Sunday, March 31, 2019

What to look for in Tuesday Supreme Court vote totals

With Tuesday's Supreme Court election between Lisa Neubauer and Brian Hagedorn, I wanted to go back over the last 2 statewide elections in Wisconsin, and see what might be the key numbers and indicators as the results come in.

To start, let's look at the red-blue county map from November's race for Governor between Tony Evers and Scott Walker, which Evers won by just over 1%.

And now compare it to the results of 2018's Supreme Court race in April of that year, which Rebecca Dallet won by double-digits.

So one huge key seems to be the Highway 29 corridor from Hudson to Green Bay. The pattern in that area generally is as follows.

1. GOP win - GOPs sweep the area, and win big in most of those counties.
2. Small Dem win - GOPs still generally win, but many of the counties are close.
3. Big Dem win- Dems win many of these counties.

Racine County is a similar story, as Walker won it by less than 5% in November, and Screnock won it by less than 1,000 votes. But a wild care here is that Neubauer is from Racine, and her daughter Greta is a State Rep from Racine. So could an area that generally favor GOPs could end favoring Neubauer more than normal?

Other key results will be in the WOW Counties, which would be Hagedorn's home territory, and tend to be an especially strong area for right-wing court candidates for both turnout and percentage. And usually Milwaukee County is a mirror image to the WOW Counties, which make it near a split decision in a statewide election.

What's interesting here is that while Screnock was getting drilled in the rest of the state in the Supreme Court election, he actually ended up with a similar performance to Walker's in the 4 counties in and around Milwaukee, and even grabbed a larger percentage than Walker in the city.

If Hagedorn wins the WOW counties by as much or more than Screnock did, then he has a chance if he can improve in the rest of the state. If his numbers there and in Milwaukee County look like Walker vs Evers, he will likely lose big.

Lastly, let's look at turnout totals from those two elections. November had 2 1/2 times as many voters as April, but just as key is where those voters are. As you can see, the red-leaning WOW Counties and bright blue Dane County took up a larger chunk of the votes in the Supreme Court election, while other mid-size counties and the City of Milwaukee had more significance in November.

Not that I should need to remind you, but if you haven't already, VOTE ON TUESDAY (and according to the Madison City Clerk, quite a few have there).

What these numbers tell me is that in order for "Handmaid's Tale Commander" Hagedorn has in order to beat Neubauer, relatively low and GOP-skewed turnout is the way he can do it. Decent people coming out to vote would shut the door on that tool, and lessen the chances of this state continuing to be held hostage by a fraction of a fraction of a fraction of Wisconsinites.

Friday, March 29, 2019

The DeVos Special train wreck of the week

I'll have more on this later (it's been busy here), but one of the highlights of this week was seeing my Congressman make a fool out of Education Secretary Betsy DeVos on Special Olympics and other Trump-propose cuts to programs that help children with special needs.

What was amazing about this is that Dwhile DeVos was claiming "philanthropy" was all that the Special Olympics needed, and that Special education funding would be cut, she and Trump wanted MORE tax dollars to be sent to their "Jesus rode a dinosaur" schools. Funny how they don't have to rely on the kindness of charity.

And at midday Thursday, DeVos was doubling down, trying to play victim and whining about how she was somehow mistreated for being called out and evading questions. DeVos was also still claiming that Special Olympics didn't need taxpayer funding.

Then, a few hours later....

Dear God. Does this doofus have a clue about what is in his budget. Or any other policy? And also, does Drumpf know he doesn't make that choice to add back money at this point? Only Congress can do that now, Biff.

And Betsy? She also saw the light!

That's all fine and dandy, but this week's folly by the Trump Administration underscores something that applies across a lot of issues with the GOP these days.

"Watch what they do, not what they say." Except when they're called out like DeVos and try to respond. That tends to speak volumes.

PS- Along those same lines.

Wednesday, March 27, 2019

Consumer sentiment and house prices dip, but so does the trade deficit. So do we worry?

If you’re in the category of believing that our recent interest rate inversion is a reflection of a US economy slowing and possibly heading into recession, this bit of news from Tuesday is something that should buffer your case.
Consumer confidence fell sharply in March, extending a recent up-and-down pattern that reflects greater worries about the U.S. economy.

The consumer confidence index dropped to 124.1 from 131.4 in February, the Conference Board said Tuesday. That’s the second lowest rate in a year….

The so-called present situation index sank 12 points 160.6, marking the biggest one-month decline since the middle of the last recession in 2008.

Another measure of how Americans think the economy will be six months from now posted a smaller 4-point drop to 99.8.
A different indicator which makes me wonder if things might be hitting a wall came on that same day when we got an indication that the mini-boom in housing might be nearing an end.
In January, annual home price gains slid nationwide, according to the latest Case-Shiller Home Price Index from S&P Dow Jones Indices and CoreLogic.

The report's results showed that January 2019 saw an annual increase of 4.3% for home prices nationwide, inching backwards from the previous month's report…

S&P Dow Jones Indices Managing Director and Chairman of the Index Committee David Blitzer said home price gains continue to shrink.

“In the year to January, the S&P CoreLogic Case-Shiller National Index rose 4.3%, two percentage points slower than its pace in January 2018,” Blitzer said. “The last time it advanced this slowly was April 2015. In 16 of the 20 cities tracked, price gains were smaller in January 2019 than in January 2018. Only Phoenix saw any appreciable acceleration.”

In fact, some cities where prices surged in 2017-2018 now face much smaller increases. An example is Seattle, where annual price gains dropped from 12.8% to 4.1% from January 2018 to January 2019. Furthermore, San Francisco saw annual price increases shrink from 10.2% to 1.8% over the same time period, according to Blitzer.
But if there’s a flip side to that news, it’s that if you combine it with the lower long-term interest rates, then houses become more affordable for people. Which helps explain this report from Wednesday.
Mortgage applications increased 8.9% for the week ending March 22, the Mortgage Bankers Association (MBA) reported in its weekly seasonally adjusted results. The week prior, mortgage applications rose just 1.6%. Purchases were up 6.4% for the week ending March 22, versus 0.3% previously, while refinances increased 12.4%, after rising 3.5% for the week prior.

An “unexpectedly large drop in mortgage rates following last week’s FOMC meeting” helped drive the jump in purchase and refinance applications, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
So maybe the bubble is being reinflated with this recent inversion? And is that really going to be good for us in a year, when either rates have gone back up (and slow that activity) or the economy is in recession (which also would slow that activity)?

Not sayin' it is. I'm just sayin' it can look that way.

Another report that got added attention on Wednesday revealed that the US’s trade deficit shrunk in January after a sizable jump to end 2018. But the reason why might not be so great.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $51.1 billion in January, down $8.8 billion from $59.9 billion in December, revised.

January exports were $207.3 billion, $1.9 billion more than December exports. January imports were $258.5 billion, $6.8 billion less than December imports.
But if you remove soybeans sent to China ($0.91 billion) and cars and trucks ($1.025 billion), total exports was flat. And the decline in imports reflects a sizable drop in household goods and furniture (-$1.25 billion) and computers and semiconductors (-$1.67 billion), which both may reflect a slowdown in consumer spending, and a need to lower the inventories that have been rising for the last 6-9 months.

To me, these economic reports raises the stakes of this week’s income and spending report for February, to see if people were starting to clamp down in anticipation of lower tax refunds from the GOP Tax Scam (or if the lousy weather kept people in). In addition, I want to see what (likely downward) revisions are made to the Q4 GDP numbers tomorrow, as the first report came out before we knew of the big December jump in the trade deficit and other reports showing end-year shakiness.

And I don’t see where continuing the low-rate coke party on Wall Street is going to translate into much in the real economy, which needs to pick up as the hangover from the GOP Tax Scam slams people’s pocketbooks at the start of 2019. We may not be in economic decline yet, but the reports from this week give you an idea about how we get there.

A few words on Evers' budget for WisDOT

The Journal-Sentinel headline mentions “gas tax to go up nearly a dime a gallon.” And that’s accurate, but as Patrick Marley notes, it’s actually two different provisions that hit in two different years.
To put more money toward roads, Evers would raise the gas tax by 8 cents a gallon initially and another 1.6 cents by early 2021. In all, the gas tax would go up 9.6 cents by then, from 32.9 cents to 42.5 cents.

In an attempt to keep gas prices down, Evers is also proposing eliminating the state's minimum markup law on gasoline. That law requires retailers to increase the price of gas in most cases by 9.18 percent above the average wholesale price.

Evers contends that change would lower gas prices by 14 cents a gallon — meaning overall gas prices would fall even with his proposed increases in the gas tax. How the situation would actually play out remains unclear because retailers don't have to raise their prices if they are matching competitors' prices.
In looking at the Legislative Fiscal Bureau’s summary, the estimation is that the indexing will hit in April 2020, and will raise the tax by 0.8 cents in that year and 2021. Put together, it would add $526.5 million to the Transportation Fund during the 2019-21. Add in increases in heavy truck fees, title fees and having a law that allows the state to finally collect on Scott Walker’s hybrid tax, and that’s another $81.9 million.

The other funding change is changing a money source by using left-over funds from the state’s gas tank cleanup and inspection fund, and not transferring anything from the General Fund.
The Governor's recommendation would eliminate the annual transfer of 0.25% of general fund taxes to the transportation fund, which would otherwise occur in each year of the 2019-21 biennium. Compared to current law, this provision would reduce the transportation fund balance by $87,817,100 in the biennium and increase the general fund balance by the same amount.

As provided under current law, revenue from the petroleum inspection fund (PIF) would be used to support transportation programs. This includes a provision of 2017 Act 59, under which the DOA Secretary, beginning on June 30, 2020, and on June 30 of each subsequent fiscal year, is required to transfer the unencumbered balance of PIF to the transportation fund, except for an amount equal to not less than 5% of the gross revenues received by PIF during the fiscal year in which the transfer is made. DOA estimates transfers of $53,677,500 in 2019-20 and $45,025,600 in 2020-21. In addition, the ongoing statutory transfer from the PIF to the transportation fund of $6,258,500 annually would continue.
This will end up reducing money in the Transportation Fund by $31.1 million in the next budget, but it also keeps nearly $88 million in the General Fund for other needs.

Marley notes that Evers plans to start up work on widening I-43 between Glendale and Grafton in the next 2 years, and also will finish up other major projects that are underway.
The influx of cash Evers included in his budget would allow other large projects to stay on their current schedules — including the north leg of the Zoo Interchange in Milwaukee, which is to be finished in 2023.

Under his plan, state Highway 441 in the Fox Valley would be completed by 2020, Highway 15 in Outagamie County would be completed in 2021, Highway 23 in Sheboygan and Fond du Lac counties would be completed in 2023 and Highway 50 in Kenosha County would be completed in 2023.
But the total funding on the major projects is still slightly less than what was used in 2018-19. Evers’ major change is to use the extra money to bulk up spending on everyday highways, bridges and rail that have been left behind during the Age of Fitzwalkerstan,

Funding for DOT major infrastructure programs 2019-21 vs base
State Highway Rehab (non-freeway work) +$252.5 million
Freight rail preservation +$18.0 million
Major Interstate/High-Cost Bridge work +$11.0 million
Major Highway Development -$40.8 million
SE Wisconsin Megaprojects -$2.7 million

Interestingly, the Evers budget counts on a cut of $27.3 million in Federal highway aid, citing “some uncertainty” about how much will be sent to the state from DC over the next 2 years, especially with the current highway bill expiring in September 2020. If those numbers stabilize, or if President Trump ever puts money behind what Candidate Trump claimed he would do on infrastructure, then there is more money that can be used for other purposes.

Another place where Evers’ budget includes more funding is through assistance to local communities to fix their roads and provide transit.

Funding for DOT aid programs 2019-21 vs base
General road aids to counties and municipalities +$66.2 million
Harbor Assistance grants $24.0 million
Mass Transit aids to localities +$13.8 million
Transit buses and other capital assistance +$10.0 million
Other transit aids +$7.6 million
Local Roads Improvement Program $1.9 million

That would take some pressure off of property taxes that otherwise have to pay for these services (or have those repairs and services cut).

Lastly, the debt story is markedly different than the Walker years. As the Evers Administration noted in January before they submitted the budget, paying off debt has taken up an increasing amount of the Transportation Fund’s costs in recent years, and was slated to take up more for the next 2.

As a result, increased amounts of money to deal with this debt was baked in for much of 2019-21, as the LFB projected millions more were needed in the current budget just to make our payments.

“Baked in” debt service increases, 2019-21
Transportation Fund $43.4 million
General Fund $16.4 million
TOTAL $59.8 million

This is what we're left with after 8 years of a governor who had the following philosophy when it came to paying for the roads.

So that’s where part of Evers' proposed tax and fee increases go to, but the higher revenues also allow Evers to limit borrowing for the 2019-21 budget to the lowest levels in years, at $338.25 million. Interestingly, $131 million of that is not for roads, but for rail, harbors, and bridges, which is a sizable increase from the $26.1 million borrowed for those forms of transportation in Walker’s last budget.

Because of Evers’ plans to not borrow much in the budget, and because of the extra money coming in due to the gas tax and fee increases, the chunk of the Transportation Fund dedicated to paying off debt will decline.

Debt service as % of revenue in Trans Fund
2017-18 18.7%
2018-19 19.4%
2019-20 17.8%
2020-21 17.8%

You can see the mess in transportation funding that Evers is trying to clean up, especially due to Scott Walker's decision to follow the wishes of out-of-state no-tax ideologues instead of taking care of the roads his constituents have to travel on. And you can see how the Evers budget adds revenues and thereby lowers debt now, and in the future. Given the conservative estimates of federal highway funding, it also seems likely to have more flexibility later in the budget cycle, if the Feds hold up their end of the bargain in the coming years and don't make the cuts that Evers is budgeting for.

So if passed, it appears that Governor Evers' budget will make the Transportation Fund more sustainable, and start to reduce the massive backlog of maintenance and other road projects that piled up in the Age of Fitzwalkerstan. It's just a matter if you can stand to pay another 8-9.6 cents a gallon over the next 2 years, and avoid fewer Scottholes and repairs in return. Grover Norquist and the Kochs may not like that, but it seems like a pretty good deal to me.

Tuesday, March 26, 2019

Your guide to the Wisconsin State Budget going forward

Been waiting for this. The Legislative Fiscal Bureau is out with its summary of every department in Gov Evers' proposed budget.

It has every new proposal and budget change in there and is a great resource to go back to as we meander through the next crazy 3-4-6 months.

8 years of the worst income growth in the Midwest. This was WisGOP's "success"?

A national report hit today that doesn't often draw a lot of attention, but it had a stark illustration of how far behind Wisconsin is after 8 years of Republican rule. The Bureau of Economic Analysis came out with its income growth by state for the end of 2018. While Wisconsin had growth like every other state of the nation had under the sugar rush of the GOP Tax Scam, it was below the US rate for both the last 3 months of 2018 and the annual average.

In itself, that's not a big deal, because you can also see, Wisconsin was in the middle of the pack over these time periods in both the US and the Midwest. (A side note, as the “boom” in Iowa and the rest of the Plains seems to be a one-time boost in farm incomes, possibly related to the Trump Administration’s subsidy program which heavily favored soybeans and paid out at the end of the year).

But what’s also intriguing in the report is this statement at the bottom of the main report.
Today, BEA also released revised quarterly estimates for 2018:Q1-2018:Q3. Updates were made to incorporate source data that are more complete and more detailed than previously available and to align the states with revised national estimates. BEA also released revised quarterly estimates of population and per capita personal income for 2010:Q1-2018:Q3, and revised annual estimates of population and per capita personal income for 2010-2017.
And that’s a big deal because it means that we now have a more complete picture of Wisconsin’s record in these stats over the 8 years Scott Walker and the Wisconsin GOP have been in power. And that record is awful.

First off is personal income. DEAD LAST over most of these 8 years, including at the end. (numbers not adjusted for inflation)

And look at Number 1 in the Midwest – Minnesota, run by a Democrat while Wisconsin was run by Republicans. However, Wisconsin’s population didn’t grow nearly as fast as some other states in the Midwest (especially Minnesota), so maybe the per capita figures will allow us to look better.

Nope, still DEAD LAST. Even more amazing is who is Number 1. ILLINOIS! Sure, some of that is a function of the declining population south of the border (it lost 127,7000 people in the 8 years measured), but it and the other Clinton-voting state in the Midwest expanded their income gap over Wisconsin over the last 8 years.

Per capita income
Q4 2010
Minn $43,788
Ill. $42,863
Wis. $39,802

Q4 2018
Ill. $57,927 (+$15,064)
Minn $57,356 (+$13,568)
Wis. $51,429 ($+11,627)

And yet WisGOPs are still trying to throw this type of BS over on the public?

Joint Finance Committee member, folks. As is typical with Republicans, the key question is “LYING, OR STUPID?”

But I do know an answer you can give when it comes to evaluating GOP policies in lifting the incomes of Wisconsinites over the last 8 years. “FAILURE”.

Monday, March 25, 2019

GOPs keep rolling up deficits in DC and Madison

So our ex-Governor decided to earn his Koch money the other day.

There are 2 big reasons that SCOTT WALKER should not be making this statement. The first involves Walker's own record here in Wisconsin on debt. In the General Fund, Walker skipped debt payments in both 2015 and 2016 and diverted them to be paid off in future years, and constantly refinanced and extended debt terms to pay off tax cuts and spending in the short term.

And Walker was even worse when it came to paying for the needs of the Wisconsin DOT, as debt took up an increasing share of the Transportation Fund's expenses in the 2010s, and crowded out road repair and other DOT infrastructure and services.

Walker also should be laughed at because he vocally supported the Trump/GOP tax cuts of 2017, which are a big reason why the deficit is exploding to historic levels today.
The federal government ran a budget deficit of $234 billion in February, the Treasury Department reported on Friday, the biggest monthly shortfall on record.

It was wider than the $215 billion recorded in February 2018, as spending rose 8% while receipts climbed 7%. Previously, the largest monthly deficit was $231.7 billion in February 2012.
As Steve Goldstein of CBS Marketwatch notes, the deficit shouldn't be jumping at all in an allegedly growing economy.

In addition, those "increased revenues" for February are misleading. To begin with February is the lowest month of the year for net taxes for Uncle Sam, due to the large amount of refunds that usually come in for the month, so the difference in revenues was all of $11 billion in a budget that is well over $4 trillion a year.

With that background, I'll now go off of the February Treasury Statements for 2017 (before the Tax Scam was law), 2018 (when lower withholdings started) and 2019 (when lower refunds started to take effect).

As you will see, while income taxes withheld in February 2019 were about $6 billion more than what we had 12 months prior, that total is basically no different than the amount coming out of Americans' paychecks 2 years ago, despite growth in jobs and wages since then. Add in the fact that prices are about 3.7% higher than they were 2 years ago, and this is a real loss of revenue.

That withholdings figure is shown by the blue in this chart. February’s income tax refunds are listed as a negative of the total, and you can see those are down nearly $7.9 billion this year vs last year, which added to the “increased revenues” for this year vs 2018 (the numbers shown are in millions).

Corporate taxes often are negligible in February, because quarterly payments aren’t usually made that month, but refunds still happen.
Feb corporate income taxes
Feb 2017 +2,478 million
Feb 2018 -1,992 million
Feb 2019 -669 million

So a better comparison is showcasing the double digits drop in total corporate revenues in each of the last 2 years to date, creating a decline of more than $28 billion.

Corporate taxes Oct-Feb
FY 2017 $87.36 billion
FY 2018 $73.54 billion (-15.8%)
FY 2019 $59.19 billion (-19.5%, -32.2% vs FY 2017)

What did increase in February compared to the last 2 years are the payroll taxes for items such as Social Security and Medicare. These are allegedly supposed to be used only for those purposes, but in reality they’re not and count just like any other tax revenues. You’d think a “deficit hawk” like Walker would want that to be done, but notice he and other Republicans never ask for that kind of lock box, because the surpluses are able to improve the budget picture and make it easier to justify income tax cuts for their rich donors.

In addition to the growth of payroll tax income, note that Trump’s tariffs are having a minor effect on revenues, as they nearly doubled to $5 billion in February 2019.

So keep these different sources in mind if GOPs try to claim that “increased tax revenues” are proof that the GOP Tax Scam isn’t adding to the deficit this year. Much of the increase has little to do with increased earnings and growth in the economy, and we’re still below the levels we were at 2 years ago.

Those lower revenues show that the tax cuts have not "paid for themselves." And combined with expanded spending under spending plans passed by a GOP Congress in 2018, we now have a massive jump in the US deficit for FY 2019.
For the fiscal year to date, the budget deficit is up 39% compared to the same period a year ago.

The expanding deficit comes as the Congressional Budget Office is projecting a shortfall of $897 billion for the full fiscal year, or 4.2% of gross domestic product. That’s up from $779 billion in fiscal 2018. The CBO sees trillion-dollar deficits beginning in fiscal 2022.

The only good news on this fiscal situation is that the higher deficit isn't translating into higher interest rates. In fact, long-term rates plunged last week, and dropped again today as fears switched on Wall Street and DC toward an economy slowing toward recession. But whatever help for the deficit that we might see in future years from lower interest on new debt will be more than offset if we start losing jobs and seeing wage growth decline.

Given that the deficit is growing due to tax cuts that sent money to the pockets of the rich and corporate instead of spending money for jobs, services and infrastructure, there wasn't much bang from the buck received. And now the one-time bump is baked in and wearing off and limiting future growth. So tell us Scotty, why would we trust you or any of your fellow Republicans in solving a deficit problem that your reckless kickbacks caused in both Madison and in DC.

Sunday, March 24, 2019

Wisconsin manufacturing jobs keep falling behind. Why do they still need their tax cut, again?

Among many areas of concern is the economy these days was evidence of softening in the job market. While I noted that the meager growth of 20,000 jobs in February may simply be due to brutal weather and a balancing out of an allegedly strong January 2019, that really hasn't been the case closer to home.

Wisconsin’s job situation was already weak in 2018, with growth revised down to less than 1% for the year. And to start 2019, things deterioriated further, based on this week’s state jobs report.

Wisconsin jobs report
All jobs
Feb 2019 -3,400
Jan 2019 (revised) -800

Private sector jobs
Feb 2019 -300
Jan 2019 +100

Feb 2019 -900
Jan 2019 -1,100

Those losses in manufacturing are on top of a downward revision of 14,000 manufacturing jobs that we found out about earlier this month. Which means we’ve added all of 3,100 manufacturing jobs in the last 12 months, and averaged less than 2,000 a year since the end of 2014.

Yet WisGOPs are running around claiming the massive tax cut to manufacturers that’s been in effect for manufacturers in that time is necessary and a “job-creator”? Give me a break. This analysis and chart from UW-Madison's Menzie Chinn shows the before-and-after in manufacturing job growth since the $225 million-a-year Walker/WisGOP tax cut for manufacturers has been in place.

In fact, it shows that 2018 was a year manufacturing-heavy Wisconsin actually fell behind the US rate of job growth. We just weren't told of that until after the November election, when totals were benchmarked to the "gold standard" Quarterly Census of Employment and Wages (QCEW). And the declines reported in January and February should make you wonder if the change in administrations in Madison is causing a more honest accounting of manufacturing jobs in the state (or at least it should).

So no matter what BS Noah Williams and the Koched-up hacks in WisGOP World are making up and trying to sell you, it's pretty evident that there has been no correlation between the major tax cut to manufacturers and job creation in Wisconsin. In fact, I'd likely be more accurate if I claimed it's causing a negative effect due to the encouragement of more profit-hoarding by CEOs.

And now if this week's interest rate revision is as indicative as it’s been over the last 40 years, it means that an official recession will start by this time next year. So I certainly don't see where it helps to be giving preferential treatment to a group of businesses that haven't done anything to hold up their end of the bargain. Especially if available resources for schools and road repairs drop due to the lack of activity, there's no way those oligarchs should be allowed to continue their free ride.

The economic outlook is back! And tells a tale of Wisconsin's subpar record

Among many improvements with the start of the Evers Administration was one that came out on Friday- the return of The Wisconsin Economic Outlook from the Department of Revenue! As the state continued to fall farther behind during the Age of Fitzwalkerstan, the Walker Administration stopped distributing this quarterly report 4 years ago. But now that Evers is in office, this analysis has returned.

In addition to a look ahead at what it thinks Wisconsin's economy will look like for the next two years, the DOR's Economic Outlook also looks at the state's recent economic history. And it's not so good.
Wisconsin personal income grew  3.6% in 2017, just above the 3.5%  growth in the Great Lakes region and below the 4.4% growth nationwide.  Wisconsin personal income should post growth of 3.8% in 2018 and 3.9% in 2019,  compared to 4.5% growth  nationwide in both years.     

Wisconsin employment grew at  slightly less than half the pace of  the U.S. in the last two years. Wisconsin added just 21,500 jobs  in 2017 and 23,000 in 2018, after  adding an average of 33,700 jobs  per year between 2011 and 2016.  Wisconsin employment posted  year‐over‐year growth of 0.7% in  2017 and 0.8% in 2018, compared  to growth of 1.6% nationwide.   The forecast calls for similar  growth in 2019 and 2020, while  U.S. employment growth slows to  1.4% in 2019 and 1.0% in 2020. 

On the positive side, the DOR report indicates that Wisconsin's unemployment rate will continue to be around 1% below the US rate, as it has been for most of the last 10 years. But the trend of lower wage growth is also expected to continue (and yes, I find this to be an oddity).
Wisconsin wages and salaries  grew 3.4% in 2017 in Wisconsin  and 4.6% nationwide.  Wisconsin's  forecast calls for total wage  growth of 3.9% in 2018 and 3.6%  in 2019, compared to 4.7% and  4.6% nationwide.  The share of  wages and salaries relative to total  personal income stands at around  50% in 2017 and shows a  continuing declining trend since its  peak at 63% in the '60s. 
Despite those lagging numbers, the DOR's Economic Outlook says that the state's revenue picture is in line with expectations, with 4 months left in the 2019 Fiscal Year.

Lastly, the Economic Outlook also notes that Wisconsin has fallen behind the country on it's growth in economic output, and that situation isn't expected to change much either.
State Gross Domestic Product  (GDP) shows Wisconsin real GDP  growth of 1.2% and 1.8% in 2016  and 2017, respectively, compared  to 1.6% and 2.2% nationwide.  As seen at the national level, the tax  cut and fiscal stimulus passed in  2017 will boost 2018 growth to  2.4% in Wisconsin and 2.9% in the  U.S.  The forecast expects  Wisconsin real GDP to grow 2.0%  in 2019 and then decelerate to  1.5% in 2020 and 1.1% in 2021, as  the federal stimulus fades out. 
Given that we reached an interest rate inversion on Friday, which has reliably called every recession in the last 40 years, I'd say those GDP predictions may be a bit, ahem, aggressive.

But it's nice to see honest analysis return to state government, instead of campaign propaganda at taxpayer expense, and bad news being hidden. Let's hope it's yet another sign that Wisconsin is taking steps back toward the decent, open governance that we deserve.

Saturday, March 23, 2019

Two big words from yesterday- not "March Madness", but "RATE INVERSION"

Earlier this week, the Federal Reserve was sending signals that the US economy was slowing down quickly from the sugar high of the GOP Tax Scam in 2018, and I noted that we were nearing a situation that has predicted every US recession in the last 40 years.

Well, that situation arrived on Friday, and was accompanied by a 460 point drop in the DOW.
A closely watched section of the Treasury yield curve on Friday turned negative for the first time since the crisis more than a decade ago, underscoring concern about a possible economic slump and the prospect that the Federal Reserve will have to cut interest rates.

The gap between the 3-month and 10-year yields vanished on Friday as a surge of buying pushed long-end rates sharply lower. Inversion is widely considered a reliable harbinger of recession in the U.S. The 10-year slipped to as low as 2.439 percent.

U.S. central bank policy makers on Wednesday lowered both their growth projections and their interest rate outlook, with the majority of officials now envisaging no hikes this year. That’s down from a median call of two at their December meeting. Traders took that dovish shift as their cue to dig into positions for a Fed easing cycle, pricing in a cut by the end of 2020 and a one-in-two chance of a reduction as soon as this year.

“It looks like the global slowdown worries have been confirmed and the market is beginning to price in Fed easing, potential recession down the road,” said Kathy Jones, chief fixed-income strategist at Charles Schwab & Co. “It’s clearly a sign that the market is worried about growth and moving into Treasuries from riskier asset classes.”
Uh oh...

One area that might benefit from the plummeting interest rate environment is the US housing market, which became increasingly shaky over 2018 as higher prices and rates made housing less affordable for many. Data that came out on Friday indicated that these trends reversed in February.
The National Association of Realtors said Friday that existing homes sold at a seasonally adjusted annual rate of 5.51 million last month, a decisively sharp rebound from a pace of 4.94 million in January.

The burst in sales points to the housing market regaining the momentum that it lost in the middle of 2018, after a spike in rates for home loans caused sales to slow. The February sales figures point toward growth in sales of homes priced between $250,000 and $500,000, a range that is generally affordable to middle-class families.

“This was fueled principally by an improvement in affordability resulting from a combination of slower house price gains, lower mortgage rates and more rapid wage growth,” said David Berson, chief economist at Nationwide Mutual Insurance.

Still, existing-home sales are down 1.8 percent from a year ago because of the severity of last year’s slowdown. But 30-year mortgage rates have since tumbled after peaking in early November at roughly 5 percent, helping sales to recover as that average has fallen to 4.28 percent this week, according to mortgage buyer Freddie Mac.
That jump in housing sales was one of two reasons that the Atlanta Fed bumped up its projected rate of growth for Q1 2019 yesterday, from 0.4% to 1.2%.

About 1/3 of that recent improvement is due to the improved housing figures in the last week. But if you dig into the Atlanta Fed's calculations, about 2/3 of that is due to inventories continuing to stay on the shelves, despite having inventory builds in the last 2 quarters. Which should make you wonder when orders stop being made because they're not necessary to have product ready to go.

Along those lines, another trigger for Friday’s rate inversion was a new report showing that the US’s growth in manufacturing was at its lowest levels in 2-3 years.
The seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™ ) 1 registered 52.5, down from 53.0 in February and the lowest reading since June 2017.

Softer rises in output, new orders and employment all weighed on the headline PMI in March. The latest expansion of production volumes was only modest and the least marked since June 2016.

A number of manufacturers commented on a cyclical slowdown in client demand. Reflecting this, new orders increased at the weakest rate for just under two years in March.

Growth of input buying was the slowest since May 2017, with survey respondents citing the need to adjust purchasing volumes to softer demand conditions. This helped alleviate pressure on supply chains, with lead-times from vendors lengthening to the least marked degree for almost one-and-a-half years.
So add it to the pile of evidence of economic softening that has come up over the last few months.

Also, the IRS released its latest updates on tax refunds, and they still continue to lag behind last year’s totals, down $5.6 billion as of March 15. As we have seen throughout much of this tax season, the refund amounts are basically the same as FY 2018, but the lower totals are due to 1.8 million fewer Americans getting refunds at this point of the year. Those gaps in amounts and number of refunds between 2019 and 2018 have persisted for the last month.

Yes, lots of us may have missed these bits of economic information because we were busy spending numerous hours socializing and watching hoops yesterday (guilty). But the real Madness may just be starting when it comes to the US economy and financial markets in the near future, and it's time to look to see if the lack of refunds and slowing economy starts to have its effect on many a Main Street in this country as the 2010s end.

Friday, March 22, 2019

Walker abused nationally on redistricting

Our fair ex-Guv has a new gig. And he got a lot of national attention on his first day.

Yes, ex-Guv Dropout is a lying partisan hack. But what's even more disgusting is the low opinion they have of voters as they try to slip this BS through.

Fortunately, Scotty got exposed nationally yesterday while losing in Wisconsin courts on his Power Grab. And if the WisGOPs want to play "victim" for being held accountable for their silliness, we need to be driving the nails into their cross.

Wednesday, March 20, 2019

WISGOP throws a tantrum on building projects, and blows their advantage

A few tweets on today's absurdity at the State Building Commission.

But if Vos and Fitz agree with a lot of the projects, why are they ordering their WISGOP appointees not tovote for them?

Here's the most idiotic part about this GOP stunt today. IT DIDNT DO ANYTHING! The whole thing goes to Joint Finance, and projects can be added/removed there just like it would have if the Commission signed off on most/all of the projects.

Look, I get that WisGOP may not like what Evers' did in the Capital Budget. Heck, I think it borrows too much (even if a lot of it is paid back via non-tax sources like room and board, parking, and other user fees), and is so big it gives a too-easy target for it to be criticized.

But instead of surgically improving the Capital Budget and still making the point about "overspending," WisGOP stamps their feet like children saying "NO! NO! NO!" And now the gerrymandered GOP legislators will look very foolish, while needed infrastructure continues to crumble.

I'm sick of these adolescent dopes messing up my state.

Fed speaks, Wall Street celebrates...then reality of slower economy sinks in

I occasionally look at the stock indexes while working, and around 1:15, I noticed that there had been quite a turnaround.

Huh, what happened around 2 pm Eastern?
The Federal Open Market Committee on Wednesday said it will hold benchmark interest rates unchanged at between 2.25% to 2.5%, marking the second straight pause on rate increases. This decision been widely expected by market participants.

The Fed’s latest dot plot, a chart showing each of the FOMC members’ target interest rates for the near- and long-term, pointed a median of zero rate hikes in 2019. This is lower than the two rate increases in 2019 suggested in the December dot plot, the last time the projections were released.

The FOMC also said in a separate statement that it expects to “conclude the reduction of its aggregate securities holdings in the System Open Market Account (SOMA) at the end of September 2019,” referring to its balance sheet normalization process.
Both of these items indicate that money won’t be tightened in the near future. And sure enough, longer-term interest rates took a dive, especially the benchmark 10-year note.

If you look at the Fed’s statement on their interest rate decision, while they talk a nice game about a balanced economy with continuing growth, you can tell they’re seeing some weakness.
Information received since the Federal Open Market Committee met in January indicates that the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter. Payroll employment was little changed in February, but job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Recent indicators point to slower growth of household spending and business fixed investment in the first quarter. On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near 2 percent. On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.
I read that and I wonder if the Fed is a bit behind the curve on the inflation. Those lower energy prices are based on what they looked like at the start of 2019, when gas was below $2 a gallon. It’s risen more than 50 cents in my neighborhood since then, and oil futures hit $60 today for the first time in several months, meaning gas will likely continue to climb in the near future.

If inflation heads back toward the 2.5%-3% range that we saw for much of 2017, the Fed is going to have a problem. It will become stuck between keeping prices in check while not ending the Bubblicious party that’s been going on over the last 3 months on Wall Street, and turning the “slow” economy into an all-out recession.

Fed Chair Powell publicly claimed after the meeting that “all was well.”
“The U.S. economy is in a good place, and we will use our monetary policy tools to keep it there,” Powell said in press conference Wednesday. “It’s a great time for us to be patient and watch and wait to see how things evolve.”
But the Fed’s own report had them lowering GDP growth now, and for the future.

Powell’s fear of a Trump Tantrum probably kept him from outright admitting that our ongoing economic expansion is sputtering, but the bond markets sure seem like they know a downturn is coming. While the 10-year was shedding more than 8 basis points today, the 3-month note nudged up by a point.

These two fixed-income securities are now only 6 points away from each other, and history shows that when the 10-year inverts below the 3-month note (the red line on this chart), recessions follow.

Coked-up Wall Streeters may have liked the statement from the Fed today when they first heard it, but the rest of us should see major warning signs flashing. And given that the market couldn’t hold that sugar high following the Fed announcement, I think even the coke fiends know the party might be ending soon.

Tuesday, March 19, 2019

The other way Evers may have gone too far - the last few tax hikes

As we wait for the Legislative Fiscal Bureau to release its summary of Governor Evers' first budget, I wanted space to step back and go over another area where I think Evers may be asking too much - tax changes.

It's not that Evers is wrong to ask for a lot of these things- as you'll see, I think many of the provisions do a good job in trying to re-level a playing field that has been slanted far towards the rich and corporate and away from the vast majority of the rest of us. I'll start by pointing out the tax cuts, which are targeted toward the middle and working classes, and also discuss the costs of these tax cuts.

Indexing Homestead Credit
$38.9 million in year 2.

EITC Expansion
$53.1 million

Middle-class tax credit
$421.5 million in FY20 and $412.0 million in FY21.

Evers also wants to make a tax shift that moves the income tax cut passed by the WisGOPs in the Lame Duck Session from one that gives more to the rich, and redirects it so that all taxpayers get a similar tax cut. This is described in the official budget summary as follows.
The Governor recommends modifying the current law automatic individual income tax rate reductions associated with increased sales and use tax collections from remote Internet sellers, resulting from a U.S. Supreme Court decision, to focus the entirety of the cut on the lowest individual income tax bracket.
That makes for quite a bit of tax relief for people on the lower 80% of the income scale. And it is more than offset by targeted tax increases on other organizations and individuals.

Reverse M&A tax cut for manufacturers that make more than $300,000
Increase in tax revenue of $279.5 million in FY20 and $237.1 million in FY21.

Capital Gains changes
Increase in tax revenue of $285.1 million in FY20 and $220 million in FY21.

End of Private School Tuition Tax Break
Increase in tax revenue of $12.1 million in FY20 and $12.2 million in FY21.

These 3 items all reverse Walker/WisGOPs giveaways to the rich, corporate and DeVos-paid voucher school backers. All are pretty good ideas, and if that was all we had, the net effect on revenue would be an increase of around $120 million over the 2 years - much less than the $320 million saved through taking Medicaid expansion.

But then more is needed to pay for expanded health services, restoring the Fitzwalkerstani cuts to K-12 funding for public schools, and giving more aids to local governments.

So more revenue is needed. The next 2 revenue raisers are relatively straightforward, as they clarify and streamline certain provisions, and I'll go back to quoting the budget document to describe them.

E-Commerce Sales Tax
The Governor recommends clarifying current law to explicitly require Internet marketplace providers to collect and remit sales and use tax on taxable sales facilitated by the marketplace on behalf of third parties. This provision is expected to increase collection of taxes already owed to the state by $26.8 million in FY20 and $67.1 million in FY21.

E-Cig Tax
The Governor recommends the imposition of a tobacco products tax on vapor products at the rate of 71 percent of the manufacturer's list price. The tax would also apply to any cartridge or container of any solution, which may or may not contain nicotine, that is intended to be used with an electronic cigarette or similar product. The fiscal impact is an estimated increase in tax revenue of $14.9 million for FY20 and $19.8 million in FY21.

Plus there is another $6.8 million from charging cigarette tax on little cigars.

That's still not really a big deal. While I doubt the Koched-up WisGOPs would have signed off on many of these tax increases, they certainly would have been put on the defensive to do so if that's all that was in the budget. Most Wisconsinites wouldn’t be affected by any of these tax increases, but many more would receive a tax break under these provisions, and there would still be nearly $255 million more to use for schools or Scottholes or whatever. And that’s before we talk about the $325 million saved from Medicaid expansion.

But I fear this part of Evers' budget is going to hit a lot more Wisconsinites, which will allow the GOP to have a much easier talking point of “look at all these tax hikes”.

Internal Revenue Code Update
The Governor recommends modifying Wisconsin Statutes to conform with changes made to the federal Internal Revenue Code. The net fiscal impact of these changes is an increase in tax revenue of $187.9 million in FY20 and $174.6 million in FY21.

That’s a $362.5 million run up on items that aren’t adequately identified. And I fear that the LFB will show that much of it will hit workign and middle-class Wisconsinites who have lost the usefulness of their itemized deductions from the GOP's federal Tax Scam (as many of you are likely aware of if you have filed your taxes).

Those last tax hikes may make it far too easy for the GOP to say “Forget it, throw it all out. It’s $1.3 billion in added taxes, herpy derpy yadda yadda.” It also takes away the card that Evers played when he rightfully vetoed WisGOP's unfunded tax cut last month, because the added investments in Evers' budget result in a structural deficit just like the WisGOP tax cut did, even with these tax increases.

It seems like an unforced error, just like I argued that the last few spending items (or decision not to cut spending on GOP giveaways like vouchers) will make a major difference in the bottom line. Which threatens to spoil the image of what is generally a good, progressive budget that tries to reverse some of the damage of the past.

Maybe the plan was for Evers to "go big" and compromise down from there, and while I appreciate that idea (it's not like WisGOP is going to be reasonable no matter what you do), I think a few limits here and there would do a lot for the public opinion battle. And let's face it, much of what is in this budget debate comes down to PR at this point, and likely will stay that way for the next 2 years. So why give dishonest WisGOPs something to jump on when it's not really needed?

Shopko sunk by vulture capitalism and bad Wisconsin business policies

As this week dawned, we knew that a major Wisconsin retailer was in big trouble, and this story from Monday is worth thinking about as you pass by a Shopko “Store Closing” sale in your community.
In a motion filed in bankruptcy court [last] Tuesday, a committee representing some of the company's largest landlords and suppliers said $67 million in special dividends and fees constituted a "fraudulent conveyance" while another $50 million in dividends were "illegal."

The creditors committee is seeking a Nebraska bankruptcy judge's permission to attempt to recover those claims, which could add millions of dollars to Shopko's balance sheets at a time when unsecured creditors, those who do not have a claim to collateral, face a real chance of not receiving anything of what the Ashwaubenon-based retailer owes them for inventory, services and leases.

In February, Shopko's two independent directors identified $179.5 million in dividends paid to Shopko's private equity owners — Sun Capital, Waverly Securities, KLA Shopko LLC and H.I.G. Sun Partners Inc. — between 2007 and 2015. The company borrowed money to pay the dividends, according to court documents.
Your hometown...hedge fund play?

While a “fraudulent conveyance” merely allows for a court to recover some of that money to shore up its balancer sheet, it’s still a reflection of horrible priorities, where hedge funders got paid while Shopko went under and screwed over many people in the process with job and business losses.

Then that was followed by worse news yesterday, where we found out those creditors aren't likely to get much of anything, because the other 120 Shopkos in America will also be no more within 3 months. And that the job losses will also happen at the company's GB-area's corporate offices.
Employees at Shopko headquarters, in Ashwaubenon, found out about the liquidation during an emergency meeting on Monday. Individual stores had team meetings to pass along the same information. An employee who works at the headquarters said longtime employees teared up as managers told them the news.

The liquidation will leave big holes in tow Green Bay area shopping malls: Bay Park Square in Ashwaubenon and East Town Mall in Green Bay. But it also means big impacts in smaller communities like Oconto and Sister Bay, where there isn't another large retailer or a pharmacy to take over prescriptions.
In addition to loss of one of the few sizable corporate headquarters that are in the Green Bay area, there are now going to be large amounts of empty retail spots in Wisconsin communities, which increases the property taxes that homeowners will have to pay as a result. And as the article alludes to shopping opportunities will be significantly reduced in some smaller communities.

The liquidation announcement was an abrupt reversal from what was expected from Shopko this week.
The bankruptcy court had scheduled an auction for Tuesday morning in the hope of driving up the price of initial bids that were submitted last week. On Monday, it announced the auction was canceled and a bankruptcy consultant would oversee liquidation over the next 10 to 12 weeks.

The court filing indicates all store closures will be completed by June 16.
Remarkably, it was barely 7 years ago that Shopko was merging with Pamida and moving corporate jobs from Nebraska up to Brown County. Naturally, that move included a waste of WEDC tax dollars.
The merger, expected to be finalized by next month, will create one of the largest U.S. retailers and shift 120 jobs from Pamida's headquarters in Omaha, Neb., to Green Bay, where 600 work in the Shopko headquarters.

With annual revenues of $2 billion, Shopko has 149 stores in 13 states. Pamida has 193 stores in 17 states and annual revenues of about $1 billion. Its 14 stores in Wisconsin include locations in Reedsburg, Adams and Lancaster.

Both companies are owned by affiliates of Sun Capital Partners, a private investment firm in Florida. Financial details of the merger were not disclosed.

However, the Wisconsin Economic Development Corp. will provide $2 million in tax credits based on creating 129 jobs over the next three years, said Tom Thieding, a spokesman for the WEDC.
Huh, you mean a "jobs announcement" made before Scott Walker's recall election didn't quite work out? Imagine that.

Yesterday was a sad one for a lot of Wisconsin communities, and the end of Shopko will leave a major gap in a lot of parts of Wisconsin going forward. But this also illustrates yet again why we shouldn’t be trusting our state’s corporate leaders and their GOP-puppets on economic policy, as all they care about is short-term headlines and rent-seeking, and it fails in the long-run.

Foxconn claims it'll build a factory by 2020. We should hope they don't

Despite falling behind schedule, Foxconn is sticking with their claims that they’ll actually make something in Racine County.
Foxconn Technology Group (Foxconn) today announced the next steps in construction of its Gen6 advanced manufacturing facility in the Wisconn Valley Science and Technology Park in Racine County, Wisconsin. The next phases of construction will begin by Summer 2019 and the facility will begin production in the 4th quarter of 2020.

“Our commitment from day one has been to establish a winning formula for Foxconn and for Wisconsin,” said Dr. Louis Woo, Special Assistant to Foxconn Founder and CEO Terry Gou. “We continue to expand our presence around the state, create jobs, and deepen our partnerships while innovating and adapting to meet changing market needs. We’re investing in Wisconsin because we know manufacturing here is going to drive even greater success and growth for Foxconn and for the community.”

The initial Gen6 facility will manufacture LCD screens for use in a variety of product applications, including vertical solutions for industries such as education, medical and healthcare, entertainment and sports, security, and smart cities. The plant is expected to begin production in the 4th quarter of 2020.
Of course, the Racine County plant was supposed to be a Gen 10.5 factory making much larger panels, and was supposed to include a separate glass factory, so this is already significantly downsized from the promises made in the last groundbreaking at Foxconn. And at least one of these guys probably knew that at the time.

You may think this is good news, that at least we aren’t left with a giant vacant field in Mount Pleasant. But it is not. It’s actually Foxconn maximizing the handout in the short term with the least amount of jobs possible.

Go back to the contract that Foxconn made with the Walker Administration and WEDC in November 2017. I’ll even go off of the Walker Administration’s rosy spin on it to show where the problems are.

Allegedly as many as 1,500 people might work at the plant, and while you should be rolling your eyes at that claim given the multitude of times Foxconn and WisGOP hacks have lied about this, remember that Foxconn’s “workforce” counts anyone who works for the company throughout the state (or beyond?). Then note the minimums required to get the full tax writeoffs from Wisconsin.

Minimum job thresholds for Foxconn
To get a 15% payback for factory costs
2019 520
2020 1,820

To get 17% payback on salaries
2019 520
2020 1,820

So if Foxconn has a few people working seasonally, counts anyone associated with Foxconn’s Wisconsin “projects”, and has their connected contractors run up the bill to $2 billion in total “investment”, and they can get $300 million for the factory and $80 million or so in jobs.

The timing is quite convenient as well, promising the factory to be open “in the 4th Quarter of 2020” – right before the presidential election so another photo op can take place. Or so Foxconn can quietly admit after the election that the high numbers of jobs and commerce isn’t quite going to work out, as they did after this November’s election.

Soon after that 2020 election, it seems highly likely that Foxconn would automate the overwhelming majority of whatever work force may be at this Gen 6 factory, and dare the State of Wisconsin to claw back their money after 2023 (which is the earliest date it can happen according to the contract).

Which proves yet again that the best thing that could happen for Wisconsin is if this expansion at Foxconn doesn’t happen, and they go away. If we get 1,900 jobs throughout Wisconsin, that would be a state cost of $380 million is a cool $200,000 a job, and that doesn’t even count the $1 billion+ more in infrastructure and local subsidies that have been handed out.

Cutting these guys a check of $100 mil (or forcing a court settlement along those lines) to have them clear out would be preferable than the massive amount of money we would stand to pay for these short-time jobs. Of all the lies told with the Fox-con, the biggest one is that we need to spend all of this money to add jobs - the growth may well have appeared without the massive WEDC handouts and local kickbacks.

So let's find out if someone else can make it in Racine County. Use the massive amounts of acres that have been cleared in Racine County for businesses that actually are invested in and want to grow in Wisconsin, instead of grifting off of sweetheart deals from gullible/crooked GOP politicians. I understand there's a giant convention in Milwaukee for the Summer of 2020 that could use some extra lodging. Seems like a win-win solution, doesn't it?