Monday, July 31, 2017

Trump boom? Only on Wall Street, not in the real America

On Friday, we got our first look at how the overall US economy has been doing, with the release of Gross Domestic Produce (GDP) in the 2nd Quarter of 2017. And on the top level, the numbers were pretty good.
Real gross domestic product increased at an annual rate of 2.6 percent in the second quarter of 2017 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.2 percent (revised).

The acceleration in real GDP growth in the second quarter reflected a smaller decrease in private inventory investment, an acceleration in PCE, and an upturn in federal government spending. These movements were partly offset by a downturn in residential fixed investment and decelerations in exports and in nonresidential fixed investment.
That 2.6% were largely in line with expectations, and were a welcome acceleration from the sub-2% growth that had been the norm over the last 2 years. But on the flip side, it was the 2nd-lowest 2nd quarter figure for growth in the last 4 years, and really wasn't much different than 1st Quarter's tepid growth, after you take out the change in inventories.

And based on other information that has recently come out, this 2.6% growth doesn't seem to be harbinger of greater growth in the coming years. Also noteworthy in Friday's GDP report was that the BEA revised all quarterly and annual GDP between the start of 2014 and the 1st Quarter of 2017. This meant that 1st Quarter GDP growth was reduced from 1.4% to 1.2%, and previous quarters also had small changes.
For the first quarter of 2014 through the first quarter of 2017, the average revision (without regard to sign) in the percent change in real GDP was 0.4 percentage point. The revisions did not change the direction of the change in real GDP (increase or decrease) for any of the quarters.

·For the period of economic expansion from the second quarter of 2009 to the first quarter of 2017, real GDP increased at an average annual rate of 2.1 percent, the same as previously published.
In addition, back on July 23, the chaos and general idiocy in GOP-run DC led the International Monetary Fund to reduce its estimates of growth in the real economy.
The IMF on Sunday lowered its economic growth forecasts for the United States to 2.1% for this year and the next, down from the 2.3% for 2017 and 2.5% for 2018 that it had predicted in April.

That's a far cry from the 4% growth President Trump promised on the campaign trail, and significantly lower than the 3% growth he has targeted since assuming office. The global financial institution cited the "uncertainty" over the Trump administration's policies as the main reason for the downgrade.
And that IMF downgrade of growth was before attempts to repeal Obamacare imploded in Congress last week. Ruh roh. While a drop in projected growth of 0.2% this year and 0.4% next year doesn’t sound like much, but when you’re talking about an economy that has a total GDP of $19.2 trillion in today’s dollars, that’s still a drop in projected activity of $380 billion for this year, and close to $800 billion in 2018. Combine those updated figures with the recent outlook from the IMF, and it sounds like the US economy is going to bounce along at the same moderate growth level that we’ve become accustomed to (which makes me wonder why the stock market keeps climbing in this ridiculous Trump rally, with the S&P going up nearly 2% in July, and is up almost 15.5% since Election Day).

It is not difficult to imagine some of those reduced estimates of activity affecting things in Wisconsin, which would reduce the projected tax revenues in an already-tight 2017-19 Wisconsin budget. Let’s go back to the Legislative Fiscal Bureau’s rosy revenue estimates from January, which forecast 2.3% real GDP growth for this year, and 2.6% growth in 2018. The LFB said at the time that they were counting on the then-new Trump Administration to pass tax cuts and put in a $250 billion infrastructure package.

That clearly hasn’t happened, and the LFB included a forecast that explained what may occur if that stimulus didn’t happen from DC.
…Under the pessimistic scenario, the January, 2017, forecast assigns a 20% probability of a two-quarter economic contraction in the first half of 2018 due to strained trade relations with China and Mexico. U.S. exports decline more than imports, and economic conditions worsen across the world. The U.S. dollar increases in value, further undermining export competitiveness. U.S. businesses react by postponing capital investments. The stock market declines markedly, along with consumer confidence.

Meanwhile, productivity continues to decline, and thus modest demand-side growth causes inflationary pressure. OPEC oil production cuts (which are not offset by increased domestic production) and inflation prompts the Federal Reserve to raise interest rates, further constricting growth. Under this scenario, disagreements between the new Trump administration and Congress, as well as a federal government hiring freeze, prevent stimulus spending. As a result, consumer and business confidence deteriorates, leading to declines in business investment, meager growth in consumer spending, and a fall in housing starts. Real GDP growth is estimated at 1.3% in 2017, -1.1% in 2018, and 1.9% in 2019. These growth rates are lower than the baseline forecast by 1.0% in 2017, 3.7% in 2018, and 0.4% in 2019.
The economic factors in that “pessimistic scenario” haven’t hit yet, as consumer confidence and the stock market remain high and business spending has been maintained (in fact, non-residential business spending is at the highest growth levels in 3 years, according to the most recent GDP report).

But the political concerns? It’s that scenario and then some, as the uncertainty regarding the future of health care (and possible Trump/GOP sabotage of the current system) will likely lead to economic problems and a drop in consumer spending in other sectors. 6 months in and we’ve barely heard a peep about an infrastructure package, and Trump’s austerity-driven budget has been considered DOA in Congress for 2 months.

Add in a potential crisis involving the end of the fiscal year and the need to raise the debt ceiling over the next 2-3 months, and you can see where the possibility of Trumpian and/or other GOP idiocy in DC leading to a slowdown and/or recession in the very near future. That’s not even counting the possibility that Commander Cuckoo Bananas might cause some kind of geopolitical crisis and/or being kicked out of office in the near future.

Stay buckled in, folks.

Sunday, July 30, 2017

Now that there is a bill, how would the Fox-con really work?

Well, the bill that describes the Fox-con deal in Wisconsin got released on late Friday afternoon, and apparently the special session to start ramming through discussing the bill begins on Tuesday. So let's take a look at the bill, and see what other goodies are a part of it.

Basically, the bill allows for the establishment of a new type of enterprize zone called an "Electronics and Information Technology Manufacturing Zone", and allows for up to $2.85 billion in tax credits that are generally determined as follows.
1. Determine the zone payroll for the taxable year for full-time employees whose annual wages are greater than the amount determined by multiplying 2,080
by 150 percent of the federal minimum wage in a tier I county or municipality or greater than $30,000 in a tier II county or municipality.

2. Multiply the amount determined under subd. 1. by 17 percent.

(bm) Filing supplemental claims. In addition to claiming the credit under par. (b), and subject to the limitations under this subsection and s. 238.396, a claimant may claim as a credit against the tax imposed under s. 71.02 or 71.08 an amount equal to 15 percent of the claimant's significant capital expenditures in the zone in the taxable year, as determined under s. 238.396 (3m).
The good part about that is that "zone payroll" that gets the 17% write-off is limited to $100,000 per employee. The bad part is that I see nothing in the language that says the credits are based on a "base year" of jobs with this Foxconn development. I don't see what that base year is, and it may well be 0, since nothing is there right now. If true, there would just has to be salaries of full-time employees and capital expenses (which is building construction, machines, etc) of some type to have things written off. And with WEDC being the ones to oversee these numbers, we have the right to be skeptical, given WEDC's awful history of tracking these things in the recent past.

Also worth noting, since corporate taxes on manufacturers are already near zero due to The Big Giveaway known as the Manufacturers and Agriculture Credit, most of this will come in the form of STRAIGHT CASH to Foxconn and others who build in the area. Not a bad deal, to be paid off by the state for hiring people and building stuff.

This part is also intriguing to me, as described by the Legislative Reference Bureau.
This bill authorizes the Department of Administration to make grants to local governmental units for costs associated with development in an electronics and information technology manufacturing zone, including costs related to
infrastructure and public safety. DOA may require a local governmental unit to match a grant in whole or in part.
Which is a good thing as a matter of policy, because it lessens the chances of local taxpayers being stuck with a huge property tax bill near the Foxconn facility. But it's not such a good thing for state taxpayers, since this is additional spending that the state would have to come up with, and with these Foxconn writeoffs.

On the flip side, the Foxconn bill allows Tax Incremental Districts (TIDs) to be extended from 20 years to 30 years under this law, meaning that local communities may be giving the property tax-free till 2048 , if the added property value doesn't match what is exempted in the TID. Which means that every other taxpayer in that community would have to pay higher property taxes to make up the difference. And we haven't seen what kind of subsidy Foxconn will get from the community they set up in...which we will find out once they actually agree on a site.

And the two bigger surprises that came out with the release of the Foxconn bill over the weekend were as follows.

The LRB indicates that this is contingent on a federal award, which would go along with Gov Walker's desire for a bailout from DC on highway funds, which was revealed earlier this month. But even if the $252 million was able to be spent on I-94 in Racine and/or Kenosha County, the bil says it would be borrowed from the General Fund, which means that there will be even fewer resources available in future years for schools, local aids, health care, and other items that the General Fund pays for.

And the most heinous parts of the bill (outside of the massive amount of corporate welfare) is this section.

And if you think the state's Department of Justice is going to make sure waterways remain clean and that others aren't screwed over by pollution on and around the Foxconn site, you shouldn't hope too hard. Why do I say that? Take a look at this tweet from the partisan GOP hack that "serves" as our Attorney General.

Nothing but corporate propaganda and GOP talking points. If that won't get you donating to Josh Kaul to get the crooked Schimel out of office next year, nothing will.

It still seems like a lot of details need to be filled in with this Fox-con, and it looks like a double-edged sword. We either see the claims of UP TO 13,000 jobs fall far short of that number, or we spend a helluva lot of money to pay off companies that add a lot of jobs and build facilities. Or worst, it could be both. Either way, this thing deserves a lot more discussion and details than I bet we will find out in the special session that is set up to jam this Fox-con through.

More to come on this one as information becomes available....and I have the time and space to go into other parts of it.

Saturday, July 29, 2017

Roger Waters - "Us and Them" in MKE...and Pigs and Dogs

On a perfect weather weekend in Wisconsin, I'm heading with my wife and friends to see the Brewers try to get back into first place tonight. And unlike our Governor, I will not be rooting for GOP mega-donor Tom Ricketts and the Cubs. I will actually support the team from Wisconsin.

A few miles away, the Bradley Center is hosting Roger Waters' latest tour, which has been playing to sellouts in almost all of the places he has appeared in. Obviously, a legend like Waters has 50 years of fan base to build up, and that's some of it. But also some of it likely has to do with the fact that Waters' songs with Pink Floyd and in his solo career seem to resonate a lot with the mess that is the USA in 2017.

I find myself listening to the Pink Floyd album "Animals" more and more these days, and the harshest song of the lot sums things up quite well, in addition to being an already-killer track. (language and some images may be NSFW)

"Dogs" works pretty well these days, too. Especially when you see sleaze like Anthony Scaramucci get promoted without having any discernable talent other than amorality and a big mouth.
You got to be crazy, you gotta have a real need
You gotta sleep on your toes and when you're on the street
You got to be able to pick out the easy meat with your eyes closed
And then moving in silently, down wind and out of sight
You gotta strike when the moment is right without thinking
And after a while, you can work on points for style
Like the club tie, and the firm handshake
A certain look in the eye and an easy smile
You have to be trusted by the people that you lie to
So that when they turn their backs on you
You'll get the chance to put the knife in

And here's a great interview with Waters on CNN from a couple of weeks ago talking about the tour, and how Waters takes the media to task for turning politics and news into flashy entertainment instead of discussing things seriously and with a critical eye.

No WIs budget = more chances for vouchers to steal from public schools

One of the things that have gotten shoved into the background with Foxconn Fever is the fact that Wisconsin doesn't have a damn budget yet.

One of the issues that we have yet to resolve is K-12 spending, which had significant modifications in the Senate Republicans’ budget proposal that was sent out last week. As I noted at the time, the Senate GOP budget included a noticeable increase in funding for school vouchers, adding $36 million on top of the increases to vouchers that were already in Gov Walker's 2017-19 budget, while taking away a similar amount from K-12 public schools.

Legislative Democrats sent out this information from the Legislative Fiscal Bureau showing what the state’s K-12 spending would look like if the Senate GOP plan were to become law. The analysis went back to 2009-10, and it shows how spending on vouchers has grown exponentially, especially once Scott Walker and the Wisconsin GOP came to power in 2011.

Voucher school spending 2011-2019 (Sen GOP plan)
2010-11 $130.8 million
2012-13 $157.8 million
2014-15 $213.0 million
2016-17 $252.1 million
2017-18 $269.3 million
2018-19 $311.3 million

At the same time, K-12 public school aids have stagnated. Under the Senate GOP plan, General K-12 Aids (which give more funding to poorer schools than richer ones) would be less in 2018-19 than they were before the GOP came to power. And combined public school general and categorical aids will be up less than 10%, while the rate of voucher spending has grown 14 times faster.

General K-12 Public School Aids (Sen GOP plan)
2010-11 $4.564 Billion
2018-19 $4.477 Billion (-1.9%)

General + Categorical K-12 Public School Aids (Sen GOP plan)
2010-11 $5.218 Billion
2018-19 $5.699 Billion (+9.2%)

That 9% increase is before we deal with inflation over those 8 years, by the way. Also noteworthy is that those combined General and Categorical aids are projected to be $6,664 a student in 2018-19, which is nearly $1,100 less than what would follow a voucher student from grades K-8, and $1,739 less than a high school student attending a voucher school.

Even worse, over the last few years, the voucher program has been changed to directly funnel money away from K-12 public schools and into the private ones, as a way to hold down taxpayer costs. Under the Senate GOP plan, $120.0 million would be taken away from public schools in 2018-19, and nearly 2/3 of that would be outside of Milwaukee. These reductions in state aid often lead to property tax increases to make up the difference, as losing a handful of students isn’t going to change the amount of teachers or schools that are required for a district to run, nor will it change the costs to leave the lights on.

And the property tax increases and funding disparities were the crux of the Dems’ complaint with the Senate GOP plan to increase vouchers (well, along with the fact that vouchers don’t do much to improve student performance).
“Local property taxpayers should see more of their state tax dollars come home to schools that have been at the heart of rural and northern communities for generations,” said Sen. Janet Bewley (D-Delta).

“At the very least they should have a say before their hard-earned tax dollars are shifted to unaccountable voucher schools at a higher rate and with no taxpayer oversight.”

Legislative Democrats introduced legislation this spring to give local taxpayers a say before voucher costs are shifted onto property taxpayers by requiring a local referendum. That plan was also included in the education package put forward by Democratic members of the Joint Finance Committee ahead of the state’s budget deadline.

“If my Republican colleagues want to mandate this program in district after district, they should either pay for it or give property taxpayers a say before sticking them with the bill,” said Rep. Gordon Hintz (D-Oshkosh)….

“The Republican plan to force property taxpayers to foot the bill for voucher schools and their lobbyists is just wrong.Taxpayers deserve to know that the Republican Legislature is spending their school money with no local accountability. What Happened to local control and accountability for local school spending?” asked Sen. Jon Erpenbach (D-Middleton)
So think about this- Walker and WisGOP want to give away up to $200-$250 million a year to Foxconn, and they're choosing that option over covering with the property tax increases that are caused by their voucher scam. The average Wisconsinite gets screwed over two ways!

This is what has to be emphasized continually as we debate both the budget and the Fox-con, because it illustrates just how far out of whack the GOP’s priorities are, as they desperately try to deflect from their failed economic record, and kick back taxpayer dollars to their donors.

Thursday, July 27, 2017

On Day 2- it's already an obvious Fox-conn for Wisconsin

As we get more information from the campaign-driven scam that is Wisconsin's $3 billion giveaway to Foxconn to make LCD screens in the some some site...additional questions keep coming up as you take further looks at the proposed package.

The obvious first question is "Why would we trust Foxconn to ever follow through on adding these jobs, given their history of jerking places around?", and that's followed closely by "What can the state do if Foxconn doesn't hold up its end of the bargain?" Walker was insisting today that there would be provisions to get back money from Foxconn if all of the jobs were not added or did not stay in Wisconsin (and amazingly, Walker derided "cynics" who didn't believe he'd follow through on it. ALWAYS projection with these guys).

Along these lines, MATC-Milwaukee Econ instructor Luz Sosa had this editorial arguing against the Foxconn deal appear in yesterday’s online version of the Capital Times, written before the Foxconn agreement was public. I guess timing is everything, as this piece has been spread around in a few places today, and it's a good one to read.

To go along with major concerns about WEDC’s lack of oversight on prior giveaways for jobs during the Age of Fitzwalkerstan (as outlined in a May audit by the Legislative Audit Bureau), Sosa mentions that any legislative package for Foxconn should include the following.
1. Foxconn must identify the specific number of jobs it will create and sustain for a minimum of five years.

2. If it fails to deliver, there must be a “clawback” provision requiring this multibillion-dollar corporation to pay back the state or local government that financed the investment.

3. Using the Milwaukee Bucks arena development as a model, require the firm to pay all of its employees $15 an hour or more.

Of course, during negotiations Foxconn will claim it can get a better deal in another state. If that’s true, let somebody else be the sucker. Wisconsin’s hardworking people deserve a real bang for their bucks.
We absolutely will pay a price for this giveaway in the form of higher taxes or reduced services, especially before the facility is built, because Foxconn and construction companies will be getting write-offs without any other jobs being added at the site, or any products being made.

We already know Walker is fudging with how many jobs will be part of the Foxconn plant. Scotty was claiming there would be over 13,000 jobs added due to this deal, but the company itself said a much smaller number would ultimately be making these LCD screens. Check out this sentence from the Washington Post's overview of the Foxconn story.
Walker, a Republican who is facing a difficult reelection next year, said the investment would create 13,000 jobs, with an average pay of $53,000 plus benefits. But the company said that it would be hiring 3,000 workers over four years. It added that it could eventually hire more but did not provide further details.
Apparently, Foxconn Chairman Gou learned his lines and is now saying the plant would start with 3,000 people and EVENTUALLY reach 13,000. Surrrreeee Terry. And be very suspicious of that “$53,000 average salary” figure that Walker and the corporate cheerleaders are throwing around as well. That number could easily be skewed upward by a few executives and supervisors making 6 figures, while the typical Foxconn worker makes well below that.

Even a 3,000-job plant would still be a very good deal if it involved few subsidies, but it’s a horrible deal when you consider Wisconsin may be giving away an average of $200 million a year for 15 years. That comes to about $66,000 a year PER JOB, well below the $53,000 average salary that Walker and his sheep are bleating about today, let alone the $3,000 or so that $53,000-a-year worker would pay in state income tax.

Oh, and there was this thing that came up today.

It was quickly shot down after that idea was made public, but note the weasel words in Stein's report.

Anyone who's ever read David Cay Johnston's excellent book Free Lunch knows that (ab)using eminent domain is a common way that corporations and retailers grab land at values well below the market rate, especially when they're part of politically-motivated "economic development." That leak also tells me that we need to look at every line in this bill once it's more public, because you can bet there will be crap that goes beyond just the details of the tax giveaways to Foxconn.

OH LOOK! We're seeing some of that "crap" emerge as I type this. Perhaps literally.

And you know there's more. There will be a lot more. And it's why we need to see this Foxconn bill in its entirety and have a full debate on it, instead of have it rammed through in a "special session" before we can find out all of the hidden subsidies and giveaways that the bill will be filled with.

Like most things in the Age of Fitzwalkerstan, the more you look into things, the seamier they become. Stay tuned, and stay aware.

Wednesday, July 26, 2017

A $3 billion Fox-conn? And a backdoor way to tolls in Wisconsin?

Well, we got the big DC press conference about Foxconn planning to come to Wisconsin to manufacture LCD screens. Here's the Journal-Sentinel's Patrick Marley with some of the details of the giveaway "incentives package" that the state is planning to give to Foxconn over 15 years.

That "sales tax holiday" is a write-off for businesses that will do construction work on the Foxconn project, which Marley says mirrors a similar provision for work on and around the new Bucks arena in Milwaukee.

Among many questions that arise with announcement is "when do we see an actual bill, and when will the State Legislature vote on it?" According to the Wisconsin State Journal's Mark Sommerhauser, Governor Walker answered that part today.

(Raises hand) Why are we doing a special session for this when we STILL HAVE TO COMPLETE THE STATE BUDGET? Shouldn't we do these things together, given the massive tax handouts and infrastructure that'll be part of it, so we can see how all the pieces fit together?

To ask the question is to answer it. The Walker/WisGOP folks want to (ab)use the special session rules to hide the details of this package, and jam it through as quickly as possible. They don't want it to be taken in as part of the already messy budget deliberations. Not a good sign.

Neither is it a good sign that WE DON'T EVEN HAVE A SITE FOR THE PLANT, only that it'll be "somewhere in Racine or Kenosha County". Given that this plant and related sites are allegedly going to be 1.8 SQUARE MILES, it kind of seems like we might need to have a spot cleared and infrastructure ready to go to handle a facility that could have thousands of people working at it (if we ever get thousands of people working there).

Oh, and here's another red flag.

I mean what could go wrong with that? It's not like there were any problems from WEDC's most recent audit from 2 months ago.
Gov. Scott Walker's troubled economic development agency is still struggling, failing to accurately track jobs its awards are supposed to create and retain, handing out nearly $10 million in bad loans over the last two years and failing to turn over millions in tax credit repayments to the state, an audit released Wednesday shows.
Even before the massive $3 billion price tag with Fox-conn was revealed, State Representative Jimmy Anderson (D-Fitchburg) expressed severe skepticism about the deal. Anderson questioned the priorities of the Walker Administration, and drew a contrast between the huge incentives likely to be given to Foxconn with investments that Walker and WisGOP are choosing not to make.
Wisconsin taxpayers should not be subsidizing private corporations at the expense of our children, schools, and roads. And despite Governor Walker’s alleged fiscal conservatism, the truth is that he is fine with spending money so long as it doesn’t go to you, the real hard-working taxpayers of our state. The Republican-controlled legislature and Governor Walker have consistently asked you to tighten your belt or have rejected other opportunities to create family sustaining jobs, but when a multinational corporation wants a multibillion-dollar handout, Governor Walker more than bends over backwards. All the while, our schools struggle to stay open, Main Street is littered with potholes, and huge numbers of Wisconsinites cannot even drink the water coming out of their taps. That’s not leadership.
Well stated Jimmy. And given our deficit-ridden budgets, you have to wonder what gets hurt in the next few years as Fox-conn racks up its tax write-offs, which adds to that bill. And I can't think that Foxconn would be thrilled with the prospect of looking at a lot of this for the next 5-10 years as Wisconsin falls further behind on highway repairs.

This is why I’m going to make a wacky prediction here- the FoxConn package will include the Trump Administration allowing Wisconsin to put toll lanes on I-94 between Milwaukee and the state line. Wisconsin would need approval from DC to put in tolls, but Trump has indicated that he is fine with tolls as a way to pay for roads, as part of having corporations take on much of the costs of building the roads (and getting a payback for doing so). Note this story from May.
President Donald Trump administration’s proposal for a $1 trillion bill to improve the quality of the nation’s roads and highways will be paid for mostly by private funding that will be stimulated by $200 billion in federal spending, Transportation Secretary Elaine Chao announced Monday.

Speaking at an event in Washington, Chao said the transportation bill will include $200 billion in federal spending that will “be used to leverage $1 trillion in infrastructure investment over the next 10 years.” The remainder of the money would come from private companies that would enter into partnerships with local and state governments to provide financing that is necessary to complete expensive construction projects in exchange for revenue that would be generated by things such as road tolls or rail fares.
Wouldn’t the highway next to Foxconn’s new Wisconsin plant be a perfect spot to try out this scam? This would go along with Trump’s pose about “reinvesting in American jobs” and improving infrastructure, while giving Walker a photo op that makes it look like the state’s going in the right direction on both issues (in reality, it’s not). And it would explain why the press conference was in DC today with Trump and House Speaker Paul Ryan- because they're going to play a role in this deal.

This toll scam might be the only way the State of Wisconsin can come close to fixing the roads in the next decade, especially if the state is giving away $1 billion to $3 billion to Foxconn, which is on top of the $1 Billion deficits the state is facing for both the Transportation Fund and the General Fund. Of course, it doesn’t change the fact that it takes 3-4 years before the state would ever get anything back for the tolls, and would cost hundreds of millions of dollars (that we don’t have) to start up. Which may be where the campaign contributors private sector investors come in.

Now there is a long way to go before we ever see any LCD panels get made in Wisconsin. I would love to be proven wrong on this, and hope that Foxconn chose Wisconsin because it was a good location with a strong work force, and that the incentives that are given out are limited in the final package, potentially making it a worthwhile investment for the state to get involved in. And I hope part of that final package includes something that keeps homeowners and current businesses in the area from being socked with major tax increases at the local level (because you know there will be more subsidies at the local level, and the already-existing taxpayers will be paying the difference).

But if it’s anything I’ve learned in the 6 ½ years of the Age of Fitzwalkerstan, it’s that these guys are never about fiscal responsibility and legitimate, long-term economic development, but instead are all about political poses and other attempts to trick unsuspecting voters into thinking this state is doing fine. This is despite chronic budget deficits and job growth that’s been in the lower half of the US every year that Scott Walker and WisGOP has been in power.

Which makes me wonder this - how desperate are Walker, WisGOP and Trump these days? Sure seems like they feel they need to try to pull a lot of stunts and trick plays like photo ops with Chinese companies as they give the store away. And just like in football, these guys are likely running those trick plays because their current game plan is failing- bigly.

Tuesday, July 25, 2017

Once again, let Milwaukee raise its own money!

Milwaukee's Public Policy Forum released a report discussing how the City faces fiscal handcuffs that many other large cities in America don't have to deal with. I had a large post ready to go on the subject, but Urban Milwaukee's Bruce Murphy beat me to it today, so I'll forward you to that article, and include some of Bruce's conclusions.

Murphy notes that Milwaukee has always been heavily dependent on shared revenues from the state of Wisconsin, but isn't getting nearly as much sent to it as it would get 30-50 years ago. And that's a main source of its fiscal issues.
In those days well more than half the city’s budget came from state shared revenue. Even today, after 20 years of declining state aid, the city still gets 48 percent of its revenue from this source, compared to just 18 percent for 38 peer cities analyzed in the study. “General state aid historically has been Milwaukee’s largest revenue source,” the new study notes.

Which is why its huge decline since the mid-1990s is a fiscal earthquake. “If Milwaukee’s intergovernmental revenue… had increased at the rate of inflation from 1995 to 2015,” the study notes, “then its revenue total would have been 58% higher ($415 million versus the $264 million it actually received).” In real dollars that’s a loss of $151 million — a huge hole for a city whose current budget for basic services is $834 million.

Milwaukee has no chance to replace this lost funding with local taxes, because it is uniquely constrained, compared to peer cities. “No other state in the Midwest has a local tax structure like Wisconsin’s that relies solely on the property tax,” the study notes. “Most other cities get about a third of their revenue from a local sales or income tax or both,” but Milwaukee gets nearly 90 percent of its local revenue from the property tax and is prevented by state law from levying other taxes. More recent state laws also constrains how much the city can increase the property tax.
You can see where the squeeze play comes in. The City’s population remained stable around 600,000 for those years, which means there have been few ways for it to make up the difference in those cuts to shared revenue. This lack of tax-raising ability means that Milwaukee actually has some of the lowest local taxes per capita of any mid-size city in America, ranking 34th out of 39 such cities, according to the PPF, at $507 per person designated for the city. (you can look at the full Public Policy Forum report by clicking right here.

Now, the reason you may think that number is low is because it isn’t counting property taxes that are designated for Milwaukee Public Schools, Milwaukee County, MATC-Milwaukee, and other local government entities. Nor does it count the sales taxes that go to pay for Miller Park, the new Bucks arena, and other attractions via the Wisconsin Center District. It also does not count charges that Milwaukeeans have to pay for City services like Water and Sewer, or Snow and Ice removal.

But when you isolate it to "taxes" that you pay that only go to the City (and pay for City services like Milwaukee Police and Fire protection, or maintenance of city streets), Milwaukee actually doesn't get all that much compared to the typical city of size. Murphy also includes this chart from the PPF report, which shows how different (and limited) Milwaukee's mix of revenues is compared to 38 other mid-size cities in America. Note how much other cities get out of a city-designated sales tax, and how comparatively little they rely on state funding and property taxes.

Later in the report, the PPF compares Milwaukee to the revenue structures in 4 other mid-size cities in America, including another Midwestern City that relies heavily on the property tax- Minneapolis. But even when compared to the city 325 miles to our west down I-94, Milwaukee has its hands tied, and that Minneapolis is better able to take advantage of the dollars that are spent when people go out to see things like this.

Where the two cities diverge is in Minneapolis' collection of general and selective sales tax revenues, which give it greater revenue diversity and elasticity than Milwaukee. Yet, even here there are similarities. While Milwaukee does not have authority to issue such taxes, the Wisconsin Center District levies both liquor/restaurant and lodging taxes to help pay for convention center debt service and operations. Those are the first use of those taxes in Minneapolis, as well. [Minneapolis' ability to levy a franchise tax also provides greater revenue diversity, but because that tax is passed along to consumers, it also could be seen as a user fee.]

Because Minneapolis' general and selective sales taxes are linked (in part) to ownership of the convention center and Target Center, it cannot be precisely argued that those revenue sources provide Minneapolis with greater revenue diversity and flexibility than Milwaukee. As described above, however, that is at least partially the case, as growth in those revenue sources has indirectly helped the City withstand reductions in State aids. In addition, Minneapolis' use of an entertainment tax and downtown liquor and restaurant taxes show how selective sales taxes can target the unique attributes of a first class city to ensure that its throngs of entertainment-seeking visitors chip in for the cost of the basic city services they use.
With this in mind, PPF designed some proposals to illustrate how reforms to Milwaukee's outdated “shared revenue and property tax” model might look for Milwaukee. One example would put in local sales taxes, and take out some property taxes as a result.
This model continues Milwaukee's heavy reliance on the property tax, but lessens it somewhat by adding a 0.5% general city sales tax; and selective sales taxes on entertainment (8%) and food/beverages (2.5%, including liquor served at bars and restaurants). We apply the entertainment tax to the entire city to ensure that Miller Park is included. In contrast, the food/beverage tax is limited to the City’s downtown per the example set by Minneapolis. This limitation also reflects the substantial public investment in downtown facilities and amenities that not only should bring considerable numbers of additional patrons to Downtown Milwaukee in the coming years, but that also should allow Milwaukee's downtown to successfully compete for restaurant and bar business despite a higher sales tax.

The addition of relatively small general and selective sales taxes in this model would not replace the property tax as the City's major revenue source, but those taxes would add diversity to Milwaukee's current revenue structure. A primary argument in favor of a general Milwaukee sales tax is that as the largest city in the state, Milwaukee is Wisconsin’s business and cultural center. Every day, the city is host to people from outside its borders: commuters, business owners, convention attendees, tourists, and others. These non-residents use city services, and a sales tax would be a way for non-residents and residents alike to help pay for them. From another perspective, a sales tax would leverage the city’s economic and cultural vitality to take some pressure off property owners.….

We estimate that if this model had been in place in 2015, then a Milwaukee property owner's total combined property tax rate would have been reduced from $29.97per $1,000 of assessed value to $28.55, and City government's portion of that rate would have been reduced from $10.71 to $9.29.This would have reduced the property tax bill for the owner of a median-valued home ($114,000 assessed value) by $162, as shown in Table 16. Of course, property tax savings for residents would be offset to some extent by increased sales taxes on most consumer purchases within the city, as well as for downtown restaurant/bar purchases and ticket purchases for certain entertainment venues. Because the amount of the offset would be predicated on consumer behavior, we cannot provide an estimate of its added cost for individual residents.
Also worth noting in this model is that it assumes the state would cut shared revenues to the City by $25 million, so suburba-GOPs shouldn’t have as much reason to bitch about “our tax dollars going to THOSE PEOPLE in Milwaukee”. In addition, under this scenario the City’s finances are better off because that $25 million cut is more than being made up for by the $56 million in sales and entertainment taxes, and the property tax cut totals $31 million.

As Murphy concludes in his article, it is well past time for legislators in Madison to step up and take off the fiscal handcuffs of the state's largest city and economic engine.
Whether this reform or some other is the best approach, it’s crystal clear that something is needed because the revenue model for Milwaukee is broken and has been for many years, as three separate studies by the sober minded PPF analysts have now concluded. It’s time for the state legislature to recognize the problem and start working toward solutions, as other states have.
If we had a Legislature that cared about good policy and outcomes, it would seem like a win-win for Republican legislators to allow the City to impose new revenue streams in favor of lower property taxes and shared revenues. But that is not the case, in no small part because suburba-GOPs would rather Milwaukee decline so that they could claim moral superiority over that majority-minority city, which plays to the AM radio race-baiting and other politics of resentment that help Republicans win elections in this state.

I can dream that maybe they'll come to their senses and pull out a 999-type proposal as they wrap up the budget that lets Milwaukee have a fairer tax system, and gives it a better chance to deal with the increased needs that part of living in densely-populated big cities that attract people from out of the area. But as long as dumb suburb trash reward these legislators for ripping on THOSE PEOPLE (no matter how much it causes their own communities to stagnate), I don't see it happening.

Monday, July 24, 2017

Hospital Assoc president says Wisconsin would be hurt bad by Obamacare repeal

This is good stuff to know in advance of tomorrow's potential vote in the Senate regarding Obamacare repeal and changes. Eric Borgerding is the CEO of the Wisconsin Hospital Association and sat down with JR Ross and Steven Walters last week, and Borgerding explained that Wisconsin's Senators and budget-makers should hope that this bill goes down in defeat. And one of those reasons is because the past refusal of Scott Walker and the Wisconsin GOP to expand Medicaid means that they will not get any extra funds to compensate for the possible removal of expanded Medicaid.

As Borgerding alludes to, Wisconsin has spent huge amounts of additional state tax dollars over the last 4 years to expand Medicaid eligiblity to many living at or below the poverty line, particularly childless adults. And related to that, Governor Walker and the Wisconsin GOP made were done with the (likely cynical) idea of pushing Wisconsinites above the poverty line onto the Obamacare exchanges to get coverage.

And many Wisconsintes have gotten coverage through the exchanges, as the site notes.
242,863 people enrolled in coverage for 2017 through the Wisconsin exchange during open enrollment, including new enrollees and renewals. For perspective, 239,034 people enrolled in coverage through the Wisconsin exchange during the 2016 open enrollment period. Nationwide, there was an average decline in enrollments across states that use, but Wisconsin bucked that trend and saw a small increase in enrollment.
So from a fiscal and practical standpoint, Wisconsin would be particularly vulnerable and damaged by most versions of the bills that the GOP Congress have put up to deform (if not outright repeal) Obamacare. Now, do I think that'll effect Ron Johnson's vote on this? ABSOLUTELY NOT.

PS-Nearly forgot this. The Joint Finance Committee set aside $50 million in a contingency fund in case TrumpCare or other things would raise Medicaid costs above what they have budgeted.

But the Senate GOP took that $50 million away in their most recent budget plan, because it was the only way they could pay for their $239 million giveaway to businesses by getting rid of Personal Property Tax. Nice priorities, eh?

Sure, road construction continues now. But WisGOP will have to tax or borrow for more

As the state’s budget impasse continues, the state trudges to complete work with the funds that they have. For example, Janesville’s Gazette noted over the weekend that despite the state budget impasse, they will continue on with planned work in September to expand I-39/90 in and around the city.

The reason they can do that is largely due to some pork timely funding from DC that was pushed through in 2016 by hometown boy Paul Ryan.
Steve Theisen, a spokesperson at the [Wisconsin] DOT's I-90/39 project field office in Edgerton, said Janesville's leg of the Interstate expansion remains set to roll this fall because it's being paid largely by a $40 million federal FASTLANE grant awarded last year.

He said the state is paying for the remainder, about $14 million, out of a pot of “base-level” state funding for major highway projects. That funding kicked in this month as the 2015-17 budget ended and the new biennial budget locked in a stalemate despite several big road projects slated to go to bid in July and August.

In the absence of a state budget, the base-level funding gives DOT project officials about $175 million to divvy up among several major highway projects, the I-90/39 expansion being just one of them, Theisen said.
The problem is that “base level” funding won’t pay for the additional needs for highway work that have cropped up in the state, and would mean sizable delays in big projects such as the full expansion of I-39/90, which would stretch from Madison to the Illinois state line.

The desire by Senate Republicans to expand work on these projects has led to the main reason behind the conflicts between Republicans in the State Senate and Assembly, as they continue to argue about a budget that is 3 ½ weeks overdue at this time. Both sides would prefer to complete the projects, but Senate Republicans have chosen to stay on the good side of DC Lobbyist Grover Norquist by refusing to raise taxes or fees to do so, and instead asked to borrow $712 million for road projects as part of their budget proposal from last week.

The Assembly Republicans aren’t keen to add more borrowing to an already debt-ridden Transportation Fund, to the point where Assembly Speaker Robbin’ Vos indicated that he would accept a cut in state highway spending down to that base level if he couldn’t get any type of fee or tax increase to pay for the extra road work.

But many Senate Republicans are still standing firm against a tax increase, which makes me and others wonder if they truly understand (or care) about the potential consequences about borrowing their way into oblivion.

For example, State Sen. Dewey Stroebel (R-Grothmanland) tried to tell the Bubble World crowd at Right Wisconsin that borrowing $150 million to pay for road work in the next budget was better than increasing the gas tax by 5 cents a gallon. Stroebel’s argument indicated that the borrowing was a one-time deal whereas increasing the gas tax continues year-after-year, which means there are an additional $3 billion in gas taxes for the next 20 years.

Lou Kaye at Rock Netroots rightfully saw the absurdity of Stroebel’s “math” and pointed out that borrowing does nothing to fill in budget gaps in future years, which means that more borrowing is needed for future needs.
Is Stroebel implying that $3B worth of transportation can be paid with $240 million? Well, not quite's actually much, much worse than that.

As per Stroebel's math, a single $150M twenty year bond at 3% will cost Wisconsin taxpayers $4.5M per year in debt service or $90 million in interest before it's finally paid off in 20 years. But we're still short $2.85 billion in additional road funding for the next 19 years. To put that number into perspective, the I39/90 expansion alone is expected to cost $1.5B and that's climbing higher as I write.

So we must assume Stroebel would rather buy a $150M twenty year bond ...each year for the next twenty years to equal the $3B target a 5¢ tax on a gallon of gas would raise over twenty years, given the choice. BUT, instead of paying $3B for $3B worth of transportation with a higher gas tax after 20 years - Wisconsin taxpayers will end up shelling out, in one shell game or another, $4.8B for $3B worth of transportation funding using Stroebels' borrow approach. The bottom line: State taxpayers will pay $1.8B more unnecessarily ...and get less. AND ...the last bond won't be retired until year 40 from the time the first bond was purchased.
This is why raising the gas tax is a better way to handle the state’s chronic $1 billion budget deficit than borrowing, if the revenues are there to be added onto (and it would be). Kaye doesn’t even mention that the Senate GOP plan borrows nearly half of their money from the General Fund, which means those future debt payments aren’t just eating up available funds from road repairs, they would also be taking away from schools, medical care, and other services.

Maybe this week, some people in WisGOP can be adults and deal with these gaps in WisDOT financing before the base funding runs low and real highway delays happen along with the unending line of orange barrels and annoying traffic patterns along Wisconsin’s freeways. But with no meetings scheduled for the state’s Joint Finance Committee in this week, it seems likely that this budget isn’t going to take effect until August…if not later.

Sunday, July 23, 2017

If Wisconsin's unemployment rate keeps dropping, why are jobs not growing much?

In between all the raindrops, the Wisconsin Department of Workforce Development released another jobs report on Friday. And in its typical fashion, the Walker DWD put its best face on (some of) the numbers.
Place of residence data: A preliminary seasonally adjusted unemployment rate of 3.1 percent in June 2017, unchanged from May and maintaining its lowest rate since October 1999. The rate remains lower than the national unemployment rate, which increased to 4.4 percent in June 2017. Wisconsin's labor force participation rate increased 0.1 percentage points to 68.9 percent and continues to outpace the U.S. rate of 62.8 percent in June. Both total labor force and employment in Wisconsin remained at all-time highs in June. Wisconsin's seasonally adjusted employment change of 76,500 year-over-year is the largest increase since July 1995.

Place of work data: Based on preliminary data, the state added a significant 38,400 total non-farm jobs and a significant 35,700 private-sector jobs from June 2016 to June 2017. Wisconsin also gained 3,600 private sector jobs over the month from May 2017 to June 2017. Other significant year-over-year changes include the addition of 6,800 jobs in Health Care and Social Assistance.
These numbers sound really good, but what the Walker DWD doesn't mention is that jobs for May were revised down by 900 private sector jobs and 600 jobs overall. And they don't mention that total jobs dropped by 1,300 in June, which is the 3rd loss of total jobs in Wisconsin over the last 4 months.

This means that the Walker jobs gap is still around 110,000 for both private sector and total jobs, which is not really any different than it was at the start of the year.

“But Jake, Governor Walker keeps telling us things are great at 3.1% unemployment, with a drop of 1% in 2017 alone. That’s much better than Minnesota’s unemployment rate of 3.7%, a rate that’s barely changed at all since the start of 2015. What gives?”

As I've mentioned previously, the payroll “jobs” number is a different measure than the household survey-based “employment/unemployment” number. They usually converge over time, but Wisconsin’s household figures don’t add up at all compared to the payroll numbers, and they are not the only ones.

Labor force and employment, Dec 2016 - Jun 2017
Ohio +88,600 Employed, +95,700 Labor Force
Wis. +75,900 Employed, +46,800 Labor Force
Mich +61,900 Employed, +2,500 Labor Force
Ind. +56,800 Employed, +24,250 Labor Force
Minn +43,800 Employed, +34,100 Labor Force
Ill. +32,900 Employed, -37,550 Labor Force
Iowa -1,500 Employed, -6,900 Labor Force

Now compare that to the total payroll jobs reported in the same time period.

Change in total payroll jobs, Dec 2016 - June 2017
Ill. +27,800
Minn +25,800
Ohio +25,100
Wis. +20,900
Iowa +20,000
Mich +14,100
Ind. +13,000

The only states who are even close to matching "employed vs jobs" figures are Illinois and Minnesota. Meanwhile states such as Indiana, Michigan, Ohio and Wisconsin have differences of between 43,800 and 63,500 across the two figures. That does not make any sense and cannot logically stand for much longer.

In addition, if you expand the state-by-state figures out to the last 12 months, you will see Wisconsin back in a familiar spot in the Midwest- in the bottom half of job growth. And look who is the far-and-away leader in our region.

Private sector job growth, June 2016- June 2017
Minn +2.42%
Iowa +1.91%
Ind. +1.73%
Mich +1.57%
Wis. +1.42%
Ohio +1.17%
Ill. +1.08%

Hmm, maybe we should look at that Minnesota place and see what they’re doing, eh?

So to me it is the same old story with the June Wisconsin jobs report. There continues to be a disparity between the strong household figures and mediocre (and declining) payroll figures. You know there are serious revisions coming in the next few months, and logic indicates that it'll be in that too-low-to-be-believed 3.1% unemployment.

When disaster strikes, Walker's here to help...his donors at Ashley Furniture

Many parts of the state have been brutalized in the past week by storms, with a lot more rain falling this weekend. Few places got hit worse than the Trempeleau County city of Arcadia, whose residents were literally running for the hills after Wednesday night’s deluge.
Several hundred people evacuated their homes early Thursday, July 20th in the small western Wisconsin community of Arcadia where heavy rain sent a creek over its banks.

The waterlogged city is part of more widespread flooding in Wisconsin and Minnesota that has closed roads and triggered mudslides. The National Weather Service issued a flash flood warning for Winona and Houston counties in Minnesota and parts of Crawford, Vernon, Richland and Juneau counties in Wisconsin. Forecasters say up to seven inches (18 centimeters) of rain fell overnight.

In the Trempealeau County city of Arcadia, several hundred voluntarily evacuated flooded neighborhoods and the downtown area beginning about 2:30 a.m., Mayor Robert Reichwein told The Associated Press. The evacuation included the overnight shift at Ashley Furniture, a major manufacturer in Arcadia, a city of 2,900 about 45 miles (73 kilometers) north of La Crosse.

Governor Scott Walker declared a state of emergency in 17 Wisconsin counties in the western half of the state on Friday, and there may be more to come after huge downpours on Friday night.

Buthe words “Ashley Furniture” and the image of rushing waterways made an immediate connection in my mind. And not in a good way. Let’s flash back 3 years to a Scott Walker photo op from 2014.
Walker also said he’s working with the Wisconsin Department of Natural Resources and the U.S. Army Corps of Engineers on a plan to move a creek away from a planned expansion of Ashley’s plant in Arcadia.

“(Those) are things that we can do that are legitimate things that U.S. Army Corps of Engineers and the DNR can work on and help them grow and expand,” Walker said.
Ashley and the DNR came under fire from environmental watchdogs for a 2005 addition there that required filling 13.5 acres of wetlands. Without that expansion, the company said later, most of the company’s 2,000 Arcadia-based jobs would have been moved out of state.

From a table of literature spread out for visitors, [Ashley Fuerniture CEO] Ron Wanek grabbed a flyer decrying federal regulations, including environmental, workplace and health care rules, saying, “This is what’s going to kill industry in the United States.”
Yes, trying to mitigate damage to communities and businesses from an increasing amount of severe floods is absolutely what’s killing industry, Ron. I mean, a company that treats its workers like this is an absolute beacon of corporate responsibility.
OSHA has also placed Ashley Furniture in its Severe Violator Enforcement Program for its failure to fix a number of issues, including 12 repeated safety violations, each of which carries a penalty of up to $70,000.

The agency had previously cited Ashley Furniture in 2014 when another worker lost part of a finger. OSHA opened its investigation after the more recent incident in July, and found that workers had suffered more than 1,000 injuries over a three-and-a-half-year period.

Of those injuries, 100 were caused by similar [woodworking] machinery. Ashley Furniture employs about 4,500 workers at its facility in Arcadia, according to the agency.
Ashley eventually paid a $1.75 million fine to OSHA in June 2016 to settle those allegaitions from the Obama Adminstration’s Department of Labor.

Oh, and did we mention that Ron Wanek and his wife gave Walker maximum donations in 2014 right after the Wisconsin Economic Development Corporation (WEDC) gave Ashley $6 million in incentives for the “expansion” that Walker just happened to show up at 3 months later.

And Scott Walker and Ron Wanek’s furniture company are still finding ways to be associated today, as we found out last month at another “it’s working” photo op in Trempeleau County, celebrating Ashley’s distribution center.
Much of the 500,000-square-foot facility will be located in a floodplain and part of it will sit on the filled-in former bed of Myers Valley Creek. Last year, the city rerouted part of the creek away from the Ashley plant, another business, neighborhoods, and bridges that constricted its flow and contributed to flooding. Ashley Furniture will raise the level of the new distribution center two feet above the 100-year flood level so that it is safe from both Myers Valley Creek and the nearby Trempealeau River, city administrator Bill Chang explained. Ashley donated $300,000 to the over $2 million creek reroute project. A $500,000 state grant and $1.3 million in city debt funded the majority of that project.

Walker praised that flood protection project and said he would support state funding for the city’s next, far bigger flood protection effort: a bid to protect most of the city from flooding on Turton Creek and the Trempealeau River by raising the level of dikes throughout the city. A roughly $1 million study funded by the city and the U.S. Army Corps of Engineers (USACE) is underway to create a plan for that project, and Chang said it should be completed later this fall.

“We’d like to get people out of the floodplain so hopefully they don’t have to buy flood insurance,” (Mayor) Reichwein explained, adding that it would help reduce the cost of living in Arcadia.

Raising those levees will be expensive, and while the USACE will help pay for it, the corps will require some kind of matching funds, Walker said. The match will be more than the city can afford; Arcadia needs a state match, the governor stated. “We’re going to continue to work with you on that,” Walker said.
Isn’t it nice that “small government” Ron Wanek has millions of dollars helping him build this expansion and defraying the costs of locating in such a vulnerable area? And that “low-spending” Scott Walker is working on giving him even more handouts for this project? Oh, but it’s poor minorities that are the “takers” in our society, eh righties?

And hey, look who leapt to his feet to head to Arcadia less than 36 hours after the floods hit!

Give Scotty this- he always remembers who paid his freight. The rest of you can screw off, but if you pay up like Ron Wanek, you’ll have the Governor ready to help and bail you out any time something bad happens to your business. Even if those damages are predictable and preventable, such as what we’ve seen over the last decade with major floods in Western Wisconsin.

Thursday, July 20, 2017

$712 million in DOT borrowing down to $0 in 2 days? Not sure it adds up

There have been a few developments regarding highway funding in recent days. So let’s pick up on this week’s proceedings regarding the DOT budget, and see where we stand.

First, let’s go into the Senate Republicans’ plans, courtesy of the Legislative Fiscal Bureau (the DOT plan is on pages 567 to 593 of this PDF). The biggest headline has been the Senate GOP’s plans to throw $350 million onto the state’s credit card to continue roadwork on Southeastern Wisconsin freeways.
Provide $350,000,000 BR in general fund-supported bonding for transportation purposes for the southeast Wisconsin freeway megaprojects program. The estimated debt service on these bonds would be equal to $633,800 GPR in 2017-18 and $7,809,600 GPR in 2018-19. Enumerate the I-94 East-West freeway project as a southeast Wisconsin freeway megaproject. Define this project as the reconstruction of the I-94 freeway in Milwaukee County, from 70th Street to 16th Street, including all interchanges, and including work on local roads as necessary for the completion of this project.
Guess they want to redo and expand I-94, even if Milwaukee social groups and elected representatives in the area don’t want it. But when the greedy oligarchs at the Metro Milwaukee Association of Commerce speak (and gives $362,500 to the Republican Governors’ Association), the GOP follows those requests.

As for the funding part, the Senate GOP would borrow $350 million of General Fund money, meaning that future payments will inevitably take from the available funding for schools, medical care, and other social services. And the extra funding is not offset by much reduction in borrowing from the Transportation Fund side, meaning that there is a total of $712 million in borrowing in the Senate GOP bill, more than Governor Walker’s proposed level of $500 million (which was all Transportation Fund-based).

That’s well above the $200 million that the Assembly GOP wanted for the 2017-19 budget, and leaders of that house said the Senate GOP “didn’t come up with something that we could live with” on transportation.

But with today came news of Governor Walker being OK with getting rid of his stupid $1-a-week income tax cut, and instead using the $200 million in General Fund money that’ll be restored to fund the roads. Assembly GOP leadership quickly leapt to agree with the Governor, saying that the cuts in borrowing that would result from that transfer comes closer to their goals.
We believe this compromise utilizes our current resources wisely by taking all or a significant portion of the proposed income tax cuts from this budget and using the savings to provide funding for our transportation system. In addition, you have offered the possibility of no new transportation bonds, which we appreciate. However, we understand there is a possibility of new bonding based on future federal appropriations and revenue-supported bonding.
That second part of the paragraph requires some more clarification, because I don’t see how $500 million borrowing - $200 million with no tax cut = $0 borrowing. Is the Assembly GOP assuming that all other portions of their prior DOT proposal from Dale (Koo-Koo) Kooyenga are going to go through as well? That plan raised $300 million for the Transportation Fund by making the state's gas tax be susceptible to the 5% sales tax (an increase of about 7 cents a gallon), while reducing the current "base" gas tax by a nickel.

The other option to reduce borrowing to $0 is to cut highway spending by $300 million, which means delays in major projects of 1-2 years. I'd like to see what the formal budget amendment looks like, because Walker is either signing off on a slight gas tax increase (which would put him on the wrong side of DC lobbyist Grover Norquist), or he's causing more delays by striking a "no borrowing" pose.

In addition, while transferring General Fund money is probably better than borrowing it (especially borrowing it from the General Fund, like the Senate GOP wanted to), that doesn’t help anything for the future. It doesn't change our $1 billion structural deficit in the 2019-21 General Fund at all, if you assume $200 million will also be sent over to the Transportation Fund in the next 2-year budget. Combine that with all of the General Fund money that is being proposed to pay for property tax relief in this budget, and it makes me wonder what future programs are going to be cut and which taxes are going to be raised if we get any type of economic or political stagnation over the next 2 years that negates the LFB's January projection of a "Trump Boom" (with a bust getting more likely by the week).

And while media may portray the developments of this week as a method of “shoring up the state’s Transportation Fund,” it looks like it’s merely trading part of the Transportation Fund’s shortfall by the possibility of increasing the one in the General Fund. Yes, it’s better than where we were, and miles better than the Senate GOP’s pile of crap. But it’s nowhere near where we should be or need to be if we’re serious about filling the many (pot)holes in the state budget. And given the mess that is TrumpWorld these days, I'm not thinking Scotty is going to get the help he needs from DC he needs to allow him to stay in GOP BubbleLand while getting the state's road needs take care of.

Wednesday, July 19, 2017

Plenty of bad in Senate GOP budget...before we get to DOT

Now that I've dug into the WISGOP Senate budget some more (and it is basically a rewriting of Gov Walker's budget), here are a few reactions. I'm going to talk about the non-DOT parts here, and will take up the DOT mess in another post.

1. The good - It finds money by dumping two of Walker's dumbest talking point gimmicks in the budget. The first is a $200 million income tax cut that the Legislative Fiscal Bureau estimated would give the average Wisconsinite around $1 a week.

The other gimmick that goes away under the Senate GOP plan was Walker's proposed sales tax holiday, which would have done next to nothing for helping the state's economy, and would have been an extra burden for retailers.

2. The not so good- Another way the Senate GOP finds more money is by getting rid of $50 million that had been set aside in a contingency fund for health care spending. This was a sensible hedge by the Joint Finance Committee since who knows how much the Feds would cover under Trump/Ryancare, but the Senate GOPs decided to use the money and roll the dice.

The Senate GOP also includes several gimmicks to cut property taxes. In addition to sticking with the $180 million in tax dollars that Walker wanted to spend to buy down the state's property tax for Forestry operations, the Senate GOPs pay back WMC by paying off $239 million to get rid of the state's personal property tax, which generally hits equipment and other business possessions.

The Senate GOP also tried to take care of the possibility of higher property taxes resulting from fewer Lottery sales by using $45 million of General tax dollars to pay back retailers who sell Lottery tickets. This enables $45 million more in Lottery sales to go to property tax reductions. If that's all you care about, I suppose that's a good thing, but $465 million is a lot of tax dollars to shell out to reduce someone's bill, and with a $1 billion General Fund deficit looming for 2019, that is not likely to be sustainable.

3. The really bad- The Senate GOP plan gets rid of Walker's proposals to expand the state's Earned Income Tax Credit (EITC) and the state's Working Families Tax Credit. Both moves will raise taxes on lower-income workers. At the same time, this proposal gets rid of Wisconsin's Alternative Minimum Tax (AMT), which overwhelmingly benefits richer Wisconsinite's. This continues the 6-year trend of Walker/WISGOP tax cuts favoring the rich, and shows yet again who this group REALLY works for.

The same applies for provisions in the Senate GOP bill that expand K-12 school vouchers yet again. Not only does the Senate GOP raise voucher eligibility to families of 4 that make nearly $54,000, but they also have other giveaways like not allowing for incomes of current voucher families to be verified, and approving the setup of "virtual private schools", where a teacher instructs from a remote location.

Combine those giveaways to the voucher lobby with prior revelations that the voucher program is taking more money and students from K-12 districts than previously thought, and now vouchers are projected to take $36 million more in taxpayer dollars than what was in Walker's original budget. And almost all of that is "paid for" by funneling away money from public K-12 districts in Wisconsin.

Now, all of that money-funneling to vouchers may make GOP donors and puppetmasters like Betsy DeVos and Scott Jensen happy, but I'm betting most of the rest of the state would hate it. Especially when school property taxes rise to make up the difference.

So this Senate GOP bill goes well beyond the binge of borrowing for roads, and while it at least admits it needs some revenue to work out, it is still badly lacking and has plenty of partisan giveaways of taxpayer dollars. It should get tossed to the curb in favor of real solutions with real fubding, but I bet some of the bad plans in Section 2 and 3 end up in the final budget...whenever that document might get passed.

Tuesday, July 18, 2017

New Senate GOP budget plan = same old failing BS

Since it's raining up North, I got a few minutes to react to the Senate GOP's "new and improved" budget plan.

First of all, it looks like Fitzgerald and the GOP Senators want to borrow $712 million for,roads, with $350 million from the General Fund.

This is a horrible idea. Apparently it's not just the DOT Fund that the Senate GOPs want to screw up, but the General Fund too. I mean, we already have $1 billion deficits in both these funds, so what's another few hundred to pay off in the future?

Oh, and it looks like the only plan they have for saving money is the same plan they've had for the last 6 years- SCREWING WORKERS, this time by eliminating prevailing wage requirements on construction programs. Hey Wisconsin blue-collars! How is that GOP vote to stick it to the book-learners working out for you tough guys?

Lastly, these guys want to give away another half-billion dollars in this budget by doing WMC's bidding and repealing the personal property tax. This will result in a significant property tax increase on homeowners, or will result in spending ANOTHER $522 million to avoid that unpleasant result.

Right now, I see no extra money being added in revenue that pay for this WISGOP Fantasyland plan, which makes me wonder what is getting cut to pay for it. School aids? Shared revenues? Medicaid?

Here's one thing I do know. SCOTT FITZGERALD AND THE SENATE GOP HAVE NOTHING. They've merely doubled down on the same poser BS that has already delayed this house-of-cards budget by 3 weeks. And I'm betting it'll be held up for a few weeks more, if this empty, no-solutions proposal is an indication.

Sunday, July 16, 2017

Little mid-Summer break

I could talk a lot about issues of the day. But this is the view from Vilas County

Current air temp- 72. Low tonight, 45. Between that and no work, I will take it. It just amazes me that people who live here vote for so many legislators who don't care about how special these scenes are (cough-Tom Tiffany- cough- Sean Duffy)

Saturday, July 15, 2017

Social Security is secure- if we choose it to be

A couple of days ago, the Board of Trustees for the US's Social Security program released its report for 2017. As always, it had some interesting numbers and projections, starting with the typical long-term outlook that is often quoted as politicians debate the future of the program.
Annual OASDI cost exceeded non-interest income in 2010 for the first time since 1983. The Trustees project that cost will continue to exceed non-interest income throughout the 75-year valuation period. Nevertheless, total trust fund income, including interest income, is more than sufficient to cover costs through 2021, so trust fund asset reserves continue to grow. Beginning in 2022, cost exceeds total income, and combined OASI and DI Trust Fund reserves diminish until they become depleted in 2034. After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 77 percent of program cost for the rest of 2034, declining to 73 percent for 2091. Figure II.D2 depicts OASDI operations as a combined whole. However, under current law, the differences between scheduled and payable benefits would begin at different times for the program’s two trust funds: in 2028 for DI (disability) and in 2035 for OASI. (Social Security for older people).
Not much different than what we have seen in the past, and this graph from last year largely holds, except that the cut in benefits for 2034 would be 23% instead of 21%.

Combining this graph with the updated numbers in this week's Social Security report, it means is that there is a "cliff" that would hit in 17 years that would require either a 23% cut in benefits, or Uncle Sam would have to do what he does with every other program that spends more than it takes in- by borrowing money to make up the difference.

What that chart doesn't show is that the $2.8 trillion in the Social Security trust fund isn't just laying around, it's earning income in low-risk investments. As a result, there was more money in that trust fund at the end of 2016 than there was in 2015.
The trust fund investments provide a reserve to pay benefits whenever total program cost exceeds income. Combined trust fund reserves increased by $35.2 billion for 2016 because income to each fund, including interest earned on trust fund reserves, exceeded total expenditures. At the end of 2016, the combined reserves of the OASI and the DI Trust Funds were $2,848 billion, or 298 percent of estimated expenditures for 2017. In comparison, the combined reserves at the end of 2015 were 305 percent of expenditures for 2016.
So Social Security's trust fund ran a $35 billion surplus in 2016, and has enough money in its bank account to pay for nearly THREE YEARS of benefits even if the taxes that fund it were to go away.

Also worth noting is this passage later in the trustees' report, where they note how much money is NOT taxed for Social Security, due to the cap on taxable earnings for the program (which the report says is $127,200 for 2017, meaning all payroll income above that is taxed at ZERO).
The ratio of taxable payroll to covered earnings (the taxable ratio) fell from 88.6 percent for 1984 to 82.6 percent for 2000, mostly due to much higher increases in wage levels for very high earners than for all other earners. From 2000 to 2010, the taxable ratio varied with the business cycle, rising during economic downturns and falling during recoveries. Specifically, the taxable ratio rose to 85.7 percent for 2002, declined to 82.4 percent for 2007, rose to 85.2 percent for 2009, and was 82.6 percent for 2015.
The flip side of that is pointing out that over 1/6 of Amercians' payroll earnings are not taxed for Social Security which leads me to bring up a simple reform that would likely solve any future funding issues with Social Security. Simply make the tax even for everyone.

Quick math indicates that the Social Security rate could be cut from the current 6.2% (employee) + 6.2% (employer) to 5.2%- + 5.2%, and if we made the rich pay the same percentage as the rest of us, and extended that 5.2% rate to all payroll earnings, it seems like it would raise the amount of revenue going into Social Security. It would be a $67.5 billion tax cut for everyone making income below $127,200 (using 2016's Social Security report), another $67.5 billion tax cut for employers, and that money would be made up and then some (by around $12-$13 billion a year) by imposing that tax on all payroll earnings, including those over $127,200.

Perhaps this evening of Social Security taxes would also have some positive macroeconomic effects, as giving massive amounts of money to high-end earners becomes less worth it for employers...and for CEOs to give themselves. At the same time, smaller employers who don't pay big-time salaries get a minor tax break, and the 90%+ of us that work for a living also get a tax cut. I strongly believe that there is more bang for the buck for the economy for those two groups to benefit, as they are more likely to spend it on activities that actually grow the economy, as opposed to rich people and corporations who tend to save/hoard their money, or spend it on less productive activities like gambling on Wall Street and buying politicians.

But that reality of a slanted-but-fixable tax system and a still-strong Social Security program didn't stop GOPs on Congress from trying to claim the program was in trouble. Buried in a national story mentioning that Social Security was going to give old people their largest raise in 6 years (at 2.2%), is this bit on finger-wagging from a Trump Administration official.
"Congress must act to ensure the long-term fiscal viability and sustainability and survival of Medicare and Social Security," said Health and Human Services Secretary Tom Price. "There are a great many ways that the situation can be addressed. The bottom line is that it must be addressed."
Hey Tommy, I'd worry more about the fiscal viability and sustainability of Americans facing medical emergencies due to inadequate health care, but that's just me.

Bottom line, Social Security is as stable as ever, and merely needs a small tweak on the revenue side or more political will to spend on it to continue as the successful program it has been for the last 80+ years. The only thing we might really have to worry about is if debt costs and our federal budget deficit goes up to maintain the program. While the debt part has its own concerns, there is no way Social Security ever goes "bankrupt"...unless members of Congress choose not to pay it.

These 3 1/2 minutes of facts from America's Favorite Politician are as true now as it was when he did it for the "Koch Brothers Exposed" movie a few years ago (with a few cameos from our own Lyin' Ryan!). The only difference is that the Social Security Trust Fund has about $300 billion more in it than when this video was taken.