Walker’s Wisconsin Manufacturing Renaissance Revised Away (Again)

Or. Oops. (Again).

Figure 1: Manufacturing employment, in thousands s.a., from December 2018 release (red), and January 2019 benchmarked release (blue). Light green shading denotes benchmarked data. Source: BLS.

A longer term perspective shows how consequential the revision has been.

Figure 2: Manufacturing employment, in thousands s.a., from December 2018 release (red), and January 2019 benchmarked release (blue). Light green shading denotes benchmarked data. NBER denoted recession dates shaded gray. Source: BLS, NBER.

Former governor Walker stated in October:

“We don’t want to go backwards,” Walker told members of Wisconsin Manufacturers and Commerce at a luncheon in Madison. “About 88 percent of all the recipients … are small businesses. Businesses that make less than $1 million a year. If we were to wipe that out, we would be taking out a lot of the growth and prosperity in the state.”

Walker signed the credit into law as part of his first budget in 2011. It was phased in over the course of several years.”

I think we can dispose of such hyperbolic warnings now, after years of continuous failure with the Manufacturing and Agriculture Credit.

 

 

15 thoughts on “Walker’s Wisconsin Manufacturing Renaissance Revised Away (Again)

  1. Moses Herzog

    I really feel for this guy. I think he’s a good person, I think he’s highly intelligent, but I think he’s also learning something the hard way. It’s better to run for something like Governor, Senator, or even a large city mayor (a la Bloomberg) before you run for President of the United States. You can’t just look at the Ross Perot and Trump examples and say “OK, I’ll just toss my hat in and see what happens”. And some people may find it hard to believe, but it honest to God pains me to watch this guy who is sharp-minded and I think genuinely wants to help the little guy, put his head on the tree stump and watch the axe fall down (seemingly to his eyes in very slow motion) on his neck.
    https://www.youtube.com/watch?v=alRgSjWT2RI

    So the question arises: “Why didn’t Andrew Yang, a very intelligent guy, run for office in the state of Washington, or say Oregon, say as U.S Congressman or even state level legislator??” or “Why didn’t Andrew Yang run in a predominantly ‘liberal’ district where his odds were high to win and he could stretch his personal resources out better??” Not only could Andrew Yang STILL help people, but he could gain some name recognition, and give himself a background people would feel more comfortable or “assured” voting for him. I think as time wears on Yang is going to be asking himself this question (if he isn’t already) and learn the “hard way” that maybe taking some political “baby steps” would have been the sharper move instead of waking up one morning and saying “I think I’ll run for President”.

    It’s a type of vicarious torture chamber watching this guy die this slow death. Maybe he’ll surprise me in Iowa, but I don’t see it happening.

    Reply
  2. pgl

    Ah c’mon Menzie. None of this compares to the forecast errors Kudlow has made on a national scale. And remember Kudlow is Trump’s chief economic cheerleader!

    Reply
    1. Moses Herzog

      My understanding is that donald trump is busy and working hard right now on building grassroots support for reproductive rights.
      https://www.miamiherald.com/news/politics-government/article227186429.html

      https://twitter.com/JeffreyGuterman/status/1104145022432219136

      https://twitter.com/JeffreyGuterman/status/1104151556943949824

      Or was it “family values”??? I don’t know, I was thinking of my ex-girlfriend’s Mom momentarily while looking at these pictures, and I know I do get “confused” sometimes what that means. It’s probably some mental problem I have, who knows.

      Reply
    1. pgl

      She dated Dinesh D’Souza? Hey – I know Ann Coulter is one ugly broad but going out with D’Souza? Yuk! OK – that beats dating Rush Limbaugh or Tucker Carlson but one would think even Ann could do better.

      Reply
      1. Moses Herzog

        Similar to Sarah Palin circa 2006–2007, as much as I hate the woman I have to give her she was attractive in her younger years. She’s long passed that stage, but at one time she wasn’t bad. As far as D’Souza I have to assume the two attractive factors were his wallet and bolstering her conservative credentials. I would think Coulter is independently wealthy at this point, but for a person like her it’s never enough. Coulter has a masculine voice, so, I have never gotten the fascination there. I can’t get into women that sound like a Marine Lieutenant on shore leave. Women tend to be much more forgiving than men on looks. I speak as one who has been with girls way out of my league looks wise. That’s not bragging, more like exceedingly grateful to the heavens and wondering “What is this amazing person doing wasting time with me??” kind of confounded feeling when in the midst of it at the time.

        Reply
        1. 2slugbaits

          A long time ago I saw a C-SPAN coverage of a formal debate between Ann Coulter and Peter Beinart. It was at some college campus and was well moderated, so you couldn’t just blather talking points or run out the clock knowing that a commercial break would bail you out, which is what happens on cable shout shows. Anyway, it wasn’t long before a pattern emerged. Beinart would say something and Coulter would respond with one of her patented flippant comments. But Beinart wouldn’t let go, so he’d rephrase the question. Coulter would make another attempt at deflecting the question with some more of her flippancy along with a flip of her hair. Beinart would come after her again. She’d make another attempt at flippancy, but you could tell the old magic wasn’t working. No commercial break to bail her out. After about an hour of this beat down I was actually starting to feel sorry for Ann Coulter. It revealed just how shallow she really is. And you see the same kind of thing with a lot of Fox News personalities. They’re very good at bullying, belittling and flippant comments, but in the end they always count on that commercial break to bail them out of any in-depth discussion.

          Reply
  3. Julian Silk

    Dear Menzie,

    This is not to support Governor Walker. But you do have to ask what he could do specifically to reverse the decline in Wisconsin manufacturing. There are essentially three competing hypotheses about the decline of manufacturing in the U.S. generally. One is that it is all imports, especially Chinese imports, as in

    https://qz.com/1269172/the-epic-mistake-about-manufacturing-thats-cost-americans-millions-of-jobs/

    Another, which directly contradicts the China hypothesis, and argues that slow GDP growth is more important, is in

    https://www.mapi.net/sites/default/files/attachments/NABE_Meckstroth%20Award_FINAL_KliesenTatom.pdf

    The most convincing for me is the argument that productivity growth has been very weak, and that it is not strictly a U.S. phenomenon, as in

    https://www.mapi.net/sites/default/files/attachments/NABE_Meckstroth%20Award_FINAL_KliesenTatom.pdf

    So the tax credit, if you’re going to allow for the conservative philosophy that government intervention in the economy should always be reduced, is a failure, but so is much else. To keep what I am working on confidential, let me just tell you and the folks that some industry has cut back on employment by heavy automation and the use of technology that replaces workers. You can think of computer automated design and cutting techniques in the textiles industry, as in

    https://www.textileschool.com/464/fabric-cutting-techniques/

    The problem with this for increased output is that it lowers cost, but does not necessarily increase sales. Chinese and other manufacturers can compete with these techniques by cutting wages and ignoring environmental restrictions that are relevant for the U.S. but not elsewhere. People will die in these other countries because of these cutbacks, but it is a slow process, and reduced transportation costs allow foreign sales to rise in the short run, which is what the businesses care about.

    Let me give you two tangible alternatives, and you and the folks can see if you would prefer them, and whether you think they would have done any better. One might be a research/environmental credit or tax relief, so that a manufacturing company that made a joint agreement with the University of Wisconsin or any other college or university in the state and embarked on a research project which produced in Wisconsin would have reduced taxes for say a 10-year period. This is similar, although certainly not identical, to what Virginia is offering Amazon. You would want new products, and the results would still likely not show up in increased sales for a long time, but you would get better growth eventually.

    The second might be a type of environmental labeling. Companies that sold in the state would be required to disclose greenhouse gas emissions per item, and there might be some sort of preference for locally produced items in terms of a sales tax. This would be similar to a carbon tariff, but on a much smaller scale than nationwide. I am thinking particularly of lighting, as with Fermentalg, as in https://www.fermentalg.com/en/. You might have them open up a factory in Wausau, or something on that order.

    Do you think either of these would work any better?

    Julian

    Reply
    1. Menzie Chinn Post author

      Julian Silk: You’ve got reasonable points. For me, the question is (i) whether we should be trying to reverse the decline in manufacturing employment, or (ii) whether we should try to facilitate the move into other activities that might have higher value added (in which case it might be the case that greater investment in higher education/vocational education would be called for, rather than slashing of such funding). And even if we *do* want to try to reverse decline in manufacturing employment, maybe the way to do it is not by giving tax credits that end up merely being a tax cut for high income individuals.

      One thing is one wants to attract a highly skilled labor force, and the way *not* to do that is to busily slash public funding for education, a foster an anti-intellectual pro-plutocratic environment.

      Reply
      1. Bruce Hall

        Menzie
        According to Bloomberg, Wisconsin was the only state in 2016 with its public sector pensions fully funded. https://www.bloomberg.com/graphics/2017-state-pension-funding-ratios/. California had a $200 billion unfunded liability. From various sources, per capita state and local debt in California is on the high end of the spectrum while Wisconsin is fairly average.

        So, the question I have is present growth in California being financed by potentially disastrous debt and obligations or is Wisconsin not being aggressive enough with its use of debt?

        With regard to education spending, Wisconsin spent considerably more per pupil than California according to a 2013 Census report summarized here: http://www.imagegator.co/education-spending-per-capita-by-state/

        So, is the government of California the mover of its economy or is the California economy expanding despite the government?

        Reply
        1. pgl

          People should read your first link to see how badly you misrepresented what it really said. 2nd paragraph:

          “By contrast, New Jersey, Kentucky and Illinois continue to lose ground and now have only about one third of the money they need to pay retirement benefits. And three states had double-digit declines in their pension funding ratios in the past year: Colorado, Oregon and Minnesota—though some of this can be attributed to actuarial changes in the way pension liabilities are calculated. We’ve ranked the states by the size of their funding gap. The lower the funding ratio, the more money the state has to come up with to meet its pension obligations.”

          New Jersey’s gap is yuuuge (thank you Chris Christie) whereas California is just a bit below the national average. “some of this can be attributed to actuarial changes … ”

          Can someone decode what this means for Brucie boy?

          Reply
          1. Bruce Hall

            pgl, so you are not disputing that Wisconsin’s public pensions are fully funded whereas there is a large hole in California’s? And you are not disputing that California’s debt obligations are also a potential problem? You are only distraught that I mentioned them?

            Oh, I didn’t say that there were state other than California that didn’t have problems. I stuck to the one-on-one comparison.

            But, regardless, you didn’t really address the big question: is the government of California the mover of its economy or is the California economy expanding despite the government?

          2. noneconomist

            Not sure of Bruce’s question, but his mention of debt (and state government) as factors in a state’s growth merit attention.
            Looking at data on usgovernmentdebt.us, “State and Local Government Gross Public Debt ranked by: percent GDP”, Wisconsin is second lowest, California is 14th highest.
            Interesting, though, are six “business friendly” states whose debt to GDP is higher than California. They include Texas (!), Kentucky, Kansas (Look out Texas, here comes, you know who) Nevada, Alaska, and South Carolina. Also just a bit lower than Ca. is North Dakota.
            Question then: in these more “business friendly” less regulated states with more debt obligations/GDP, given THEIR debt obligations, has the role of government expanded (or limited) state growth
            Interesting also: if you consider only state debt, there are a number of “business friendly states with higher debt/GDP numbers: South Carolina, Kansas, Kentucky, North Dakota, Louisiana, Missouri, Mississippi, Montana, Indiana, and South Dakota.
            Comparing an economically diverse state with 40 million people with one 3X smaller with a population of 6 million has more than a few pitfalls not the least of which is judging the effects of gross public debt on economic success.

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