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Wisconsin’s Economic Cautionary Tale

Memo Pad

Wisconsin’s Economic Cautionary Tale


The continuum of American politics is not a straight line — it is more like a circle. Travel farther out on the right and left, and ultimately the sides bend to a common position on an issue like taxpayer subsidies for big business. To many progressives, such expenditures are giveaways to the already wealthy. To many conservatives, they are a free-market-distorting waste of taxpayer resources. Both sides also often criticize the subsidies as an instrument of cronyism and corruption.

In recent years, taxpayer subsidies for corporations have become a huge expense: The New York Times estimates that states and cities now spend more than $80 billion a year on such so-called “incentives.” For the most part, this gravy train has not faced much pressure to slow down.

But now, as the 2016 presidential campaign intensifies, both the left and the right will have a prime opportunity to spotlight its critiques. That is because one of the most prominent Republican presidential candidates — Wisconsin governor Scott Walker — has made such subsidies a central part of his public policy agenda. Those subsidies have produced both high-profile scandals and lackluster economic results.

In 2011, Walker created the Wisconsin Economic Development Corporation to give businesses taxpayer loans and grants. Within a few years, state auditors published reports spotlighting “concerns with WEDC’s administration and oversight of its economic development programs and its financial management.” Specifically, auditors said “WEDC did not require grant and loan recipients to submit information showing that contractually required jobs were actually created or retained” and also noted that money was handed out “in ways that did not consistently comply” with state law.

Much of the cash flowed to Walker’s political allies. According to a new report by the left-leaning One Wisconsin Institute, 60 percent of the $1.14 billion given out by the WEDC went to firms connected to Walker’s campaign contributors — that includes more than $2.1 million those donors have given Walker’s election campaigns directly.

Had the taxpayer largesse significantly boosted Wisconsin’s economy, perhaps the financial management problems and the allegations of cronyism could be downplayed. But Wisconsin’s economy has suffered under Walker. As Bloomberg News reported, “Wisconsin ranked 33rd among U.S. states in economic health improvement during Walker’s first term” with the state only “a little more than half the 250,000 private-sector jobs that Walker promised during that time.”

Those results, though, have not deterred Walker: His most recent budget proposed to slash $300 million out of higher education funding and spend roughly the same amount to help finance a new arena for the Milwaukee Bucks. One of the members of the investor group that owns the NBA team is the national finance co-chairman of Walker’s presidential campaign. Walker pushed the subsidies despite a widely cited 2008 study by researchers at the University of Maryland and University of Alberta, which found the “overwhelming preponderance of evidence” shows “that no tangible economic benefits are generated by these heavily subsidized professional sports facilities.”

As Walker’s record faces intensifying scrutiny during his presidential campaign, his free-market rhetoric may conflict with his embrace of market-distorting subsidies for private businesses. Particularly in the Republican primary, conservative candidates and groups will have an opportunity to spotlight Wisconsin as an illustration of why they crusade against corporate welfare.

Walker, of course, may try to shift the blame for Wisconsin’s troubles — but the facts, stats and policies tell a clear and compelling story about why states cannot rely on subsidies as a tool of economic growth.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

U.S. Republican presidential candidate Scott Walker speaks at a campaign stop in Haverhill, Iowa, United States, July 18, 2015. REUTERS/Jim Young   

David Sirota

David Sirota is International Business Times' senior editor for investigations. He is also a nationally syndicated newspaper columnist and a bestselling author. He lives in Denver, Colorado and covers the intersection of money, politics and finance. He appears periodically on national television shows and is a "real guy represented by the character on ABC's The Goldbergs," according to Twitter.

In 2014, he was the winner of the Society of American Business Editors and Writers' investigative journalism award, and the winner of the Izzy Award for Journalism from Ithaca College's Park Center for Independent Media.

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  1. Marv Nochowitz July 31, 2015

    Republicans believe in welfare but only for the rich. The Republican pattern is to take from the poor and redistribute it to the rich.

  2. Eleanore Whitaker July 31, 2015

    Walker wouldn’t last five seconds in the northeast. Cheese doodles like him rarely can cut the dog eat dog world we live in. Anyone in WI can lay back, collect tens of billions in federal tax subsidies and then preach their Great Depression gospels. Too bad we don’t want to hear what Cheese Doodle Walker has to say. We know his brand of mindless hardship on the middle class is the Koch dissertation on how to OWN the US. Try again Walker. You are down for the count.

    1. RED July 31, 2015

      Although, I can imagine that living in the Northeast is most definitely a struggle. But let’s not forget that New Jersey voter have shown some extreme ignorance themselves, twice. And they should really know better.

      1. Eleanore Whitaker July 31, 2015

        Living in the Northeast IS a struggle…First the bombing in NY City in 1993, then 9/11 and then SuperStorm Sandy. You reds live off our federal taxes. NJ gets back 52 cents for every dollar we pay in federal taxes. Every red state gets a return of $1.35 to $1.87. How fair is that?
        NJ also has to contend with the pollution that comes from midwestern and southern states from their relic fossil fuel industries. NJ is No. 3 in Solar Energy in the US. We DO something about pollution..the slugs in the RED states just sit back on their lazy haunches and force the rest of the states to help pay your spill fines and polllution cleanup.

        As for showing extreme ignorance, Walker is a cheese doodle who is wound up by the Koch boys, Issa, Gowdy, Cotton and Inhofe are attack dogs and NJ has not forgotten what that little turd Rand Paul did when NJ for the 1st time in over 200 years needed FEMA funding. It was okay when year after year, NJ’s tax dollars are spent on the wild west’s wild fires, tornadoes and floods they can do something about but refuse to.

        We did know better. But, unlike you bully boys in the good ole good ole Dixie Confederacy, we at least elect men and women to our state government who have educations. Not the dregs of Dogpatch.

        1. RED August 2, 2015

          Eleanor, you completely misread my comment or maybe I wasn’t clear. Yes, I live in a very Red state, sadly, very sadly. But I myself very much believe in progressive ideals which is why I pointed out the tragedy that a traditionally blue state would elect a moron like Chris Christie. Here in Alabama there is no hope for a good while. But you seem to have taken my comment as if I was a supporter of the continued ignorance of the moronic Cons. I certainly am not!

          1. Eleanore Whitaker August 2, 2015

            Sorry, Red and I apologize. As you know, the tone of posts often go awry. No excuse though for my misundertanding.

            In truth, I have several relatives in southern states. I always feel sorry for them because it’s almost as if they have NO control over their own futures. This is why they seem to all remember the past with such fondness.

            I’m a progressive populist. NJ has a lot of problems AL would never want. Like many states today, NJ is almost like 3 separate states: North, Central and South. The further north in NJ you go, the more you see the Noo Yawk wannabees with their show off Manolo Blahnik $900 shoes and their Lord & Taylor $3,000 jeans.

            The minute you leave Monmouth County, you’d swear you were in Georgia, compete with the accents, Stars and Bars flags and bully boy pickups.

            When Christie was elected, the choice was another term with Jon Corzine, former Goldman Sachs CEO or Bush appointed US Attorney…Christie.

            In NJ, the one unfortunate problem is how these men are chosen. First, the party bosses choose from among 5 candidates to put out there. Then, we get to choose one of them from the party of our particular affiliation. Then, those two go head to head in the state election. NJ Judges are appointed…not elected.

          2. RED August 2, 2015

            Thanks. No big deal. It’s rough down here. I joke that if I was gay I could tell my family that but to tell them I’m a Democrat they might dis-inherit me!! Hehehe. Seriously though I could actually lose my job if it became known that I wasn’t a nut bag tea party moron. Scarey!! I would love to live somewhere that had people who were much more open minded and less ignorant. But because my whole family is here and my wife, plus being a Southern I can’t take the Northern climate, I’m stuck here.

          3. RED August 3, 2015

            Your original comment got me thinking. My twitter is blueinbama but on this my name is RED. I didn’t really think about how that might make people think that I was an ignorant Con because RED just happens to be my actual initials. So I tend to think of that when I see RED, not being an ignorant Con.

  3. 5612jean July 31, 2015

    Wisconsinites seem to be pretty stupid in light of the fact they elected Scott Walker twice. He decimated the economy and now he wants to do it nationally. Fortunately the rest of us aren’t as stupid as they seem to be. Scott Walker doesn’t stand a chance on being president fortunately.


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