Tuesday, February 20, 2018

Foxconn 2? $100 million+ Kimberly-Clark bailout needs to go down

To no one's surprise, Appleton-area Republicans have now formally introduced a bill that would give out tax dollars in an attempt to avoid over 600 layoffs that Kimberly-Clark is planning to impose by closing two facilities in the Fox Valley. So let's take a look at the bill, and see how this bailout package would work.

The bill gives Foxconn-levels of tax breaks for keeping jobs, allowing WEDC to give back 17% of Kimberly-Clark’s payroll costs, and a 15% writeoff for “significant capital expenditures” at the plants. But it only requires K-C to keep “93 percent of its full-time employees” at both the plant and the state and have those employees make at least $30,000.

Now from that, I can’t tell what that 93 percent figure is based on, but if I’m reading WEDC’s fiscal note correctly, it means that the 610 jobs that are supposed to go away with the two facility closings would be retained. And if that happens...
..WEDC could certify the business as eligible to earn approximately $6.7 and $7.8 million per year for up to 15 years.
So that’s somewhere between $100 million and $117 million for a Wisconsin manufacturer who is already seeing near-zero state tax levels due to the Manufacturers and Agriculture tax credit, and just got another massive tax break from the GOP’s tax bill that went through DC in December.

This is where I remind you that these layoffs are coming in spite of Kimberly-Clark pulling $812 million in profits in 2017, and I think it's also important to remember that Kimberly-Clark said the Piece of Shit tax bill in DC was the excuse they needed to layoff workers and grab EVEN MORE for the suits.
[CEO THomas J.] Falk added that the company restructuring would make it "leaner, stronger and faster."

But in the same announcement of plans to restructure the company, it announced that the Kimberly-Clark Board of Directors "approved a 3.1 percent increase in the company's quarterly dividend for 2018, which it says is the 46th consecutive annual dividend increase for shareholders," NPR reported. Falk also noted that Kimberly-Clark stated, "we returned $2.3 billion to shareholders through dividends and share repurchases."

How does the GOP tax plan play a role in all of this? The company stands to "net benefit" from the newly passed tax cuts, so much so that it will be able to pay for its "restructuring" plan, as Nathan Bomey of USA Today noted. To recap, last year's profits dipped, Trump and the GOP put forth a tax plan that provided relief to the company and now Kimberly-Clark is using that money to restructure.
If that’s how corporate America will act (and they will), why don’t we stop bowing down to Lord Business as an economic policy? Instead why not encourage good trade policies that make paper manufacturing a worthwhile job still to keep in America.

Our US Senator put it well when the layoffs were announced, before meeting with laid-off Kimberly-Clark workers last week. She asked K-C, "How many more tax breaks do you need?"

The scared Wisconsin GOP is trying to fast-track this Kimberly-Clark bailout, and a Public Hearing and Executive session was scheduled for this bill today (they usually wait a day between the two). I haven't seen anything on where it is from there, but my guess is that the GOP Assembly will try to jam it through in this bum-rush of a last week of session. And who cares if we have little money left to pay for it.

And the rushed nature and the waste of tax dollars are among the reasons that this proposed Kimberly-Clark bailout needs to go down. Maybe if the paper industry is in structural decline (and it probably is), the state should instead do more to help these laid-off workers with retraining, which will cost a fraction of the $7 million a year this tax giveaway would, and direct them into fields that are more sustainable with better wages.

Also, we should get rid of the wage-suppressing right-to-work (for less) mentality and related disrespect of workers that seems to permeate Wisconsin boardrooms these days. And we should recognize that giving away the state Treasury to corporations isn’t nearly as worthwhile and economically productive as investing in people and quality of life.

We need to worry a lot more about our supply of workers and having them be rewarded properly for their work. We also need to become a state that attracts people and businesses than we do in giving yet another handout to corporations that have already gotten more than enough, and keep letting us down. And that won't happen until we boot these GOP regressives who are trying to shove through yet another giveaway to big business at everyone else's expense.

Sorry Racine County- Foxconn's getting your land, one way or the other

You knew this headline was coming with the Fox-con, but it’s going to be even uglier than we thought. “Eminent domain may be used to acquire land for Foxconn from holdouts.”

The first part of that process would involve the Village of Mount Pleasant using state law to condemn the land where the Foxconn plants will be built.
The move could see the village declare the entire 2,900-acre designated Foxconn area — the great majority of it now open farmland — to be a blighted area under state law, but not in the commonly understood meaning of blight….

Under the law, such an area doesn’t have to be a crime-ridden slum; it also can be a predominantly open area that, because of diverse ownership, obsolete platting and even for unspecified reasons, “substantially impairs or arrests the sound growth of the community.”
Part of the reason the Village of Mount Pleasant and their attorney Alan Marcuvitz want to take the land is to clear the way for the Wisconsin DOT to start work on their $134 million effort to widen local roads near Foxconn.

And if people don’t like the idea of their land being taken and/or having a massive increase in traffic in front of their home? Then Marcuvitz and Mount Pleasant will put the screws to them.
Like most such projects, the plans here will involve taking slices of private property alongside the roads so they can be widened.

But the Foxconn-area road-improvement plans likely will go a step further: According to village officials, the DOT will shut off road access to the parcels inside the Foxconn area.

So owners who balk at selling their property for the Foxconn project would be left landlocked. And their parcels, inaccessible from the roads, would be what Marcuvitz described as “uneconomic remnants” with little or no value.
Classy, eh?

Sure, Foxconn gave the village $60 million in late December to buy up land for the campus, but as another article from the Racine Journal-Times shows us, the village is spending much more than that for this scam project.
As of Monday, Marcuvitz said, between $82 and $85 million in total land purchase options were in hand in the three Foxconn areas combined. The village exercised all of those options and now owns those roughly 1,7090 acres. Most purchases of large tracts of land are being made for $50,000 per acre.

Marcuvitz said he and Village Foxconn Project Director Claude Lois will seek Village Board approval next Monday to buy another group of properties totaling another 300 to 400 acres. In rough numbers, Marcuvitz said, that would give Mount Pleasant about 2,100 acres under contract in the three Foxconn areas, or about three-quarters of the 2,894 acres in Foxconn areas I, II and III.
Hope the people of Mount Pleasant enjoys the property tax spike that’s coming from all of the extra borrowing and extra services that are needed to buy up all this land (if they still have a home, that is). They'll probably like it as much as the rest of us are enjoying seeing so many of our tax dollars funneled down to the SE corner of the state to pay for this boondoggle.

It fact, it seems like the only people making out on this deal are the Foxconn corporates, Walker cronies, and land dealers. Funny how that works.

Monday, February 19, 2018

End-of-session goodies tie Wisconsin's hands, and won't fix the roads

As the GOP-run Legislature tries to jam through a massive amount of legislation in the near future (before taking off on an 11-month paid vacation), I wanted to take a step back and look at where our fiscal situation is before a lot of the remaining funds are tossed out in this furious rush.

The Legislative Fiscal Bureau said last month that they projected $385 million will be left over at the end of this budget cycle on June 30 of next year. But that was based on $579 million being carried over from the end of Fiscal Year 2017, and the Legislative Audit Bureau found accounting errors in the annual reports that lowered the carryover by $21 million, meaning there is actually $364 million of cushion to play with for the rest of this budget, not $385 million.

Interestingly, one of the bills that will NOT be affecting the finances for 2017-19 is the Governor's plans to spend tax dollars to sub subsidize insurers in an attempt to hold down premium increases on insurance plans bought on the Obamacare exchanges. Due to an amendment that passed the Joint Finance Committee last week no payments will be made to insurers until August 15, 2019, pushing those costs into the next budget. Of course, the question then becomes whether insurance companies do anything to lower premiums that are being purchased on the ACA Exchange in Fall 2018 for the next year, because they'll have to wait several months to get that money back from any lowering of premiums (I am...skeptical).

Also worth noting, the LFB came out with its analysis of the Governor and Assembly GOP's plans to give out a $100-a-child tax rebate and a 2-day sales tax holiday in August. The price tag for these one-time stunts tax cuts are as follows.

$100-a-child tax rebate + processing- $122.9 million
Sales tax holiday- $51.5 million

(Side note: I think the sales tax holiday number is BS, and intended to inflate the value of the tax cut, as Walker’s Department of Revenue claims 14 days of sales would get compressed into the 2 days of the weekend. But I’ll go with it for this post).

Now, let's look at most (but not all) of the goodies that either have already been handed out, or have been through the Joint Finance Committee in recent weeks.

Rural WEDC $50 million
Added funding for child care subsidies $48 million
WEDC “talent attraction” $6.8 million
Added Sparsity Aid $6.45 million
New drug court items for DOJ $3.8 million
Raising cap on Historic Rehab Credit $3.5 million
Raising cap of New Business Ventures $2 million
Tuition remissions for students in foster care $930,000
Outreach + mental health services for vets $900,000
Tax deduction for apprenticeship $800,000

(Notice that not a dime of this extra money is going to this state's pothole-filled roads)

If all of those provisions were passed and signed into law, that would leave a little more than $66 million for ANYTHING else that may happen in the next 16 months as a result. That is less than 2 days of state operations, and while the LFB has made projections of the potential changes, we really don't know what effect the Piece of Shit tax bill from DC will have on state collections.

Oh, and have I mentioned that we already have major structural deficits looming in both Transportation and the General Fund for the 2019-21 budget cycle, and that any of these giveaways will drive the deficit even higher?

So maybe having all of these giveaways isn't such a bright idea if you care about keeping things running smoothly in Wisconsin, and lessening the chances of fiscal problems that would have to be fixed this time next year. But of course, that's the cynical plan of Walker and WisGOP. The goodies get handed out before November 2018, and then we end up paying a bigger price for those giveaways after the election.

Again, if Milwaukee and Wisconsin want young people, Walker/WisGOP must go

As the Wisconsin Assembly plans to vote tomorrow on giving the Wisconsin Economic Development Corporation (WEDC) $6.8 million to start up a campaign to lure young workers to the state, the Milwaukee Business Times had an article out on Friday afternoon illustrating why WisGOPs say such a bill is needed.
When it comes to population growth of millennial residents, it’s slow going for the metro Milwaukee area, according to a new report from the Brookings Institution.

The area ranks seventh lowest in the nation for population growth among young adults, aged 18-34, from 2010 and 2015, the report said.

Drawing from U.S. Census Bureau data, the analysis examined where millennials – defined as those born between 1981 and 1997 – are settling in the U.S., as well as their educational attainment and racial diversity.

The only metro areas to see lower growth rates than Milwaukee’s 1.4 percent millennial population growth rate were Birmingham, Alabama which saw a loss of 0.6 percent; Chicago, with a 0.2 percent growth rate; Toledo, Ohio (0.5 percent); St. Louis (0.9 percent); Youngstown, Ohio (1 percent); and Jackson, Mississippi (1.2 percent)….
Zooming it out statewide, Brookings says that Wisconsin had the 10th-smallest amount of millennials out of the 50 states in the nation (22.4%), and they note that the trend in that statewide standing is even worse since Scott Walker and the GOP came to power.
Two states, West Virginia and Illinois, registered losses of young adults in 2010-2015, and seven others, mostly in the middle of the country, showed growth of less than 2 percent. These include Mississippi, Alabama, Arkansas, Kentucky, Missouri, and Wisconsin, along with, in New England, Maine. With the young adult population growing at 4.7 percent nationally, these states are drawing fewer millennials than others.
When you’re as unattractive as Mississippi, Alabama, Arkansas, and Kentucky, you should really check yourself and realize you're on the wrong path.

In contrast, Madison had the 5th highest proportion of millennials out of the top 100 metro areas in America (26.8%). And the Business Journal notes that the young people Madison is getting are also highly educated.
Madison tied with Boston for having the highest educational attainment among older millennials. In both cities, 58 percent of 25- to 34-year-old residents have at least a college degree. Among white residents in Madison, that figure was 63.8 percent.
Sure makes you think that if we want to attract younger people to the state, then maybe we should see what Madison does and have that as a model that the rest of the state can learn from. And that maybe a change in strategy is in store to get those young people to settle in Milwaukee?

Instead, our current Governor tries to score political points by saying this.

And that same Governor is supported by the Metropolitan Milwaukee Association of Commerce (MMAC) to the tune of hundreds of thousands of dollars. If the MMAC honestly was interested improving things in the state’s largest metro market, how could they look at the stagnation in Milwaukee’s economy and its worsening demographics over Walker’s 8 years in office, and then say “Oh yeah, we want more of that!”?

The answer to that question is obvious – the MMAC and other Wisconsin corporate oligarchs DON’T CARE if the state becomes more desirable to young people, or even if the economy grows for most Wisconsinites. They only care about their elite position and having their puppets in power at the state and local levels.

And it’s why those slimebuckets should be ignored at all levels, if not outright fought. Because as long as the MMAC, WMC, and their GOP puppets are in power in Wisconsin, this state will continue to be unattractive to young people, especially those with talent and options in life. And $6.8 million in tax dollars for marketing isn’t going to change that.

The only thing that changes it is to FIRE THE GOP in 2018, and restoring Wisconsin’s progressive heritage by reversing these regressive policies.

Sunday, February 18, 2018

Sorry Guv, but CAFR shows all you've done is can-kicking

In this last week, we had the long-awaited release of Wisconsin's Comprehensive Annual Fiscal Report (CAFR). And Governor Walker used the opportunity to brag about how the state's finances looked at the end of the 2017 Fiscal Year, on June 30.

(By the way, nice use of state resources for campaigning, guv).

Not mentioned by Scotty was that the Legislative Audit Bureau took a second look at the CAFR, and noticed that a few high-amount transactions were missed and/or mislabeled. This means the real final numbers ended up being a bit different.
In addition, in conducting our audit work related to the State’s General Fund financial statements to be presented in the State’s CAFR, we questioned a $38.2 million increase in a liability that, after discussion with SCO staff, was determined to be the result of an error in the cash balance for the General Fund as of June 30, 2017. The error had been appropriately identified as a reconciling item in the bank reconciliation process and was corrected on STAR in fiscal year (FY) 2017-18. However, SCO staff did not ensure the error was considered for FY 2016-17 financial reporting. This error resulted in a $38.2 million overstatement of the General Fund cash balance as of June 30, 2017.

Further, after we discussed these errors with SCO staff, we were informed that SCO had identified a third error that occurred during the implementation of the STAR payroll module, Human Capital Management (HCM), in FY 2015-16. This error resulted in a $7.3 million understatement of the General Fund cash balance on the June 30, 2017 financial statements.

Finally, as part of our audit of the bank reconciliation, we raised questions regarding an outstanding receipt of $9.6 million that was deposited in the bank in March 2017, but was not yet recorded in STAR as of June 30, 2017. SCO staff researched this reconciling item and identified that it related to a deposit that had been made to a disbursement account. This error resulted in a $9.6 million understatement of the General Fund cash balance on the June 30, 2017 financial statements.
Put that together, and it means that the “surplus” Walker keeps claiming is actually $21.3 million less than what we thought it was. It's still $558 million at the end of FY 2017, but it also drops the 2017-19 budget's cushion to $364 million. And that's before we begin to account for all of the goodies Wal(typical borrowing er and the WisGOP Legislature try to give away in the next few weeks.

Another main part of the CAFR includes the GAAP accounting balance. This figure improved from $1.723 billion to $1.626 billion, but that's only an improvement of $96.7 million while the cash balance went up by $248 million (before the $21 million adjustment LAB found).

So where did the other $151 million go? Even if you account for designated, multi-year appropriations going down by $80 million (as you'd expect in the 2nd year of a 2-year budget with many funds having a 2-year life on them), there is still a $71 million difference in the GAAP budget, which indicates a higher amount of delayed payments to other governments and entities. In other words, exactly the opposite of what "reformer" Scott Walker was promising voters in 2010.

The CAFR also gives information about the state's debt standing, and unlike how Walker and WisGOP try to portray it, what we owe went up in all areas in Fiscal Year 2017. This is on page 40 of the PDF, and the change is compared to what we ended FY 2016 from.

General Government Obligations $6.190 billion (+$135.4 mil)
Annual Appropriation Bonds $3.114 billion (+$81.5 million)

Revenue Bonds (mostly DOT-related where registration fees pay it off) $2.315 billion (+$57.9 million)

So debt continues to go up on all sides, and another interesting sidelight of the CAFR shows the schedule of when debt is supposed to be paid off (it's on Page 111 if you're into that sort of thing). What it shows is that the amount the state is slated to spend in future years for debt went up last year. Some of this isn't surprising (any added debt will add to debt service), and in the 2 largest expenses of debt service, the higher payments only go up between $30-$40 million year, and even some of that is offset by money sitting in an escrow account from new debt.

But the real jump starts in Fiscal Years 2021 and 2022, where state taxpayers and car owners are expected to come up with more than $60 million more in 2021, and $140 million more in 2022.

That's bad enough for a higher tab to pay off in the future, but even worse is the situation involving Appropriation Bonds. In August 2016, the Walker Administration did a debt refinancing of $571 million to avoid a massive balloon payment in this current Fiscal Year. But as you can see, what they did is merely push off most of it until 4-5 years later.

Cute trick, eh? Yes, the Walker Administration has reduced total debt costs by quite a bit in the last year, due to these aggressive refinancings (an option that's going away as interest rates rise, by the way). But when we pay that off is also important to keep in mind. And it looks really bad in a few years.

The last part of the CAFR I want to point out is a new segment that began with this report.
Wisconsin statutes authorize tax abatements to encourage economic development and other actions beneficial to the State or its citizens resulting in a reduction in tax revenue the State would otherwise be entitled to collect. GASB Statement No. 77, Tax Abatement Disclosures, requires disclosure of tax abatement agreements entered into by a reporting government, along with agreements entered into by other governments, which reduce the reporting government’s tax revenues. Most tax abatement programs meeting the criteria for disclosure in the State’s CAFR are certified by the Wisconsin Economic Development Corporation (WEDC), a separate legal entity also reported as a component unit in the CAFR. WEDC enters into the abatement agreements and administers the programs. The Wisconsin Department of Revenue (DOR) is responsible for ensuring the certified tax abatements were properly applied when processing income tax returns filed by recipients.
Almost all of the abatements are WEDC business incentive programs.

Tax abatements, FY 2017
Historical Preservation Tax Credit $28.6 million
Business Development/Jobs Tax credit $26.6 million
Qualified New Business Venture $12.8 million
Enterprise Zone Tax Credit $8.8 million
Development Opportunity Zone Tax Credit $0.2 million

State Historical Society
Historical Homeowners Tax Credit $1.2 million


The notes from LAB indicate that this is a new reporting requirement, and I think this is simply informational, explaining how much in taxes we wrote off in the name of "economic development." And of course, that $78.2 million is ON TOP OF what the state already gives away with the Manufacturers and Agriculture tax credit, other corporate tax breaks, and wage suppression measures. And this number will explode if Foxconn ever opens up.

Bottom line on the CAFR - continued growth with the 2016-17 US economy also helped Wisconsin's books be balanced in the short term. But it also isn't nearly as sunny as the Walker Administration tries to portray it. And with the increased debt payments that are coming in the next few years, it would seem foolish to get rid of the tiny fiscal cushion we have on pre-election stunts. But let's face it, in a WisGOP that chooses politics over responsibility every time, they're likely to screw this up in this next month.

Saturday, February 17, 2018

The Wisconsin connections to yesterday's Mueller indictments

As I digested the information from Robert Mueller's indictment of 13 Russians and 1 American for taking part in psy-ops, wire fraud, and illegal campaign contributions for the 2016 elections, I flashed back to this New York Times story that came out 2 weeks after that election.
Wisconsin, a state that Hillary Clinton had assumed she would win, historically boasts one of the nation's highest rates of voter participation; this year's 68.3 percent turnout was the fifth best among the 50 states. But by local standards, it was a disappointment, the lowest turnout in 16 years. And those no-shows were important. Mr. Trump won the stat by just 27,000 voters. (later revised down to 22,000 after canvassing and recounts).

Milwaukee's lowest-income neighborhoods offer one explanation for the turnout figures. Of the city's 15 council districts, the decline in turnout from 2012 to 2016 in the five poorest was consistently much greater than the drop seen in more prosperous areas - accounting for half of the overall decline in turnout citywide.

The biggest drop was here in District 15, a stretch of fading wooden homes, sandwich shops and fast-food restaurants that is 84 percent black. In this district, voter turnout declined by 19.5 percent from 2012 figures, according to Neil Albrecht, executive director of the City of Milwaukee Election Commission. It is home to some of Milwaukee's poorest residents and, according to a 2016 documentary, "Milwaukee 43206," has one of the nation's highest per-capita incarceration rates.

At Upper Cutz, a bustling barbershop in a green-trimmed wooden house, talk of politics inevitably comes back to one man: Barack Obama. Mr. Obama's elections infused many here with a feeling of connection to national politics the had never before experienced. But their lives have not gotten appreciably better, and sourness has set in....

All four barbers had voted for Mr. Obama. But only two could muster the enthusiasm to vote this time. And even then, it was a sort of protest. One wrote in Mrs. Clinton's Democratic opponent, Senator Bernie Sanders of Vermont. The other wrote in himself.
I also agree that Obama didn't do enough for the inner cities of this country, as he still trusted states and locals and corporations to do the right thing, and many didn't. I also fault Obama for not speaking up more on behalf of minority communities, out of fear of being portrayed as the "angry black man" - a wrong move because right-wing trash called him that anyway, so he may as well have stepped up and taken more action.

But maybe the disillusionment of those African-American barbers in Milwaukee might have stemmed from "things that they'd read." And as we discovered yesterday, those "things" may well have come from Russian troll farms who had a specific goal in mind.

And as I've mentioned before, there is no question that a drop in voters in Democratic cities with sizable minority populations were a big reason behind the GOP victories of Donald Trump and Senator Ron Johnson in the state.

A side order of Scott Walker-WisGOP voter suppression also helped lead to this lower turnout in pro-Dem places. I'll leave it up to you as to whether that suppression and the Russian propaganda program were related.

Not only did suppressing the enthusiasm of minority voters help the GOP in 2016, but so did driving up the interest of scared white guys. And let's not forget that Johnson got a lot of support from the NRA, who sent out numerous digital and over-the-air ads encouraging people to vote for Johnson so "Hillary wouldn't take your guns." (hell, I saw plenty of these ads online, and I don't own a gun and the sites I visit aren't exactly NRA-friendly).

Now, put yesterday's indictments together with this story that we saw from McClatchy last month.
The FBI is investigating whether a top Russian banker with ties to the Kremlin illegally funneled money to the National Rifle Association to help Donald Trump win the presidency, two sources familiar with the matter have told McClatchy.

FBI counterintelligence investigators have focused on the activities of Alexander Torshin, the deputy governor of Russia’s central bank who is known for his close relationships with both Russian President Vladimir Putin and the NRA, the sources said.....

The extent to which the FBI has evidence of money flowing from Torshin to the NRA, or of the NRA’s participation in the transfer of funds, could not be learned.

However, the NRA reported spending a record $55 million on the 2016 elections, including $30 million to support Trump – triple what the group devoted to backing Republican Mitt Romney in the 2012 presidential race. Most of that was money was spent by an arm of the NRA that is not required to disclose its donors.
Lastly, remember that Johnson was in the room with Senate Majority Leader Mitch McConnell when President Obama told them that Russians were interfering with the election in September 2016. And Johnson went along with McConnell's complaints to keep that knowledge from the public.

Which sure makes Johnson's "secret society" talk to try to disrupt Mueller's investigation of Trump-Russia all the more interesting, doesn't it? Maybe there is a reason (mo)Ron doth protesteth so much.

Friday, February 16, 2018

Stuff to know before Tuesday's Wisconsin Supreme Court vote

In the "timing is everything' department...

Less than 2 hours later, Nikolas Cruz showed up at Marjory Stoneman Douglas High School in Parkland, Florida, and opened fire with an NRA-approved AR-15 semiautomatic assault rifle. A total of 17 students and teachers are now dead as a result.

If you needed another reason to vote for Tim Burns or Rebecca Dallett in Tuesday's Supreme Court primary, there it is.

And yes, it matters that you come out to vote in this primary, even more than most elections. In the last contested Supreme Court primary, in 2016, only 567,000 votes were cast, a turnout of less than 19%. And of that, 252,000 were the right-wing sheep that voted for Bigoted Becky Bradley.

So if we ratchet turnout up to 800,000 or 900,000 (27-30% turnout), then that would likely be enough for both Burns and Dallett to advance to the April General Election, and knock out right-wing puppet Screnock in the process. That would be a major upgrade from Crooked Michael Gableman, and a huge step toward getting this state back toward respectability.


Add some jobs in Kenosha...and lose more

Headlines posted on the Milwaukee Business Times within 15 minutes of each other today.

The shot.
International Mold and Production will relocate its operations from Grayslake, Illinois to Kenosha and plans to add 25 new jobs in the near future, Gov. Scott Walker announced Friday.

The Wisconsin Economic Development Corp. awarded IMAP $110,000 in tax credits over the next three years to support the job creation….

The company is investing $1.5 million in the facility at 6011 29th Ave. in Kenosha.
And the chaser.
Georgia-based Southwire Co. LLC will close its Pleasant Prairie customer service center and move equipment and inventory to other distribution centers in the U.S. and Canada.

The transition is expected to begin in the summer and should conclude by the end of November….

Southwire has approximately 80 employees at the Pleasant Prairie facility. The company said eligible employees would have “the opportunity to bid on open positions at other Southwire locations” or receive severance packages if they did not want to transfer.
So we’re adding 25 jobs but losing 80? I know some people consider math a liberal plot, but that doesn’t sound good.

A great break from bleakness

Decided to have a night out with a friend in from out of town. Had very few expectations of how the main event would go. And then....

I will have more to say on the depressing chaos going on over the weekend, but THAT was a great respite from it.

Wednesday, February 14, 2018

Inflation jumps, stocks jump. But wages and retail sales drop. MAGA?

Given the recent instability in the stock and bond markets, many looked to this morning’s release of the Consumer Price Index for guidance on the future of this economy after tax cuts and other stimulative measures. And when the report came out, it wasn’t good news for people who were hoping things might be settling down.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.

The seasonally adjusted increase in the all items index was broad-based, with increases in the indexes for gasoline, shelter, apparel, medical care, and food all contributing. The energy index rose 3.0 percent in January, with the increase in the gasoline index more than offsetting declines in other energy component indexes. The food index rose 0.2 percent with the indexes for food at home and food away from home both rising….

The all items index rose 2.1 percent for the 12 months ending January, the same increase as for the 12 months ending December. The index for all items less food and energy rose 1.8 percent over the past year, while the energy index increased 5.5 percent and the food index advanced 1.7 percent.
0.5% inflation for 1 month is obviously quite a bit, and DOW futures plummeted before the market opened on the high inflation figures. But then things stabilized, and a couple of finance guys interviewed by Reuters said that maybe a little inflation wasn’t a big deal.
“Of itself, inflation, particularly driven by higher demand, is not necessarily negative for equities," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

Rather, Meckler said, the concern is if bond rates adjust substantially higher in response to inflation data. Such increases in bond rates would provide more investment competition to stocks, after years of low yields made equities comparatively more desirable…

"Maybe if we saw the yield continue to rise, if it went up past 2.90, it might hit stocks," said Michael Antonelli, managing director for institutional sales trading at Robert W. Baird in Milwaukee. "That it’s stabilized has helped."
Except within a couple of hours of Meckler’s and Antonelli’s statements, the 10-year Treasury yield DID rise past 2.90%,and closed at 2.91%, the highest levels in 4 years. Yet the stock market also kept climbing, with the DOW Jones ending up 253 points.

I also think that the Wall Streeters that were shrugging off CPI numbers because the year-over-year increase was “only 2.1%” are off-base. If you look at the last 6 months, the CPI is up 2.05% in that time period alone, and unless inflation stops dead in the next 6 months (not likely), that year-over-year figure will head up toward 3% sooner than later. In itself, that may not be bad, but it’s silly not to think that inflation hasn’t meaningfully risen in the last few months.

So what gives? I think some of the answer may lie in a couple of other reports released today, which showed that maybe that “Trump Boom” GOPs keep trying to be sell us really isn’t happening, and that the GOP Piece of Shit tax bill isn’t going to make the average person better off.

Because at the same time that the high inflation report was released, the US retail sales report came out, and was surprisingly bad.
Advance estimates of U.S. retail and food services sales for January 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $492.0 billion, a decrease of 0.3 percent (±0.5 percent)* from the previous month, but 3.6 percent (±0.7 percent) above January 2017. Total sales for the November 2017 through January 2018 period were up 4.9 percent (±0.5 percent) from the same period a year ago. The November 2017 to December 2017 percent change was revised from up 0.4 percent (±0.5 percent)* to virtually unchanged (±0.3 percent)*.
So a decline in retail sales from a revised-down number in December? That’s a really bad sign, and making it worse was the fact that January’s number would have been even worse except that the dollar amount of gas sales were up 1.6%...because gasoline prices went up by 5.7% in January.

Also noteworthy is that the 0.5% increase in the CPI meant that the “startling” wage growth that we saw in January’s jobs report (which started a 10-day downward spiral on Wall Street due to inflation fears) didn’t do much to make people better off. In fact, if you look at today’s real wages report, it shows that real average hourly wages dropped again in January, the 5th time in the last 6 months that inflation-adjusted wages have failed to grow.

Yes, real average hourly wages for all employees over the last year are still up by 0.8%, and that figure has improved over the past couple of months. But you can see that reflects gains that were made in the first half of last year, and that number will likely go down in coming months unless we get a shocking turnaround from our recent, declining trend.

It’s even worse if you look only at “production and non-supervisory employees.” This group is defined by the BLS as follows.
Data relate to production employees in mining and logging and manufacturing, construction employees in construction, and nonsupervisory employees in the service-providing industries. These groups account for approximately four-fifths of the total employment on private nonfarm payrolls.
Those individuals (i.e., most Americans who work for someone else) didn’t even do as well as the mediocre national figures. Their real average hourly earnings were down 0.5% for January and their real average hourly earnings have only gone up 0.1% over the last 12 months.

No real change in wages over the last 12 months, with gas prices and interest rates on the rise? I’m sure that’s what you blue-collar MAGAs voted for, right?

And maybe those still-declining wages are what encouraged Wall Street to make the stock market rise, even with higher inflation and interest rates today. Because with more cost-cuttings/layoffs sure to happen in the near future to “hit the quarterly numbers”, wage inflation doesn’t seem that likely to follow our current price inflation.

Low wage growth and high profits may be something the investor/CEO crowd likes, even if it sucks for the overwhelming majority of the rest of us. Not a lot of this adds up right now, and I have real worries about what happens as any stimulus from the Piece of Shit tax bill pumps itself out in the next few months.

It also makes me wonder what will happen politically when the average dope looks around in 3-4 months and realizes the handful of extra bucks they got from those DC tax cuts aren’t coming close to making up for the higher costs he/she is dealing with…..Assuming he/she still has a job, of course.

Tuesday, February 13, 2018

What would happen if Wisconsin copied the tax writeoffs in DC?

Because I'm a budget nerd, I perked up today when I saw this item pop up on The Wheeler Report today. It was a summary from the Legislative Fiscal Bureau on the tax changes that have already hit the state due to December's tax bill that went through Congress, and it also described the effects o the budget that would occur if the state copied all the other tax deductions.

First of all, there are some revenue changes that are already “baked in the cake”, because state law is set up to match federal law for certain provisions (something that has become more common in the ALEC-GOP era). Most of these baked-in changes have to do with what is known as Section 179 Expensing.
Under state and federal law, qualified property, generally tangible personal property purchased in the active conduct of a trade or business, including off the shelf computer software and qualified real leasehold improvement, restaurant, and retail improvement property, can be immediately expensed under Section 179. For tax year 2017, the maximum amount of qualified property that could be expensed was $510,000 per taxable year. The maximum expense limit was reduced by a dollar-for-dollar amount for qualified property expensed in excess of $2.03 million. The expensing limit and threshold amounts were indexed for inflation beginning in tax year 2016. Prior to tax year 2018, for sport utility vehicles (SUVs) expensed under Section 179, the maximum that could be expensed was $25,000 in any taxable year.

Beginning in tax year 2018, the Act increased the maximum amount a taxpayer may expense under Section 179 to $1.0 million, and the threshold after which the limit is reduced is increased to $2.5 million per taxable year. The higher expensing limit, the higher threshold, and the $25,000 limitation for SUVs subject to Section 179 are indexed for inflation under the Act beginning in tax year 2019. Qualified property subject to Section 179 expensing is expanded to include certain property used predominately to furnish lodging or in connection with furnishing lodging. Qualified real property eligible under Section 179 is expanded to include the following improvements to nonresidential real property placed in service beginning in 2018: (a) roofs; (b) heating, ventilation, and air-conditioning property; (c) fire protection and alarm systems; and (d) security systems.
This accounts for $70.5 million in reduced revenue in the next 2 years, with the Section 179 break decreasing in later years after most people have already taken advantage of the change. It also makes for a nice double-tax cut for Wisconsin businesses in 2019, since they are already getting a personal property tax exemption on tools, machinery, and other related equipment (yes, that’s my head hitting the desk).

Which again reminds me of this Tammy Baldwin tweet from last week asking "How many more tax breaks do you (corporations) need?"

The real question that follows is whether the state will change its tax laws to match other provisions from the Piece of Shit tax bill. Basically, the income that Wisconsin taxes is determined at a higher-up line in the 1040 tax form, so many federal adjustments to that income doesn’t count in Wisconsin. This is why there aren’t too many Wisconsin revenue changes “baked in”, despite the huge changes to taxes in DC.

If Wisconsin lawmakers did codify the DC tax changes into “Wisconsin income”, the largest potential tax breaks would be as follows:

1. Cutting 20% of pass-through income for LLCs and other sole-proprietor businesses- Would cut Wisconsin tax revenue by $242.5 million next year, and by $1.26 BILLION by 2025.

2. Bonus depreciation – Goes from 50% to 100%, and stays at 100% through 2022. This would cut Wisconsin tax revenue by $241.1 million next year, and by $494.7 million by 2023. Interestingly, the LFB says this would start adding back revenues to the state after that, since there would be less depreciation happening then.

3. Simplified accounting for small business- I’m not going to pretend to understand half of those items, but it seems to be based on not having to account for as much in inventory and other cost items, so less things to track and pay on. Adding this tax cut would cost the state $53.4 million next year, and $71 million in the next 2 years before having those costs go down in future years.

There also are a few tax hikes that would hit if the state decided to copy the new federal tax codes, including a limitation on the amount of losses that pass-through owners can write off, and a limit on how much interest a business can write off. The LFB says these items could be sources of revenue raisers to the tune of 141.5 million next year, and exceeding $175 million by 2025.

It's also worth noting that Wisconsin taking on the federal income standard would result in tax hikes in many other areas starting in 2021-22 with those tax hikes getting bigger in the 5 years after that. The main reasons are twofold.

1. The stimulus of the initial years wears off and less economic activity happens in the following years vs what would have happened if the law didn’t change (it’s like how buying a car now lessens your need to buy a car in the near future).

2. Many of the federal tax cuts are temporary, as a means of holding the total cost of the Piece of Shit package under $1.5 trillion, which allowed it to be passed with 50 votes in the US Senate. Of course, most of the GOPs who voted for this pile of trash are hoping to be cashing in on a big-money lobbying career at that time, and they’ll be benefitting from the lower tax rates on the rich in the meantime.

I think it's also important to have these ideas in the back of your head, because when State Rep. John (Wacko) Macco talks about wanting to do tax reform at the state level in 2019 (if the voters are dumb enough to keep WisGOP in power), "federalizing" the state's tax laws to fit the new tax laws would seem to be a logical place to start. And it would likely make our already-regressive and pro-corporate income tax code even more so, particularly when Macco and his fellow ALEC goofballs have also talked about raising sales taxes by "closing exemptions" on many products that currently don't pay sales tax.

And in fact, there is already going to be a vote in the Assembly's Ways and Means Committee tomorrow on a bill would do this sort of "federalization" to a number of Wisconsin tax provisions. The provisions are minor, involving switching back from Roth to Traditional IRAs (and vice versa), making members of Congress not be able to write off expenses incurred when living in DC, counting student loan forgiveness in case of death and disability, and (the most concerning) allowing 529 college savings plans to be used for private school tuition at the K-12 level.

If a person can't get a voucher, will this guy pay for their private schools?

The LFB and Department of Revenue indicate that the revenue effects of tomorrow's bill will be minor, but I sure don't trust what might come in the future as an after-effect of the GOP's Tax Scam from DC. And given how we're handing out pre-election tax exemptions and added spending, whatever surplus we might have as a projection feels like it's disappearing by the day.

Monday, February 12, 2018

Kimberly-Clark already gets plenty of tax help. They don't deserve more

As the state Legislative session winds down, there is discussion about possibly throwing more incentives at Wisconsin paper companies like Kimberly-Clark, who recently announced plans to shut 2 facilities and lay off 600 workers in the Fox Valley. But before we try a 920 version of the Fox-con, it may be good to read this analysis by Tamarine Cornelius at the Wisconsin Budget Project.

Cornelius reminds us that manufacturers like Kimberly-Clark already have received years of tax cuts from the state of Wisconsin under the Manufacturers and Agriculture tax credit (aka "The Big Giveaway").
The Manufacturing and Agriculture Credit costs the state an estimated $276 million this year in tax breaks for manufacturers and agricultural producers. That’s a lot of money. For example, that’s more than all the tuition and fees combined paid by students in Wisconsin’s technical college system.

For such a big tax break, you might think that the state would require a great deal of accountability on the part of manufacturers receiving the credit. But in fact, there is no requirement that businesses create even a single job to receive the credit. Kimberly-Clark’s announcement illustrates that allowing a corporation to get away with paying next to nothing in income taxes doesn’t mean that corporation will increase the number of workers it employs....

While the Manufacturing and Agriculture credit doesn’t do much to keep jobs in the state, it does serve another purpose: to line the pockets of the wealthy and well-connected who have rigged the system to their benefit. The credit is strongly slanted in favor of the very rich, to the point where millionaires take home nearly three-quarters of the portion of the credit that is claimed through the individual income tax, despite making up only 12% of the claimants (and a much smaller share of the total population). In fact, just 15 credit claimants—all with incomes of at least $30 million—received a combined tax break of $28 million from this credit. That averages out to a tax cut of a whopping $1.8 million each for these extremely wealthy claimants. These figures are based on the Legislative Fiscal Bureau’s analysis of the costs and distribution of this credit.

And recall that 2 years ago, we were told that right-to-work (for less) would save jobs and help companies expand in Wisconsin, guess that's not quite happening either, is it?

Remember, these GOP giveaways are already in place before any bailout package would be considered. But instead of recognizing that maybe tax cuts and wage suppression don't add or save jobs, and using those hundreds of millions of dollars for the M&A tax cut for something that might actually work, Cornelius notes that the Walker Administration now wants to give away EVEN MORE TAX DOLLARS to Kimberly-Clark
Now, Governor Walker and other state policymakers are saying that nearly wiping out the requirement for manufacturers to pay income taxes is not enough, and that Wisconsin should also publicly subsidize a portion of each job that Kimberly-Clark (and potentially other companies in the same situation) identifies as threatened.

Given the high cost of the Manufacturing and Agriculture credit, its failure to spur employment, and its extremely slanted nature, Wisconsin policymakers should be seeking to roll back the credit. Instead, Governor Walker and other lawmakers have proposed giving an even bigger break to Kimberly-Clark (and presumably other companies) by paying cash subsidies to maintain employment levels, similar to a portion of the incentive package that the state offered Foxconn.
Kimberly-Clark also got a major tax break from the recent Piece of Shit tax bill that was jammed through by Republicans in Washington DC. In fact, Kimberly-Clark cited those tax cuts as a reason for the layoffs, because it allowed to begin a wide-scale restructuring in 2018, letting them reap the benefits of the "cost-cuts" by being taxed less.

This prompted Wisconsin US Senator Tammy Baldwin to ask why state and federal governments was giving so many breaks to a company that would cut so many Wisconsin jobs.

Tammy's got a good point- How many tax breaks DO these corporations need? Maybe it's the corporate tax breaks that are the problem, and maybe it's time that politicians and government have the backs of people that actually work real jobs instead of caring about their donors rich jerks in the boardroom.

As another US Senator asked a little over a decade ago: "When does the greed stop?"

Sunday, February 11, 2018

GOP gives up all fiscal coherence - which may be what they want

I haven't had a lot of time to discuss the 6-hour shutdown and resulting spending bill coming out of DC this week. So instead, I'll forward to you an article from Stan Collender in Forbes, who went over the "Biggest Losers" from this week's budget deal.
1. Donald Trump. There was no money for his wall, a rejection of his 2018 budget cuts, Congress undercut his 2019 budget the week before it was released and there was no apparent role for Office of Management and Budget Director Mick Mulvaney or any other Trump economic official in the negotiations that led to the deal. Congress essentially told the president to butt out, and he did. Trump did nothing other than tweet his support for the deal (and in the process kneecapped the House Freedom Caucus). What else needs to be said?

2. The House Freedom Caucus. I said this in another post on Friday, but it needs to be repeated here. The House Freedom Caucus, the allegedly fiscal ultra conservatives who for years have tormented the rest of the Republican House caucus and two GOP speakers with their take-no-prisoners approach to legislating, suffered a true political beatdown from which it will be hard to recover. First, domestic spending was increased over HFC's adamant objections. Second, unlike what happened to his predecessor, Speaker Paul Ryan (R-WI) suffered no HFC-induced political problems from working with House Democrats to pass the deal. Third, two of the HFC's other biggest fiscal priorities -- repealing the Affordable Care Act and cutting mandatory spending -- not only weren't included in the deal but were essentially abandoned for the rest of this year.

3. The Committee for a Responsible Federal Budget. This probably should be broadened to include all of the anti-deficit groups that for years have been preaching the gospel of the balanced budget, but the Committee for a Responsible Budget deserves special recognition as one of the big losers in this budget deal. The CRFB, which has been railing about the federal deficit and national debt for decades, routinely claimed the mantle of anti-deficit champion and was the most visible of what Nobel award-winning economist Paul Krugman calls the "deficit scolds," wasn't just shoved aside by this deal, it was completely ignored. Even worse for CRFB, the now $1 trillion or more (and perhaps much more) deficit caused by the tax cut and this deal isn't a cyclical temporary change, it was an enacted permanent increase.
So remember all of those crocodile tears that Republicans and the allegedly "independent" Tea Party shed around 2009-10 about how Obama was passing on debt to their kids and grandkids and that was a future they couldn't endure? It was always partisan BS.

In fact, Collender says that the younger generations are the ones that will have to pick up the pieces of the wreckage that the GOP is causing with the Piece of Shit tax plan and now this budget-busting spending deal. Especially since the Boomers are going to be retired and not have to worry about losing their jobs int he 2020s.
4. Millennials. Ask yourself one question: Who's going to bear most of the burden of the trillions of dollars in new government debt caused by the tax cut and the budget deal? You get the prize if you said Gen Xers and Millennials.

The billions of dollars in additional interest costs won't be their only problem. Unless these younger generations are willing to tolerate even higher annual deficits in the future ($2 trillion is no longer unimaginable), the federal government's ability to respond to future crises and deal with the Millennials' needs will be limited.
And while I'm a person that doesn't think deficits in themselves are economy-destroying, I do recognize that it can lead to higher interest rates and devaluation of the dollar. And the annual costs from having to deal with the increased debt and higher interests logically would eat into the ability to take care of other needs.

There's also a part of the new spending deal that expands Medicare coverage to long-term coverage and supports, allowing for more individualized service plans, similar to Wisconsin's Family Care Medicaid program. But of course, the expanded benefits also likely will lead to higher costs in a program where expenses are exceeding revenues in some years.

But of course, that's likely the plan for these Koched-up jerks. Run up the massive deficit with these permanent spending increases, then whine and blame Democrats when they are back in power over the next few years. Which is why I bet the GOP won't try to mess with Social Security or Medicare between now and Election Day, no matter how much Lyin Ryan still wants to screw those people over.

It's also cute how Mr "Budget Wonk" claims that entitlement spending is the real budget problem (when virtually none of it adds to our fiscal deficit today), but the increases in military spending (which DO add to the deficit) is somehow...different.

Soooooo punchable.

Instead, some of the GOP puppetmasters would probably be OK with losses in 2018 and maybe even 2020, so that they can return to their preferred status as an obstructionist minority party in order to dupe Dems into falling for some kind of "Grand Bargain" that eradicates the New Deal. This would allow the RW oligarchs to get some of what they want, with the bonus of absolving the GOP for some of the blame for the bad consequences that follow.

Don't fall for it. Fire these reckless GOP bums, and keep them out of power for a LONG time.

Saturday, February 10, 2018

Charlie Pierce- the GOP is the problem in DC, and in Wisconsin

Charlie Pierce is one of my favorite writers, and he consistently reminds us that none of what we are seeing in 2018 "governance" should be considered normal and acceptable. And Charlie doesn't find it a coincidence that this dangerous absurdity is happening in a time when the Republicans are in charge of the federal government as well as many states.

Pierce noted that Donald Trump's presidency is not the cause of this, but is instead the symptom of a party that has gone mad.
It did not begin with Donald Trump, god knows. It was there when Bob Dole, who is looked upon now with nostalgic fondness, declared that he represented all those people who didn’t vote for Bill Clinton, an unprecedented public statement by the leader of an opposition party. It was there when various influential Republicans met on the night of Barack Obama’s inauguration and declared open warfare against his agenda before they even knew what it was, and this in the middle of the worst fiscal crisis since the Great Depression. It was there when they meddled in the care of Terri Schiavo and it is there in their pathological insistence that supply-side economics works. It cost Merrick Garland a seat on the Supreme Court. And it was the direct cause of the election of the current president*.

Just on Monday, the President* of the United States declared insufficient applause at his State of the Union address to be a treasonous act. From The New York Times
“Can we call that treason?” Mr. Trump said of the stone-faced reaction of Democrats to his speech. “Why not? I mean, they certainly didn’t seem to love our country very much.”
The White House dismissed this as simply a “tongue-in-cheek” remark by our laff-riot president*. I guarantee you that most of his intended audience, fed as it is with daily doses of the monkey brains by its favorite radio and TV stars, did not take it that way. They cheered because, in their minds, he meant every word.
You can certainly add in Wisconsin GOP to this mentality, and could even say that they were the model for what DC GOPs are trying to pull over today. This is particularly true when you consider all 18 WisGOPs in the state Senate voted to get rid of the administrators of the Wisconsin Elections Commission and the Wisconsin Ethics Commission. And why? Because those individuals worked for the Government Accountability Board when it was investigating the Wisconsin GOP for money-laundering and excessive campaign contributions during the Wisconsin recalls of 2011 and 2012- activities that WERE ILLEGAL UNDER THE LAW AT THE TIME. And because the GAB dared to investigate that illegal activity, it hurt the fee-fees of Senate GOP leader Scott Fitzgerald, so he decided to chill future investigations and try to rig future elections through these measures.

Just another authoritarian GOP power-grabber

Pierce also took aim at Fitzwalkerstan this week, where the Marquette graduate calls out our Marquette Dropout Governor for preventing voters from filling vacant seats in the Legislature because those voters might (gasp!) choose Democrats.
Moving on up to Wisconsin, we find that Scott Walker, the goggle-eyed homunculus hired by Koch Industries to manage that particular Midwest subsidiary, is working very hard to minimize potential Republican losses in special elections in that state similar to what happened this week in Missouri. Walker has decided that you can’t lose elections that you don’t hold. (Genius!). John Nichols, from The Madison Capital-Times, explains this strategy.
Gov. Scott Walker is thwarting representative democracy in Wisconsin. He is refusing to call prompt special elections to fill the seats of former state Sen. Frank Lasee, of De Pere, and former state Rep. Keith Ripp, of Lodi, a pair of Republicans who quit the Legislature in December to take posts with the governor’s administration. Walker wants to leave those seats open until January 2019 — denying tens of thousands of Wisconsinites representation for a full year.
As Nichols points out, the Republicans in Alabama have decided to try this finagling, too, in the wake of losing a U.S. Senate seat to a Democrat who managed to beat Roy Moore, the Gadsden Mall Creeper. And it wouldn’t be a trip to America’s Dairyland if we didn’t check in on the Foxconn project. Apparently, they’re going to get their own Amtrak stop. From Urban Milwaukee:
The board will also take this proposal up as an opportunity to discuss the need for transit service to the Foxconn development in Pleasant Prairie. The Public Transportation Review Board will also hear about a proposed bill (Assembly Bill 918) in the state Legislature that would prohibit city governments from regulating taxicab companies. Under the proposed legislation, the state’s Department of Safety and Professional Services would be the sole regulator of taxicab companies, maintaining control of all licensing for companies and their drivers.
This thing is going to be a state within a state, and the actual state is going to be unable to maintain its constitutional authority. Wait and see. That’s how this is going to go down. That’s going to be Walker’s lasting legacy in Wisconsin: The Grand Duchy Of Foxconn. There’s a plummeting employee on the royal seal.
Well, that's certainly what they did with environmental laws in the "Foxconn zone", which now they will use to try to spread to the "Kimberly-Clark zone" and the rest of the state, if the voters are stupid enough to keep the GOP in power.

Also note the ALEC-style mandating of laws from the state level to prohibit local governments from installing their own standards, which might actually keep donors and other friends of WisGOP from screwing people and the environment as they see fit. Just this week, a similar bill got a public hearing that would outlaw local governments from putting in laws that include non-discrimination policies and higher minimum wages. And there are still dingbats in this state who think the GOP is the party of fiscal responsibility and local control?

None dare call this fascism. But I don't know what else you'd call it? All are complicit at this point, and all must be fired, ASAP.

Friday, February 9, 2018

Rising trade deficit the latest reminder of the pre-Great Recession economy

Wanted to go over an economic report that came out this week that didn't seem to get a lot of play, but gives another bit of evidence that our economy continues to have resemblances to the mid-2000s. And even more noteworthy is that it shows that Donald Trump's "America First" talk isn't matching what's going on overall.

The report was the monthly balance-of-trade report from the Bureau of Economic Analysis, and it not only featured December's figures, but the preliminary year-long figures for 2017. And both the monthly and annual numbers showed a trade deficit on the rise.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $53.1 billion in December, up $2.7 billion from $50.4 billion in November, revised. December exports were $203.4 billion, $3.5 billion more than November exports. December imports were $256.5 billion, $6.2 billion more than November imports.

The December increase in the goods and services deficit reflected an increase in the goods deficit of $2.6 billion to $73.3 billion and a decrease in the services surplus of $0.1 billion to $20.2 billion.

For 2017, the goods and services deficit increased $61.2 billion, or 12.1 percent, from 2016. Exports increased $121.2 billion or 5.5 percent. Imports increased $182.5 billion or 6.7 percent.
This means that imports rose to an all-time record for 2017, and exports also rebounded in America after two years of declines.

Those figures would be expected with a US and world economy that continued to grow in 2017. And locally, Wisconsin Republicans touted the state's increased overseas sales as proof that things were going well at the state level.

And the $22.3 billion in Wisconsin exports cements trade as an important part of WIsconsin's economy. But when the country's exports grew by 5.5% overall, it simply means Wisconsin was joining in the increase that much of the rest of the nation saw. In fact, this article from the Milwaukee Business Times says that the 6.1% increase only placed Wisconsin 26th of the 50 states for export growth.

On the flip side, the state's trade deficit grew at a notably faster rate than the rest of the US.
Wisconsin’s imports were also up, increasing $5.3 billion or 23.6 percent to $27.8 billion. The state’s increase was the fourth largest in the country but Wisconsin remained 22nd for total imports.
And let's take a minute to talk about overall trade deficits, because 2017 wasn't just a rebound from a couple of stagnant years in this front- it represented the largest trade deficit since before the Great Recession, and December's deficit was the largest in any month since before the 2008 financial crisis shut down trade.

Wisconsin Congressman Mark Pocan noted the increased deficit in 2017 didn't exactly match up with President Trump's campaign talk about "getting tough on trade".

Realistically, we shouldn't be too surprised by this jump in the trade deficit. After all, the US savings rate has plummeted back to pre-Recession levels, and given that people are consuming so much, it seems natural that some of that would come from overseas.

Now the question is whether this trade deficit is a bad thing, and a sign of bad things to come? I'm not as sanguine about free trade as the typical Econ person tends to be, because I do think that corporations have abused low tariffs by allowing it to be a reason to offshore jobs and cut wages in America while grabbing major profits for themselves. But it is noteworthy that manufacturing employment has risen by 186,000 in the last 12 months measured, which was a nice reversal from the drops we saw last year. So at least that part of Trump's big talk is holding up, even if our trade deficit is widening (FYI, the goods deficit rose by $58 billion in 2017 to a total of $810 billion).

But the catch-22 is that one major way to encourage exports is to lower the value of dollar (which did drop in 2017 vs many overseas currencies). And that'll raise the prices of those imports that we keep buying more reliant on. Combine that with the return of $1 trillion fiscal deficits (especially after this last budget deal), and you've got a situation that causes interest rates to keep going up, making a crash of our Bubbly assets even more likely.

Like a lot of other things we've seen in recent months, just because our trade deficit is on the rise, it doesn't mean a disaster is imminent (even with the craziness in the stock market over the last 2 weeks). But the resemblances to the 2nd term of George W. Bush are quite remarkable, and we'd be crazy not be concerned about seeing the economic awfulness of the Aughts repeating themselves.

Walker's rail fail continues to cost Wisconsinites

A theme during the Age of Fitzwalkerstan is seeing how prior WisGOP decisions often end up being more costly for Wisconsinites in the future. Well, add this to the pile, and it’s a big one.
Adding three additional daily roundtrips to the Amtrak Hiawatha line between Milwaukee and Chicago would require $195 million in infrastructure upgrades, a state Department of Transportation representative said Thursday.

The department presented on its plans to increase the number of daily trips from Milwaukee to Chicago from seven to 10 during a meeting of Milwaukee’s Public Transportation Review Board, chaired by Alderman Bob Bauman.

Plans for increasing the Hiawatha service have been in the works for five years. The Milwaukee to Chicago rail corridor is already a busy one, with 65 Metra commuter trains, 25 freight trains and 16 Amtrak trains. Adding more Amtrak trains would require the completion of 10 infrastructure projects on the tracks, including three in Wisconsin, Arun Rao, DOT passenger rail manager, told the board….

Funding for the expansion of Hiawatha service would come from a combination of federal and state sources, but could also include private investment. Rao acknowledged one of the challenges the project faces is there’s no current federal funding opportunity for the department to apply for.
Wait a minute, I seem to recall that the state had a chance to pay for infrastructure upgrades on this line a while back. OH YEAH! It was from this article in December 2010.
The Obama administration is taking back the $810 million awarded to Wisconsin for train projects after Republican Gov.-elect Scott Walker made it clear he will not waver in his opposition to the project.

With almost all of the money now going to 13 other states, Walker lost a high-stakes gamble — played throughout his campaign for governor — that he could persuade Congress to redirect the money to fix Wisconsin’s crumbling roads and bridges. Federal officials repeatedly said that wasn’t an option, and the money would be sent to rail projects elsewhere.

Walker claimed victory Thursday, saying the project represented “runaway government spending” and would have cost taxpayers in the long run.
Oh, I see a decision that’s costing taxpayers in the long run, alright.

Walker’s idiotic pose against the high-speed rail project, which would have included the feds fully paying for the same Milwaukee-to-Chicago rail line that now needs $195 million of work, will now likely be paid for by Wisconsin state taxes. And that project will have to fight for dollars in a DOT Fund that already doesn’t have enough money to pay to fix our crumbling roads and highways.

Flash ahead 7 ½ years, and look who’s now begging DC for more federal money to bail out the state’s infrastructure.
The department applied last fall for a roughly $250 million federal grant to support the expansion of I-94. The Foxconn special session legislation authorized around $250 million in state bonding for the project, but required the DOT receive federal funding as well before spending any of the money.

A decision on the federal grant is expected later this year. The DOT’s estimated schedule has the mainline I-94 work being completed in 2019 and 2020.
And yes, Foxconn is also being promoted as a reason to upgrade the Hiawatha Line, since it has a stop in Sturtevant that is near the planned Foxconn campus, and the DOT plans that to contribute to increased Amtrak traffic (along with the fact that the Hiawatha Line has doubled in ridership since 2001).

Wonder what’s caused Scotty’s change of heart on asking the feds for infrastructure funds? You don’t think it has something to do with the Black Man not being in the White House anymore, do you?

FIRE THESE SHORT-SIGHTED, RACE-BAITING BUMS before they screw us over for another decade with political pandering. Sure, Walker's and WisGOP's poses may rile up some rube voters, but it’s failed miserably when it comes to making this state better off for business and quality of life.

It must be ended.

Thursday, February 8, 2018

Obamacare reinsurance and rural WEDC

I wanted to go into detail on a couple of pre-election bills that were part of Scott Walker's State of the State address, now that both bills have been officially introduced and are now in legislative committees.

The first involves Walker's newfound embrace of the Affordable Care Act (ACA). In looking at the bill text, it looks like that this new reinsurance program would be set up in time for payments to be made on 2019 plans bought on an Obamacare exchange, which people would sign up for in the months before the November 2018 elections.
This bill creates the Wisconsin Healthcare Stability Plan (WIHSP), which is a state-based reinsurance program for health carriers, subject to the approval of a waiver of the federal Patient Protection and Affordable Care Act. WIHSP makes a reinsurance payment to a health carrier if the claims for an individual who is enrolled in a health benefit plan of the carrier exceed a threshold amount, known as the attachment point, in a benefit year. The commissioner of the Office of the Commissioner of Insurance in this state administers WIHSP. After consulting with an actuarial firm, the commissioner sets the payment parameters for the reinsurance payment as specified under the bill. In addition to the attachment point, the other payment parameters are the reinsurance cap, which is the maximum amount of claims eligible for a reinsurance payment, and the coinsurance rate, which is the percent of the claim amount eligible for a reinsurance payment. The commissioner must design and adjust the payment parameters with the goal to stabilize or reduce premium rates in the individual health insurance market, increase participation by health carriers in the individual market, improve access to health care providers and services for individuals purchasing individual health insurance coverage, mitigate the impact high-risk individuals have on premium rates in the individual market, and take into account any federal funding and the total amount of funding available for the plan. If the funding amounts available for expenditure are not anticipated to fully fund the reinsurance payments as of July 1 of the year before the applicable benefit year, the commissioner must adjust the payment parameters and then allow the health carrier to adjust its filing of insurance premium rates. If funding is not available to make all reinsurance payments in a benefit year, reinsurance payments will be made proportional to the health carrier's share of aggregate state resident premiums, as determined by the commissioner. Under the bill, health carriers are required to calculate the rates the carrier would have charged for a benefit year if WIHSP was not established and submit those rates as part of its rate filing.

The commissioner must calculate a reinsurance payment to be made to a health carrier as specified in the bill. If the claims cost amounts for an individual enrollee of the health benefit plan do not exceed the attachment point threshold, the commissioner may not make a reinsurance payment. If the costs exceed the attachment point, then the commissioner makes a reinsurance payment that is the coinsurance rate multiplied by whichever of the following is less 1) the claims cost minus the attachment point or 2) the reinsurance cap minus the attachment point. When a health carrier meets criteria set in the bill and any requirements set by the commissioner, the carrier may request a reinsurance payment. A health carrier, however, is not eligible to receive a reinsurance payment unless the carrier agrees not to bring a lawsuit over any delay in reinsurance payments or reduction in the payments for insufficient funding. The commissioner must notify the carrier of any reinsurance payments for the benefit year no later than June 30 of the year following that benefit year.
But here’s the kicker, in order to pay for it, there are $80 million in unspecified cuts savings in other Medicaid funding.
The bill requires the secretary of health services to ensure a lapse is made to the general fund of up to $80,000,000, as determined by the secretary of administration, from the general purpose revenue appropriation for the Medical Assistance program.
If we keep seeing savings in Medicaid due to lower enrollment numbers along with lower costs due to Obamacare, like we did in the 2015-17 budget, then there won’t be any effect on the overall state budget. But if we get a recession and/or costs end up being more than expected, then things get very dicey, and benefits will have to be modified and/or cut.

There’s also a mechanism in the bill which would funnel any “savings” from not paying an ACA fee into this reinsurance fund, if Americans are stupid enough to keep the GOP in power and they actually do repeal Obamacare.
Under the bill, if a fee imposed under the Affordable Care Act is no longer applicable to insurers participating in the state's group health insurance program or the Medical Assistance program, the secretary of administration must calculate the expected savings to state agencies from avoiding the fee. The secretary must then transfer, in the biennium in which the savings calculation is made, to the general fund the program revenue based on the savings calculated or adjust state agency employer contributions for state employee fringe benefit costs in the biennium following the biennium in which the savings is calculated or both. The secretary may transfer any program revenue transferred based on calculated savings to an appropriation account to be used for WIHSP or reinsurance.
Right now, this bill is in the Joint Finance Committee, but hasn't had a hearing or any other action scheduled.

The other bill I want to talk about is a Walker proposal to start up a new rural development fund for $50 million. There are two key provisions that are part of this bill. First of all, what is a “rural” part of Wisconsin? Let's see what the bill tells us
In this section, “rural county” means a county with a population density of less than 155 residents per square mile.
I don’t see a date that those “population density” figures are based on, but if we base it on the 2010 Census, that would include 58 of Wisconsin’s 72 counties, including “rural” counties such as Eau Claire, Calumet, Fond du Lac, Jefferson, and Manitowoc. But I've also heard 55 counties being eligible, and the most recent estimates from the Wisconsin Department of Administration has 16 counties above that 155 person/square mile standard,meaning that 56 counties qualify. So I would think that should be sorted out before this bill goes forward.

But more importantly, what is “rural development” and how would this program handle taxpayer funds? Basically, it would give WEDC $50 million in taxpayer dollars to give away to “expend moneys for any economic development program the corporation is administering...., if that expenditure assists economic development in a rural county.” That's pretty damn broad, and seems to largely leave it up to WEDC to decide what developments to kick back campaign funds to fund with this $50 million.

Is this what rural WEDC will be funding?

Fortunately, there is a backstop, unlike most WEDC handouts.
1. Before [WEDC] first expends moneys on each program under this paragraph, the corporation shall notify the joint committee on finance in writing of the corporation's intention to expend the moneys on the program. The notice shall describe the program and purposes for which the corporation proposes to expend the moneys under this paragraph.

2. If, within 14 working days after the date of the corporation's notice under subd. 1., the cochairpersons of the joint committee on finance do not notify the corporation that the committee has scheduled a meeting to review the corporation's proposal, the corporation may make the expenditures as proposed in the corporation's notice. If, within 14 working days after the date of the corporation's notice under subd. 1., the cochairpersons of the committee notify the corporation that the committee has scheduled a meeting to review the corporation's proposal, the corporation may make the proposed expenditures only upon approval of the committee.
So given WEDC’s shaky-at-best record of taxpayer-funded handouts, it would seem to be wise to object and require a hearing for at least the first few of these projects under this $50 million “rural WEDC” program, to see what (and who) we are dealing with.

What’s also interesting is that unlike the reinsurance program, this rural WEDC plan doesn’t use already-existing money, but adds this $50 million to what already exists. And since the program is designed to last 20 years, that means there would be another $100 million to be set aside for this program in the 2019-21 budget, raising the state’s structural deficit even higher.

The rural WEDC bill got a hearing in a Senate Committee yesterday, but hasn't moved at all in the Assembly. But given the plans announced today about how Walker and the Assembly GOP plan to blow nearly half of the small cushion this state has in this budget on pre-election tax cut gimmicks, I wonder if rural WEDC might go down the tubes in these last weeks of the legislative session. And that might be a good thing.

Let's see if either of these ideas progress in the coming weeks, or if they prove to be empty Walker posturing ahead of an election that he seems to already be trailing in.