong. The Wisconsin economy was creating jobs until July, all through the protests in Madison and while the first round of recalls were underway. Businesses invest and expand in response to increased demand. Since disposable incomes are down, so is demand. As a result, we are, unfortunately, losing jobs.

Dave Kacynski said...

It's not hard to imagine that when you take money from the middle class and give it to the rich in the form of "jog creating" loopholes, unemployment is going to go up and the 99% lose again. Thank you Scotty, you've done enough damage, time to leave.

Anonymous said...

With the recall process under way, what business is going to move to Wisconsin?? They don't want to move here and have the libs back in office. Higher taxes, more regulations; exactly what a new business doesn't want to move into.

Michael Rosen said...

Business owners, at least sucessful ones, don't make investment decision, which are long term decisions, based on election results or recalls. That is because they know that the political party in power can change over night. Nor by the way do they make them based on tax rates. As Paul O'Neil, former Alcoa CEO and President Bush's first Secretary of Commerce said: "As a businessman I never made an investment decision based on the tax code. If you give money away I will take it, but good business people don’t do things because of inducements."

Anonymous said...

Why not the same anger toward Obama and his policies (or lack thereof)?

Remember when he posted the Romer chart and said if his stimulus package was not approved, unemployment would drive up to double digits? Approving it would cap unemployment at 8%. Lots of hope. Jobs have been Priority Number One since he took office. For who? Bankers? Wall Street? Hollywood? The high end vacation industry?

Channel you anger and Hope there is Change in 2012.

Anonymous said...

My sister owns a small business in Milwaukee. Much of her business came from Milwaukee public employees and Milwaukee Public school employees. Her business is suffering greatly thanks to the massive cuts to those employees by Scott Walker. His policies, which are supposed to help business only help big corporations, which are now just sitting on the money. (proof is in the unemployment rate) For us to get out of this recession money needs to flow through the economy for it to recover. His policy eliminates the middle class.

Anonymous said...

"Much of her business came from Milwaukee public employees and Milwaukee Public school employees. Her business is suffering greatly thanks to the massive cuts to those employees by Scott Walker."

There were no massive pay cuts in MPS. You are a liar and a fraud. Stick to the talking points that you are given. Don't try any independent thoughts. People may think you are stupid now, why risk removing all doubt.

Anonymous said...

First of all, there is no need to be such an ass with your comments. Secondly it is not only the layoff ( yes there were layoff is MPS) but it is the propect of being laid off that scares people from spending their money. Your ignorance is showing.

Anonymous said...

How many of those jobs were in the public sector? A lot of teachers lost their jobs in Milwaukee because of the new contract they entered into. (Who enters into a new contract when you don't know what your budget will be?) When the dismissed employees went to their union and asked to have the contract renegotiated, the union voted "No".

Which proves this was never about helping union members: it was about the union keeping their dues.

And no one has ever explained to me why the public employees are entitled to all those benefits? "Because we've always had them" is not an explanation.

The only ones who deserves those benefits are police and firefighters. They put their lives on the line every single day, not knowing if they're going home that night. The least we can do is take care of them and their families.

I believe the private sector losses will continue as long as we have those ridiculous EPA rules and the current tax rules, and Obama's position on fossil fuels.

If we were allowed to drill for fossil fuels in Wisconsin like Gov. Walker wants, that would create hundreds of jobs. If Canada were allowed to build a pipeline, that would create hundreds of jobs. What's stopping us? Obama.

And we continue to waste millions of dollars on Gov. Walker's recall. Why is no one recalling Obama? Look at the lousy job he's done in the last 3½ years. He is arguably one of the worst presidents in the history of this nation.


Anonymous said...

As a small business owner myself, I am seeing and asking questions about the following:
1. it doesn't matter who is governor, the policies seem to benefit the workers or larger business. Small business never seems to get anything. I don't need tax relief, I need working capital. Grants to hire/train employees would be great.
2. The state is a business. A business must operate within its means. If a business spends more money than it takes in, it goes out of business. Why is this so difficult for people to understand?
3. As a small business owner, I am always asked to "pay my fair share". I don't have a problem with that as long as everyone is paying their fair share, and that includes the public employees.
4. if a 5.8% reduction in pay for public employees resulted in a loss of 3900 jobs, I believe there are too many public employees. Private sector employees should outnumber public employees many times over.
5. If all public employees didn't contribute 5.8% for benefits, I wonder how many more jobs would have been lost?
6. Seems like contributing 5.8% for benefits is a much better deal than only getting $363/wk unemployment...
7. Most business owners I know, look for ways to create additional revenue when sales are down. When the union thought that their revenue was going to be reduced because union dues were no longer going to be automatically taken from public employees paychecks, instead of looking for other revenue generating ways to provide value to their members, the union cut 50% of it's staff. Seems like a double standard...if Harley would cut 50% of it's workforce at the first sign of financial trouble, the union would come down hard on them...
8. I've had more than 50% of my projects put on hold due to the political unrest not only in wisconsin but in washington as well.
9. Although I do agree with Michael that, previously, business owners didn't make decisions based on political incentives...I believe things are different now. I speak to many business owners on a regular basis that are looking to move to states that are more business friendly. I think the tough economic times has changed how businesses operate.
10. I don't believe 6 months is a long enough time to see if policy changes work. Wisconsin is a multi-billion dollar business, to expect that to change overnight I don't think is realistic.
11. Wisconsin needs to live within it's means, become more business friendly, create programs for small business owners with 1-50 employees, and reduce the size of government.

That's my two cents for now.