Tuesday, December 31, 2019

Goodbye 2019 and 2010s. Now what?

So I'm sitting here at the end of 2019, and I find myself in a constant eye-roll when it comes to both our economy, and our society in general.

On the economy, the last 3 months have seen an absurd runup in the stock market, with a jump of 11.5% since October 2.

And there really isn't a reason for it other than the promise of easy money from the Federal Reserve, and an alleged drop in uncertainty due to fewer "trade war" headlines. But that doesn't change the overall picture of the economy, especially since any thaw in the trade war isn't going to reduce the tariffs that these same people claimed was holding back the economy and stock market in the middle of this year.

We also have seen home prices get Bubblier in recent years, pumped up by tax cuts and low interest rates encouraging those with money to throw around to put them into assets....and taking the rest of us along with it. Wisconsin is not immune from this trend, as these numbers from the most recent report from the Wisconsin Realtors Association.
Tight inventories continue to be the key driver of Wisconsin’s housing market, according to the most recent analysis of the existing home market by the Wisconsin REALTORS® Association. Specifically, closed sales in November were slightly below those of November 2018, falling 0.8 percent, and median prices rose 6 percent to $194,000 over that same period. On a year-to-date basis, home sales trailed the pace established in the first 11 months of 2018 by just 1.4 percent, whereas median prices increased 6.9 percent to $197,500.

“As we close in on the year-end, it’s clear that we are going to be very close to the sales levels we’ve seen the last couple of years, but the tight inventory levels have kept our growth in check,” said WRA Chairman Steve Beers. Inventory levels do fluctuate on a seasonal basis, rising during peak sales periods in the summer and then falling during the winter period. However, inventory levels peaked at 5.2 months of supply in June and July of this year, which is below the six-month benchmark that characterizes a balanced market. With November inventories falling to just four months of supply, the number of homes for sale has tightened over the past 12 months, keeping Wisconsin a seller’s market.
That might be nice for your equity if you already own your home, but that 6.9% increase in prices is a whole lot more than what most Wisconsinites are getting in raises these days, and it’s definitely a factor behind the higher property taxes people are paying these days.

Now combine that with the fact that many of us still won't be getting write-offs this Spring for our more expensive mortgages and property taxes, and it makes me wonder when the music stops, and people realize that there isn't a lot of organic growth underneath. We haven't seen the housing market tumble yet, which indicates to me that we're not at 2007 quite yet. But then you read this article about home prices in Vegas dropping, and ads like these all over TV, and I'm not sure we are too far away either.

We also are dealing with a politics where are a few are able to control things while the rest of us are affected, but ignored without much ability to level the playing field. This tweet from journalist Alec MacGillis summed it up perfectly to me.

Far too many Americans are willing to look the other way from this destructive economy and politics these days, as long as they don't suffer from it. And that's especially true the higher up you go on the income scale, and/or the insider status level.

Almost no one has paid a price for this bad behavior, either electorally, financially, or physically. It's fitting that MacGillis had a definitive profile of the then-governor of Wisconsin in 2014, in an article titled "The Unelectable Whiteness of Scott Walker," and included this picture that showcases the ugliness of Gov Dropout's soul.

But MaccGillis was wrong in one sense. Walker's race-baiting politics wasn't electoral poison, it just needed a celebrity like Donald Trump to openly explot it. In fact, it turns out that the 8-year reign of our "divide and conquer" Governor presaged the RW Bubbleworld of BS that most right-wingers live in these days, complete with a media propaganda machine that could shield his weak-minded supporters from the incompetence and failures that happened on a daily basis with this grifter, whose only skill seems to be shamelessness.

And we may have finally blown Governor Dropout out of power in 2018, but other than being prevented from screwing up the state further by signing bad policies and appointing more RW hacks, there hasn't been much of a chance for the state to climb out of the hole he left us in. The gerrymandered GOP Legislature still holds power, despite not having the consent of the majority of Wisconsin voters, and these thugs (and their oligarch puppetmasters) are determined to hold onto their ill-gotten gains by any means necessary.

Walker's still tweeting and getting paid by RW oligarchs to sprout BS like this, where Walker sheds crocodile tears for the national debt while not demanding a reversal of the GOP Tax Scam that caused the debt to explode over the last 2 years. But yet, somehow added spending that is PAID FOR WITH TAXES is worse to Scotty than a Trump Administration that ratchets up spending at the same time as these tax cuts.

And it's not just Trump that caused this mess in our politics and economy to become so top-heavy, toxic and uneven. It's a rot that goes much deeper than the senile old man in the White House, and includes an entire political party that has decided power and money matter more than a fair and functioning society, and has chosen tactics over convincing people of their ideas.

It's time for accountability and payback in 2020. And frankly, the righties better hope that accountability does come at the ballot box next year, because when the will of a Silenced Majority is ignored, things end much worse for the illegitimate ones that are allowed to stay in power.

It's not going to be that fun to stop the madness that has enveloped many areas of our government and our economy, because the bad guys will not relent until they are CRUSHED, and that might take several years. But it is necessary, and it's something that has to happen for this country to have the 2020s be better than the garbage decade we are ending.

With our current backsliding, it doesn't feel like we've come very far in the 50 years, sad to say.

I know blogging has kind of gone out of style in the last couple of years, but I still dig the long form, and I'll be around this place more in 2020. There'll be plenty to write about, and likely plenty to mock as our vapid and bloated media tries to tell the story of our tipping point of a state. See ya on the other side.

New estimates show US population keeps slowing, and Wisconsin's even slower than that

Right before we turn into 2020, we got new total US population figures from the Census for 2019. It shows that the population slowdown throughout the 2000s, which dropped below 1% a year in between 2000-2010, got even slower this year. And the reasons why include less of the birth-vs-death "natural increase", and the US gaining fewer people through immigration.
Drops in natural increase and net international migration have resulted in a gradual slowdown of the nation’s population growth this decade, according to U.S. Census Bureau population estimates released today.

On the eve of the next decade, Vintage 2019 population estimates show the nation’s growth continues to slow: the U.S. population is at 328.2 million, up 0.48% since July 2018. Growth has slowed every year since 2015, when the population increased 0.73% relative to the previous year....

In 2019, natural increase dropped to 957,000, marking the first time in at least four decades that it slipped below a million, continuing the trend toward fewer births and more deaths.

International migration, the other source of population growth, has been gradually declining each year since 2016. Between 2018 and 2019, the nation’s population increased 595,000 due to net international migration, compared to 1,047,000 in 2016.
Well, if the Trump Administration had a goal of slowing down what the country was adding through immigration, I guess it's working. But it sure isn't going to help our economy grow.

The decline in "natural increase" comes from both a drop in the country's births, especially in the last 4 years, but also a steady rise in deaths throughout the 2010s.

And the Census Bureau noted that the "natural increase" doesn't even exist in a few states.
Four states experienced natural decrease (recorded more deaths than births) between 2018 and 2019: West Virginia, Maine, New Hampshire and Vermont.
Going further into the state figures on population, let's look at Wisconsin in particular. Like most Midwestern states, our population growth is below the US rate, and like the rest of the country, it has slowed further in the 2010s. The Census says Wisconsin added 15,028 people in 2019, an increase of 0.26%, and the state has not added more than 20,000 people in a year for the entire decade.

In breaking down the reasons behind Wisconsin's 2019 increases in population, you can see that despite our state's birth rates falling to its lowest level in decades, we still are on track to have more people born than dead in this year (side note- just found out two of my 30-something Millenial friends are doing their part to reverse that trend in 2020). But our relatively low levels of foreign immigration, along with having more people move out of state than move in, adds up to a small amount of population growth.

In comparing the total change in population with our neighbors since 2010, two of these states (Michigan and Iowa) have been similar to Wisconsin in having relatively slow but consistent growth in the 2010s. But Minnesota had by far the best population growth of the region, with growth exceeding Wisconsin's by more than 200,000 people this decade. Conversely, Illinois' population has declined in each of the last 6 years due to people leaving the state.

Interestingly, Illinois' decline continues to keep Wisconsin's population growth going, as we have consistently gained FIBs in the 2010s, offsetting the losses Wisconsin has had to other states in 2018.

But we can't continue to count on that continuing in the 2020s, and seeing Minnesota's population jump like it has in this decade would seem to give a template that we should look into for stopping the demographic issues that are limiting our growth. The declines in Wisconsin's population haven't happened yet (as a whole state anyway, your community may be different), but you can see where it'll happen soon if we don't find a way to attract talent from other places.

We likely took the first step with the election of Tony Evers in 2018 to at least stop more regressive garbage from being put into law in this state. But there's a long way to go, and outside of the Madison area, there isn't a lot of new talent heading in. Tax cuts aren't going to do it - good jobs and a good quality of life will. And you know what else might make people consider Wisconsin in the 2020s? Not seeing this on Election Night in November.

Monday, December 30, 2019

Our smaller trade deficit doesn't mean that manufacturing is bouncing back as 2019 ends

There isn't much new financial data to report before the New Year begins, but we did see information from the Commerce Department on trade in goods and inventories, and it had one particular item that may make your eyebrows raise up.
The international trade deficit was $63.2 billion in November, down $3.6 billion from $66.8 billion in October. Exports of goods for November were $136.4 billion, $0.9 billion more than October exports. Imports of goods for November were $199.6 billion, $2.7 billion less than October imports.
A 5% drop in our goods deficit in a month? That seems like quite an improvement, and the trade deficit is down $9.8 billion from the $72.9 billion that we had in November 2018.

However, the improvement isn't for "the good reason", which would be increased exports over imports. Instead, it's because the amount of imports have dropped more than our decline in exports over the last 12 months.

That would ordinarily be the sign of a recession over growth, but maybe Trump's strategy of using tariffs to encourage companies to make products in is paying off after all? One good way to find out is to see if manufacturers' orders are increasing, and we got information last week that shows....not so much.
New Orders
New orders for manufactured durable goods in November decreased $5.0 billion or 2.0 percent to $242.6 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 0.2 percent October increase. Excluding transportation, new orders were virtually unchanged. Excluding defense, new orders increased 0.8 percent. Transportation equipment, also down two of the last three months, led the decrease, $4.9 billion or 5.9 percent to $79.2 billion.

In addition, unfilled orders in durable goods continue to decline while inventories are still increasing. So there are no signs that US manufacturing is picking up as imports have dropped off in the last half of 2019, at least not yet.

And we know that manufacturing employment growth has also leveled off this year (barely more than 6,000 jobs a month over the last year), so do we think that or exports are going to grow more in 2020? Color me skeptical, but it'll go a long way toward determining if the economic "growth" we are seeing as 2019 ends is anything more than a debt-fueled Bubble.

Sunday, December 29, 2019

IT projects, juvenile corrections and other unpaid-for costs in Wisconsin state govt

This week, the Wisconsin Legislature's Joint Finance Committee got its annual report on overdrafts for state government accounts that are supposed to be self-supporting. This happens every year and frequently involves items that had a lot of up-front costs, and are later recovered over time. But some items saw their deficits grow, and may require further action and/or discussion as to what to do.

The total unsupported amount of these overdrafts grew from $94.6 million in FY 2017-18 to $101.0 million in FY 2018-19. The overwhelming reason for the increase is due to the costs of IT projects that are not getting back the money that has been put in. Most of this is due to the ongoing State Transforming Agency Resources (STAR) program, which was intended to centralize many duties in HR and accounting across several agencies, and has been a general cash drain since the Walker Administration re-started the project several years ago.

The STAR project had overdrafts in a few areas this past fiscal year.

STAR cost overdrafts
DOT Transportation Fund $2.165 million
DOA General Fund $46.25 million (+$1.42 million vs FY 2019).

The report indicates that the DOT items will be paid off in the near future due to new assessments, but the General Fund's STAR deficit keeps rising, despite constant assurances that the project will be paid for. So why is this still happening?
With the deployment of STAR releases 1 and 2 in fiscal year 2015-16, the department began incurring postdeployment maintenance and operations costs for the system. These costs began to be recovered from agencies starting in fiscal year 2015-16 and annually thereafter. As such, the maintenance and operation costs do not contribute to the deficit in this appropriation. The STAR development projects began to be recovered through an assessment to state agencies beginning in fiscal year 2017-18. In fiscal year 2018-19, the department assessed agencies $17,385,548 for STAR operations and maintenance. The department assessed agencies $5,810,527 for STAR development costs, which represented 80 percent of the annual amount necessary to fully recover project and financing costs of the project.
80%? So we're just eating the rest of these costs? Nope, and it'll cost agencies more in taxpayer dollars this year.
The department will continue to annually assess state agencies for ongoing operations and maintenance costs to fully collect project and financing costs over a period of 19 years. In addition, the department plans to begin to assess agencies for the previously unrecovered costs incurred from the IBIS project (the original STAR project, which the Doyle Administration aborted before they got too deep into it).This includes a one-time assessment of $5,547,624 in 2019-20 and $591,212 annually over the subsequent 16 years.
Good thing we got a ton of tax dollars available to blow in 2019-20 so that additional $5.5 million in costs doesn't cause a lot of stress for those agencies.

Let's look at what this overdraft looks like when this report comes out next year, and if the STAR project's deficit has dropped by a few million, then we might be on track to have the project paid off around 2036. So...yay!!??

There also is a separate IT project that led to a new overdraft of nearly $4.15 million from last year. Part of it is for the state spending more for cloud-based services as opposed to buying and owning a license on-site. But much of it is also due to a Walker-era project that never came to be.
...the negative closing balance includes costs associated with the department's project to replace the existing enterprise Automated Call Distribution System, which will not be supported by its proprietary vendor in the future. The department contracted with Genesys for the replacement, but the project ultimately failed due to its lack of functionality represented by the vendor. The project resulted in $6.35 million in costs incurred between fiscal years 2015-16 and 2018-19, plus an additional $3 million in future master lease obligations. No cost recovery has occurred for this project, and the department indicates that it does not plan to pursue a replacement vendor for the system. To recover incurred costs, the department is currently considering implementation of an assessment to agencies that would have participated in this project. The department expects to decide whether to implement this assessment by January 2020.
In other words, we are out $9.35 million or so due to this messed up call system project, and the Evers Administration is now going to charge other agencies to pay back this messed-up project from the Walker Administration.

What's funny (or pathetic) about this situation is that you can bet the GOPs on Joint Finance that signed off on these costly and failing IT projects will now use this report to call a meeting where they demand that the new Evers Administration "do better" and get these costs under control, and come up with a plan to close these multi-million dollar deficits. Cool, cool.

A couple of law enforcement areas also had their overdrafts grow. One involved the state's Penalty Assessment Surcharge, whose deficit went up by nearly another $2 million, making the total overdraft reach $12.6 million. This surcharge is basically the cost of fines for certain infractions, and they are supposed to cover the costs of a variety of programs in 6 different agencies. This isn't happening, and the Department of Corrections notes it hasn't happened for 8 of the last 10 years. But there aren't any solutions coming in this document beyond "hey, we need to find a way to pay for this." Not really assuring.

In addition, the state's Juvenile Correctional Services had its already-sizable overdraft jump significantly in the last fiscal year, up nearly $3.3 million to a total of $7.72 million. These are the costs that the state takes on for taking Juvenile offenders from counties and housing them at their state facilities, but money from the counties and/or state taxpayers aren't making up the difference.
In FY15, the Department retired the deficit and ended the year with a cash surplus. However, juvenile populations declined rapidly in the period between FY16 and FY19, while at the same time the [Juveile Correctional Facilities] also incurred expenses that were unbudgeted or under-budgeted during FY17 and FY18, such as paying for contracted health care staff to handle medication administration. Additionally, a delay in authority to charge the FY18 daily rate led to lost revenue of $1,643,000 during that fiscal year. In FY19, the average daily population at JCFs was 54 youth less than the FY19 budgeted population. A combination of all these factors resulted in a ($7,721,000) PR cash deficit at the end of FY19.

In 2019 Wisconsin Act 9 (the 2019-21 Biennial Budget, a $6/day rate add-on was included in the JCF daily rate to reduce the JCF operational deficit. This additional amount will be included in the JCF daily rate in future biennial budgets until the deficit is eliminated. The Department estimates that the deficit could be retired in FY40 if populations remain at the FY20 budgeted level.
Of course, given that Scott Walker had this philosophy regarding the issues on Juvenile Corrections until it became an electoral problem before 2018, no wonder why we have a deficit and uncertain policy future on this topic.

Lastly, let's talk about an overdraft on a subject that might be close to many of your hearts.

Dog licenses, Rabies Control and related services
Total overdraft $185,400 (all in FY 2019).

This led me down a rabbit hole asking "What are the laws about dog licenses and fees in Wisconsin?" Here you go.
(2) Tax. The minimum dog license tax is $3 for a neutered male dog or spayed female dog, upon presentation of evidence that the dog is neutered or spayed, and $8 for an unneutered male dog or unspayed female dog, or one-half of these amounts if the dog became 5 months of age after July 1 of the license year.

(3)  Additional tax. The governing body of any county may by a majority vote of the members present at any regular meeting raise the minimum dog license tax on dogs within its jurisdiction and the governing body of any town, village or city may by resolution raise the minimum dog license tax on dogs within its jurisdiction. If the governing body of any county, town, village or city increases the minimum tax, it shall provide that the tax for unneutered male dogs and unspayed female dogs is greater than the tax for neutered male dogs and spayed female dogs. The additional tax may not exceed the total cost of all dog licensing, regulating and impounding activities for the previous year, less any refunds which may be received under s. 174.09 (2), and shall be levied and collected in the same manner as other dog license taxes.

But apparently the cost of overseeing the dog licenses and rabies is more than what the state is taking in these days. So there will have to be some kind of raise in the state's dog license fees in the next budget or a reallocation of money from other areas in the near future.

But they're worth it, right?

Most people may find items like this overdraft report to be drudgery. But it's often drudgery that clues us in to what types of changes might be coming in the near future, and whether controversies that legislators choose to make out of them are legit, or if they're trying a pathetic misdirection play filled with fauxtrage.

Let's keep an eye on this one as we go into 2020.

Saturday, December 28, 2019

As 2019 ends, Wis reduces record debt from Walker era, but also trails in economic performance

Wanted to make a few notes after the release of Wisconsin's Combined Annual Financial Report (CAFR) for Fiscal Year 2019, and yesterday's release of the state's Continuing Disclosure of debt at year's end.

Both documents show that the last Fiscal Year did have a notable decrease in something that had generally grown during the Walker era – long-term debt, which had reached a record level of nearly $14 billion by the end of Fiscal Year 2018.
The State's total long-term debt obligations (bonds and notes payable) decreased by $450.1 million during the current fiscal year which represents the net difference between new issuances, payments and refundings of outstanding debt. Decreases in debt resulted primarily from repayments of existing bonds debt in excess of new issuances. During the year repayments of long-term general obligation debt exceeded new issuances by $450.2 million. Revenue bonds outstanding increased by $41.6million. Annual appropriation bonds outstanding decreased by $41.6million.
That’s a reflection of a lack of need to borrow in 2019 as revenues grew, and a lot of debt that was retired and not necessarily replaced. Maybe some of that was due to the state budget not being put into law until early July 2019, so there was no bill allowing more debt to be offered until after the report closed, but it's still a step in the right direction.

As a result of the added tax revenues (especially the upside surprise due to new "corporations" appearing to take advantage of the GOP Tax Scam in DC) and retired debt, the state’s GAAP deficit dropped under $1 billion for the first time in well over a decade.
The General Fund is the chief operating fund of the State. At June 30, 2019, the State's General Fund reported a total fund deficit of $(773.5) million. The net change in fund balance during Fiscal Year 2019 was $480.1 million, in contrast to $372.4 million in Fiscal Year 2018.
That decline in debt was almost all in General Obligations, which are usually paid off with everyday taxes and other charges. Interestingly, the state's debt in the Transportation Fund rose, largely a result of Walker and WisGOP notoriously increasing borrowing in recent years to avoid having to raise DOT's taxes or fees.

But at the same time, the state also paid off less debt in the Transportation Fund in Fiscal 2019, which seems to be based on when those bonds came due.

This specific type of debt involves revenue bonds that are sent out, with a portion of your registration fees paying off that debt in coming years (instead of going into road repair or other DOT services). The drop in debt payments in FY 2019 meant that the amount of funds available from registration fees to use on DOT services topped $500 billion for the first time ever, even though overall registration fee revenues declined in FY 2019.

The CAFR also gives a good illustration about how Wisconsin’s economic growth has lagged the nation as a whole over the last few years.
Wisconsin employment continued to grow throughout 2018 at a moderate pace. According to the federal Bureau of Labor

Statistics, total nonfarm employment in Wisconsin increased 1.2 percent in 2016, 0.7 percent in 2017 and 0.8 percent during 2018. This performance lagged national employment trends. Nationally, employment grew 1.8 percent in 2016, 1.6 percent in 2017 and 1.7 percent in 2018. Wisconsin employment growth is somewhat constrained due to a lower unemployment rate and a slower overall population growth than the nation as a whole.

More recently, Wisconsin's growth in employment has slowed along with national employment growth. Between September 2018 and September 2019, Wisconsin employment has increased 0.2 percent. Nationally, employment is up 1.5 percent over the same period, slower than at the beginning of the year when growth was 2.0 percent. Wisconsin's seasonally adjusted unemployment rate in September 2019 was 3.2 percent, below the 3.5 percent national unemployment rate for the same month.

Reflecting the continuing expansion, Wisconsin's state nominal gross domestic product increased 4.8 percent in 2018, tracking national growth of 5.4 percent. Wisconsin's 2018 growth followed growth rates of 2.4 percent and 3.0 percent in 2016 and 2017, respectively. These figures compare with the 50-state total gross domestic product increases of 2.7 percent in 2016 and 4.3 percent in 2017.
That's not good, and reports that have come out so far for 2019 indicate the state's economy has fallen further behind the country, both in GDP growth, and in jobs.

Which tells me that the 2020 reports on these subjects might look a bit different for Wisconsin. And not just on the economy, as the trend of DOT vs General Obligation debt might be reversed in next year's report, where DOT debt goes down due to less borrowing and more fees, and General Obligation debt might go up after Evers and Republicans in the Legislature agreed to shell out for maintenance in state buildings and infrastructure that had gone by the wayside under Walker.

We'll see whether the new investments along with the income tax cut resulting in higher state tax refunds will have an effect up or down on the GAAP deficit, and whether we have more room to do more in the 2021-23 budget to dig us out of the hole that we were put in during the 2010s.

The superrich aren't like the rest of us, but too many politicians listen to them vs us

I wanted to mention an article from Paul Krugman on how the super-rich aren’t like you and me, and don’t want any possibility of being like everybody else.

The first thing you need to know about the very rich is that they are, politically, different from you and me. Don’t be fooled by the handful of prominent liberal or liberal-ish billionaires; systematic studies of the politics of the ultrawealthy show that they are very conservative, obsessed with tax cuts, opposed to environmental and financial regulation, eager to cut social programs.

The second thing you need to know is that the rich often get what they want, even when most of the public want the opposite. For example, a vast majority of voters — including a majority of self-identified Republicans — believe that corporations pay too little in taxes. Yet the signature domestic policy of the Trump administration was a huge corporate tax cut….

Why do a small number of rich people exert so much influence in what is supposed to be a democracy? Campaign contributions are only part of the story. Equally if not more important is the network of billionaire-financed think tanks, lobbying groups and so on that shapes public discourse. And then there’s the revolving door: It’s depressingly normal for former officials from both parties to take jobs with big banks, corporations and consulting firms, and the prospect of such employment can’t help but influence policy while they’re still in office.
And when you have candidates that are either mega-rich themselves (Hi, Mr. Bloomberg! Hi, Mr. Steyer!), or spend a lot of time and effort chasing after donations from the mega-rich (Hi Pete!), these politicians are not likely to come up solutions that speak to the economic realities and limitations that the overwhelming majority of us have to deal with.

Krugman also points at a corporatist “mainstream” media in DC that often runs in the same circles as these out-of-touch rich folks, and tends to give them a lot more attention and credence than they deserve. Krugman notes how media gave us a ton of opinions from anti-deficit Tea Partiers and other oligarchs in the early 2010s while the rest of the country was dealing with massive unemployment and lower wages.

The result? Cuts in government spending amid a lot of crocodile tears about “responsible budgeting” that happened at both the state and federal levels. Combine that with the Citizens United decision, which opened the floodgates to a lot more money in politics (to the great benefit of corporate media companies), and Krugman says it has slanted media coverage to a point that progressive candidates are held up to criticism that more corporate-friendly candidates don’t have to deal with.
Which brings me back to the 2020 campaign. You may disagree with progressive ideas coming from Elizabeth Warren or Bernie Sanders, which is fine. But the news media owes the public a serious discussion of these ideas, not dismissal shaped by a combination of reflexive “centrist bias” and the conscious or unconscious assumption that any policy rich people dislike must be irresponsible.

And when candidates talk about the excessive influence of the wealthy, that subject also deserves serious discussion, not the cheap shots [about fundraising] we’ve been seeing lately. I know that this kind of discussion makes many journalists uncomfortable. That’s exactly why we need to have it.
And the media’s concerns about the deficit? They have gone out the window as our country now is seeing its deficit rise again because of Trump’s GOP Tax Scam, and Krugman noted earlier this week that there is a now-bipartisan agreement that more government spending is needed to keep the economy growing in Year 11 of the current expansion.

Funny how that works. It’s almost like a lot of corporate media members and (especially) their bosses have a vested interest in continuing these high levels of inequality and Big Money spending large amounts in 2020’s politics instead of asking why this is allowed to happen. Almost…

Which means our media is going to be conveniently slow on calling out the concerns of our currently Bubblicious policies that drive up the stock market and home prices while real-life investment flatlines. Nor will they care too much about the fact that wages are barely keeping up with the rising expenses that take up a lot more of the budget of everyday Americans vs the “needs” (or lack thereof) of the fortunate few.

Well, until the Bubble inevitably bursts, at which point our media will bewilderedly look around and say “WHA HAPPEN?” I can only hope it happens sooner than later, before voters go to the polls in November. Because we need more Americans to face the two-tiered society that we still have in 2020, more than a decade after the Great Recession officially ended, and demand more than a lot of elite-connected politicians want to see done.

Thursday, December 26, 2019

Lots of Holiday buying online, but not so much overall

As Christmas comes and goes, it’s time to start looking at what consumers may have spent for the Holiday shopping. And information from Mastercard indicates that the structural changes in the retail sector continue, with more sales happening online versus people buying stuff in stores.
E-commerce sales this year made up 14.6% of total retail and rose 18.8% from the 2018 period, according to Mastercard’s data tracking retail sales from Nov. 1 through Christmas Eve.

Overall holiday retail sales, excluding autos, rose 3.4%.

The increasingly preferred way to shop.

Not bad overall, although that’s also not accounting for inflation, so real sales are maybe up 1.5% vs last year. President Trump took to the Twitter-waves to imply that this was a big deal.
Well, no kidding that it’s “the biggest number in US history”. It would be major news if it WASN’T “the biggest number in U.S. history”, because it would mean the economy would be in a significant recession.

In fact, the preliminary retail numbers from Mastercard fell short of the amount of growth we had last year.
….Mastercard spokesman William Tsang, citing 2018’s 5.1% growth in total sales, said this year’s holiday sales growth was not the biggest ever….

The National Retail Federation had forecast U.S. holiday retail sales over the two months to increase between 3.8% and 4.2%. That compares with an average annual increase of 3.7% over the past five years.
In other words, decent, but not great. Same “slowing, but steady growth” story that we’ve had for much of the last half of 2019, but in fairness, that’s better than we were thinking it was going to look like a month ago.

Those Mastercard figures go along with the nationwide picture of November’s consumer spending that was released by the Commerce Department on the Monday before Christmas.
Personal income increased $101.7 billion (0.5 percent) in November according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $87.7 billion (0.5 percent) and personal consumption expenditures (PCE) increased $64.9 billion (0.4 percent).

Real DPI increased 0.4 percent in November, and real PCE increased 0.3 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

The increase in personal income in November primarily reflected increases in compensation of employees, farm proprietors’ income, and personal interest income (table 3).

The $37.8 billion increase in real PCE in November reflected an increase of $22.6 billion in spending for goods and a $17.1 billion increase in spending for services (table 7). Within goods, spending on new motor vehicles was the leading contributor. Within services, spending on health care was the leading contributor.
The November increase came after softer numbers in the previous two months in both income and spending, and would be slightly better than a 3.7% annual rate of growth. But it also seems to echo the lines of “decently growing but not booming consumer sector.”

However, that wide difference between online sales jumping by nearly 19% but overall sales being up less than 3.5% seems to indicate that in-store numbers are going to be bad, and would likely mean that more stores are set to close in early 2020 after year-end earnings get tallied.

That’s going to raise your home's property taxes, because unless you live in a community with an Amazon Warehouse, you’re not likely to see that store’s tax base replaced in the near future. We don't consider that extra cost when it comes to evaluating retail spending figures these days, but maybe we should.

Tuesday, December 24, 2019

Right before Christmas, GOPs showcase the Two Santas

Unlike last year, there's no federal government shutdown at Christmastime this year. And that's because President Trump signed a budget deal last week that both the Democratic-led House and GOP-led Senate agreed to, as all sides decided to keep things running smoothly ahead of the 2020 election.
President Trump on Friday signed two spending packages totaling $1.4 trillion, averting a government shutdown at midnight.

The bills included all 12 annual appropriations bills for the 2020 fiscal year that started Oct. 1. They also included a slew of tax cuts, extending expiring and expired tax breaks and eliminating other taxes that amount to an additional $426 billion in lost revenue, bringing the total cost of the bill to more than $1.8 trillion.

The government spent the first quarter of the fiscal year operating on stopgap funding that was set to expire on Friday. Trump reportedly signed the bill while aboard Air Force One en route to Mar-a-Lago for the holidays....

Congress also agreed to scrap three taxes intended to pay for Obamacare. Eliminating those three taxes alone will add $373 billion to the deficit over a decade, the lion’s share of the bills’ lost revenue. Negotiators extended energy credits for biofuels and wind power, but not for solar or electric car manufacturers.
These parts of the budget deal will add even more to a deficit that was already projected to climb over $1 trillion in the current fiscal year. Trump/GOP "fiscal conservatism", you know.

But it's actually in line with how things have gone over the last 2 years, which have shown yet again that Republicans really don't care about cutting government spending, and instead, GOPs admit that more funding helps to keep our 10-year expansion going. Economist Paul Krugman noted this in a series of tweets that also served to commemorate the 2 year anniversary of the GOP Tax Scam being passed into law. In that time, business investment has NOT picked up after having their taxes cut, but something else has.

Remember how at the start of the 2010s, Republicans were crying all of these tears about the deficit/debt, and how this would hamper "their children/grandchildren." Therefore, they claimed President Obama couldn't spend as much to help the economy recover from the Great Recession. But now, as the 2010s are ending, Republicans are more than happy to break out the government's credit cards to throw money around.

At the same time, Trump has jawboned the Federal Reserve to lowering interest rates from where they were this Summer, and the massive amounts of public and corporate debt has led the Fed to conduct numerous repo operations to allow bills to be paid. Given that these stimulative measures are happening at a time of full employment, it's led stocks and other assets to Bubble higher and give the impression of a strong economy.

Which allows me to use Christmas Eve to talk about the "Two Santa Clauses" theory of fiscal policy, which is a cynical type of politics that Republicans have subscribed to for the better part of 40 years.

Radio host Thom Hartmann gave a great description of how this works in a column released last year, a couple of months after the Tax Scam became law.
Republican strategist Jude Wanniski first proposed his Two Santa Clauses strategy in 1974, when Richard Nixon resigned in disgrace and the future of the Republican Party was so dim that books and articles were widely suggesting the GOP was about to go the way of the Whigs. There was genuine despair across the Party, particularly when Jerry Ford began stumbling as he climbed the steps to Air Force One and couldn’t even beat an unknown peanut farmer from rural Georgia for the presidency.

Wanniski was tired of the GOP failing to win elections. And, he reasoned, it was happening because the Democrats had been viewed since the New Deal as the Santa Claus party (taking care of people’s needs and the General Welfare), while the GOP, opposing everything from Social Security to Medicare to unemployment insurance, was widely seen as the party of Scrooge.
So what would Republicans do to avoid look like miserly Scrooges? TAX CUTS, and not have them be combined with the austerity of spending cuts.
For working people it would only be a small token – a few hundred dollars a year on average – but would be heavily marketed. And for the rich, which wasn’t to be discussed in public, it would amount to hundreds of billions of dollars in tax cuts.

The rich, Reagan, Bush, and Trump told us, would then use that money to import or build more stuff to market, thus stimulating the economy and making average working people richer. (And, of course, they’d pass some of that money back to the GOP, like the Kochs giving Paul Ryan $500,000.00 right after he passed the last tax cut that gave them billions.)

There was no way, Wanniski said, that the Democrats could ever win again. They'd be forced into the role of Santa-killers by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.
So Republicans give away money in a slightly different way than Democrats, but they give money away nonetheless. At least Dems have asked for taxes to pay for their high levels of spending. By comparison, Republicans run up spending on the military and won't cut spending on anything (except things like food stamps to poor people, because those people don't matter to Republicans).

After all, if there's something the 2010s have proven, it's that high fiscal deficits don't necessarily lead to high interest rates. As the federal deficit has risen since the Tax Scam was passed at the end of 2017, the yield on the benchmark 10-year Treasury note has dropped.

So if interest costs aren't rising and keeping people from spending, and Trump and other Republicans know they badly need the economy to avoid a recession that it is logically due to happen, they're more than happy to keep money pumping out as much as possible to keep the "growth" going. So they're more than glad to pull this two-step where they throw away their alleged belief in low government spending and reduced deficits.

Does that mean Dems should also stop asking for austerity and deficit control? No, because rising debt costs have to cause problems at some point, but the austerity can be of a different type. Make the rich and corporate have to tighten their belts this time, in the form of reversing the many breaks they've received from the GOP Tax Scam, and crack down on incentives that encourage stock buybacks over actual production and reinvestment. And then use those higher tax revenues to give stability to everyday Americans through universal health care and grow the economy through investment in infrastructure and other public goods.

For now, the average American consumer is continuing to spend and keep the expansion going. But when this Bubble inevitably bursts and/or Democrats take power again, you can bet the Republicans will become "concerned" about the deficit again, and try to trap Dems into limiting the programs that they believe in (like Social Security, Medicare and Medicaid), and try to limit the recovery from the hard economic times that reckless GOP policies have helped to cause.

Hey, it worked for the GOP in the 2010s, why wouldn't they try it again?

Wisconsin is still superior to Minnesota in one key area

We might trail Minnesota in almost every economic metric these days. But there's one thing we do beat their asses in!

Did not see that performance coming. And it's less than 1 month after another group of Wisconsin footballers went up to the Cities to wreck the division hopes of some 'Sotans.

Good times, good times. But still lots of work to take care of next week for both Wisconsin-based football teams.

Monday, December 23, 2019

Fitz is floating another tax cut? Shouldn't we wait to see what happens with the current ones?

It’s almost like clockwork. Right ahead of a new year, here come WisGOPs asking for some kind of tax cut in case the state has more money coming into it. This time it’s Senate GOP Leader and Congressional candidate Scott Fitzgerald doing the pandering, and it’s in reaction to the surprising jump in property tax bills that hit throughout the state for this year, particularly in K-12 schools.
Discussion of a property tax cut comes in the wake of homeowners receiving the tax bills in December. Those bills could amount to the largest property tax increase in 10 years, the nonpartisan Wisconsin Policy Forum said in a report this week.

“People are a little surprised,” Republican Senate Majority Leader Scott Fitzgerald said at a news conference.

Republican senators are in the early stages of putting together a tax cut proposal, but there's no targeted amount yet, he said. That will partly depend on the state's tax revenue forecast, which is looking good and will be updated next month, Fitzgerald said.
There’s definitely evidence that revenues look good as we near the halfway point of Fiscal Year 2020, as the November figures from the Wisconsin Department of Revenue came out late last week. Corporate revenues in particular are carrying the numbers higher than expected - up by nearly 57% when the 2019-21 budget counted on a DROP in corporate revenues of nearly 13%. However, there are two major caveats with those revenue figures.

First, year-over-year totals for income taxes will likely drop by a lot in the next 4 months, because one income tax cut signed by Governor Evers in the state budget has been in effect for all of 2019, and a second takes effect in 2020, but Wisconsinites won’t see any change in their wallets until they file their taxes and get tax refunds that are larger than they’d previously have. The Legislative Fiscal Bureau estimated that the income tax cuts will drop revenues by $167 million next year, and $268 million in 2021, but we won't have an idea on how much it'll be for another 4 months.

Hold up there, Fitz

Second, a lot of that increase in state corporate tax revenues are an offshoot of the GOP Tax Scam in DC that Fitzgerald would certain like to continue as a Congressman. Basically, the Tax Scam encouraged a lot of business owners to stop being assessed on their individual income taxes and become "corporations" and related business entities, in order to get a massive tax cut at the federal level. The LFB outlined this tax shift during their analysis of May's upside revenue surprise.
As noted, higher than expected entity-level tax payments and shifting of income from tax year 2017 to tax year 2018 in response to the TCJA contributed to higher than expected year-to-date collections. In addition, compared to the January forecast, IHS Markit's May forecast of2019 growth in economic profits increased by 1.6 percentage points to 6.3%. For tax year 2019, S corporations and partnerships choosing to pay at the entity level are required to make quarterly payments, resulting in a one-time higher fiscal effect from S corporations remitting two estimated payments for tax year 2019 and full-year tax payments for tax year 2018. Previously, for tax purposes, such entities would have passed through their income to their owners, most of whom would have filed under the individual income tax. As a result, collections data suggest that a sizable amount of payments will now be made under the corporate income/franchise tax on a continuing basis. Due to the factors described above, this forecast anticipates growth in corporate tax collections of 51.6% in 2018-19. For context, the highest annual growth rate in corporate tax collections over the last 40 years occurred following the 2008-09 recession, with growth of 32.6% in 2009-10 compared to 2008-09.
But if this is a one-time change, the LFB analysis notes that the 57% increase in corporate revenues could come back to earth very quickly in the early part of Calendar Year 2020. And not just because of that, but because of a potential shrinking of corporate profits in coming years.
Collections in 2019-20 and 2020-21 are estimated to be lower than in 2018-19 for three reasons. First, as discussed above, the effect of tax planning for the TCJA is expected to be a one-time shift that would not have a similar effect on revenues in the 2019-21 biennium. Second, entity-level tax collections are expected to be lower over the next two fiscal years after accounting for the one-time increase in collections described above. In addition, it is anticipated that collections under the entity-level tax may stabilize at a lower annual amount going forward if refunds are owed once entity-level tax forms are released by DOR and S corporations can accurately calculate their final payments for tax year 2018 later this year. Finally, IHS Markit forecasts that the growth in economic profits in 2021 (1.2%) will be 1.1 percentage points lower than previously forecast in January.
What effect the larger income tax refunds and this year's corporate tax shift makes next month's LFB revenue estimates VERY interesting, because there are a lot of unknowns there in how much those two items will change total revs.

Also, let me add that a lot of what the Policy Forum lists as an "increase" in property taxes for schools isn't necessarily showing up on people's tax bills. And that's because of prior stunts by Fitz and the rest of the WisGOPs throughout the 2010s that have used a shell game with state tax dollars to offset property taxes assessed by local governments.
This analysis looks only at gross property tax levies, meaning state tax credits that buy down the property tax – the School Levy, Lottery, and First Dollar credits – have not yet been factored in. The first two credits are essentially flat in the state budget but the lottery credit is budgeted for a substantial increase.
Sure enough, Fitz is talking about pulling a similar move to "reduce" property taxes in a potential 2020 bit of legislation.
One option being discussed is shifting some of the money that currently funds technical colleges off the property tax bill and onto the state's general fund, Fitzgerald said.

“I wouldn't take anything off the table,” he said.
That’s pretty lame, particularly because GOPs already did this stunt in 2014, when they gave $406 million an additional in state taxes for tech colleges, and removed that amount from property taxes for the tech colleges. All it did was tie up state tax dollars for future years, and didn't allow the tech colleges a better ability to offer more classes and/or staff.

Unless Fitz is talking about a reform that removes all property taxes from tech colleges, and makes the tech colleges be funded the same way as the UW System, this is a silly idea. But hey, it sounds good to low-info voters, and it doesn't do anything to actually improve the resources of schools or local government. It just gives the impression of cutting taxes while not cutting government spending (until the inevitable recession and deficit comes). Win-win in ALEC World!

Hey Fitz, I know you're desperate to get to Congress, but the rest of us want might want to see what's happened with this year's tax cut and to see how much corporate revenues are leveling off before we decide to cut taxes further. Seems logical and responsible, but that's not the way today's WisGOP rolls.

Saturday, December 21, 2019

Sorry Robbin' Vos - Foxconn changed their end of the deal, so we should change ours

As the Foxconn project flounders in Racine County and the Evers Administration tries to "rightsize" the Wisconsin Economic Development Corporation's (WEDC) contract with the Asian company to match adjust to a very different plan than what was Scott Walker promised to Wisconsinites, Assembly Speaker Robbin' Vos jumped in with his take. And it was such a pathetic case of goalpost-moving that I had to share it with you.
Assembly Speaker Robin Vos said he doesn't understand the dispute between the Evers administration and Foxconn. He said at issue is a "technical fix" that should take "about two seconds" to resolve.

"The idea of saying that we care if they make a Gen 10 or a Gen 6, when 99% of the people who are going to read the article you're writing don't know the difference, that seems like an argument over nothing," said Vos, a Republican from Rochester.
Actually Robbin', the Gen 10 part is explicitly mentioned on Page 4 of the state's contract with Foxconn, and was a major selling point that WisGOPs were throwing 2 years ago, when they were claiming the Foxconn project was going to be the "eighth wonder of the world."
. "This project is a once in a generation and maybe once in a century opportunity for our state. Before us is the opportunity to bring 13,000 new family-supporting jobs and a high-tech manufacturing ecosystem to Wisconn Valley," said Department of Administration Secretary Scott Neitzel, using the nickname Walker has given to the project.

Walker has argued bringing Foxconn to Wisconsin would "transform" the state, in a similar fashion to Silicon Valley, the tech industry in Northern California.
This "transformational" argument was why the Fox-con package had such a larger payback compared to the typical WEDC incentive package, both in wages (17% for Foxconn vs 10%) and capital investments (15% for Foxconn vs 5%).

So if Robbin' doesn't care about what Foxconn makes at its Racine County facility and just adds jobs, then he'd be glad to have the contract adjusted so that Foxconn gets the incentives that other companies might get for similar jobs programs (as sketchy as that might be), right? Of course not.
The plant is under construction in Vos' district and he helped shepherd the deal through the Legislature. He said he doesn't want to see Foxconn's per-job subsidy reduced, saying such a change could make it harder to bring other companies to Wisconsin.

"If another company wants to move to Wisconsin, and they are promised a contract, and they learned that, geez, the state's the one who reneged and now Foxconn canceled, that is going to chill economic development for every other part of Wisconsin," he said. "And that's bad no matter what your philosophy is."
No Robbin'. The state didn't renege, Foxconn did. They changed the product they were going to make and chose to downsize it (or were lying all along), and the Evers Administration is trying to react to that change and not give them special treatment that Foxconn does not deserve.

And besides, Robbin', your district has already gotten hundreds of millions of taxpayer dollars in highway upgrades and other infrastructure due to this Fox-con that clearly will not provide nearly enough to warrant that kind of investment. In fact, Racine County LOST MANUFACTURING JOBS LAST YEAR, so it clearly hasn't triggered other activity in the area, and studies are now indicating that Foxconn's favorable treatment has crowded out the growth of other homegrown Wisconsin companies.

Always scheming. Always BSing.

If Foxconn or Robbin' Vos or other WisGOPs don't want to admit that this thing isn't going to be what was signed up for in 2017, and they don't want to adjust to reality, then they are DISQUALIFIED from being part of its resolution. At that point, the best action for the Evers Administration to pull is to take a cue from this guy, and walk away from further shakedown attempts.

SALT cap changes get through the House, but don't count on help for this year's taxes

It didn’t get nearly the attention of a lot of other measures in the US House this week, but members passed a modification to reduce one of the biggest tax hikes that resulted from the GOP Tax Scam – the raising and then removal of the cap on deductions for State and Local Taxes (SALT).

The SALT cap prevented filers from writing off more than $10,000 of those taxes on their return – no matter whether it was a single person or a married couple filing jointly. That flaw meant that a lot of 2-income households hit the SALT cap, and combined with the higher standard deduction (which WAS doubled for married couples vs singles), it made deductions for items such as mortgage interest, property taxes, and charity worthless for those couples to take.

The bill that passed the House would fix the flaw to allow more of those married couples to take those deductions when they file taxes in the coming months. But then it goes a step further, and gets rid of the SALT cap entirely starting next year.
The bill would raise the cap to $20,000 for married couples for 2019, fixing the marriage penalty. It then would largely eliminate the cap for 2020 and 2021. It also would increase the amount of a deduction for educators’ expenses and create a new deduction for first responders’ expenses. As a result of the GOP motion, those educators and first responders would be able to deduct up to $1,000 of expenses, up from $500 in the earlier version of the bill.

To offset the cost of these changes, and to curb the benefits of the bill for high earners, the bill would raise the top individual tax rate from 37 percent to its pre-GOP tax law level of 39.6 percent. That change would take effect for 2020 through 2025, after which time nearly all of the 2017 law’s tax changes for individuals, including the SALT deduction cap, expire.
The entire removal of the cap was a reason why some left-wing organizations opposed the bill to remove the SALT cap. Let me resurrect this chart that was part of a report from the Center on Budget and Policy Priorities.

It’s likely that studies like that one helped to encourage some vulnerable northeastern Republicans to vote for the measure, but it also led some Democrats to vote against it. Including my own Congressman!
Five Republicans voted for the bill — Reps. Brian Fitzpatrick (Pa.), Peter King (N.Y.), John Katko (N.Y.), Tom Reed (N.Y.), and Chris Smith (N.J.). Fitzpatrick, Katko and Reed voted for the GOP tax law.

Sixteen Democrats voted against the bill, including progressives such as Reps. Alexandria Ocasio-Cortez (N.Y.) and Mark Pocan (Wis.), as well as vulnerable freshmen Democrats in Trump districts such as Reps. Kendra Horn (Okla.) and Ben McAdams (Utah).
It’s especially interesting that Dane County’s Pocan chose to vote against SALT cap repeal, because Dane County is a place that would benefit the most from the bill, as shown in the dark blue on this map.

Don’t worry, we still love ya, Mark. But those of us with two incomes and high educations are the ones most likely to be screwed by the Tax Scam under SALT. Might want to keep that in mind down the road as we try to untangle the regressive GOP mess that our tax code is in.

Despite this week’s action, the article from the Hill says it will be unlikely that the SALT cap will be changed on our upcoming tax returns, because Moscow Mitch and the rest of the GOP crew in the Senate plans to bury it in their legislative graveyard. And even if it were to pass the Senate, President Trump has threatened to veto it out of a laughable claim of “tax fairness” (funny, they didn’t care about fairness when they targeted the Tax Scam to the rich and corporate).

So while I can selfishly hope that the SALT cap gets modified to give me and my wife a break on our income taxes, I don’t see it happening this year. And while numerous profitable corporations are paying ZERO taxes and likely will get sizable refunds, us and a lot of others will likely be writing another check to the IRS this April (even after increasing our withholdings in 2019). Mostly thanks to the fiscal genius of Wisconsin’s own Paul Ryan.

Soooo punchable.

Friday, December 20, 2019

November Wis jobs report shows more flatlining here, and the rest of the Midwest

I wanted to go over the numbers from this week's Wisconsin jobs report for November. It was more mediocrity, with a minor job loss reported for November, but October was revised up, so we basically ended up flat .

November 2019
-2,900 all jobs
-1,200 private sector

October 2019 revisions
+ 3,100 all jobs
+3,000 private sector

Over the last 12 months, the numbers are equally lame – with only 9,900 private sector jobs added and only 6,500 overall. I’d be even more alarmed with the 6,900 jobs reported to be lost in the manufacturing sector in the monthly reports, but we already know that those manufacturing figures will be revised up in a couple of months (overall jobs likely will not, by the way. So something else is falling).

On the household side, technically Wisconsin’s 5-month streak of 0.1% increases came to an end. But things still weren’t good in November.

Wisconsin, November 2019
Labor Force -800
Employed -2,200
Unemployed +1,400
Unemployment rate +0.05% (to 3.345%)

A minor consolation is that October was slightly revised up in the household survey as well (+400 labor force, +350 employed). But it’s still not trending in the right direction overall, as Wisconsin’s labor force and employed figures continue to trend down, with more than 32,500 fewer Wisconsinites being listed as employed vs the total at the start of 2018, and the number of unemployed jumping in the last 6 months.

But Wisconsin is far from alone among Midwestern states when it comes to a lack of job growth these days. That was reiterated in the Bureau of Labor Statistics' report today, which showed that despite the US adding jobs at a rate of 1.5% nationwide over the last 12 months, not ONE state in our part of the country was even over 1.0%.

It's a continuing trend where Wisconsin and other Midwestern states that gave Donald Trump the 2016 election are the ones that are not benefiting from the allegedly "great economy" in 2019 that Trump and Beltway media continue to talk up. And as I mentioned earlier this month, what if we're in a rerun of 2006-07? Where the Midwest was trailing the country as the economy was in the last throes of a debt Bubble, and then turned down with the rest of the country by the election year of 2008.

In other words, what the nationwide reports are claiming isn't something that a lot of us are seeing.

Thursday, December 19, 2019

Has "Trump Country" in Wisconsin turned around as 2020 approaches? Or declining like it was in 2016?

A recent article from Reuters referenced the recently released GDP by county information from the Bureau of Economic Analysis, and it reiterates a theory of mine about the 2016 election. Namely, that an economic slowdown that especially hit rural and blue collar areas of the country (particularly in the Midwest) may help explain Trump’s stronger showing in those communities.
For the U.S. economy as a whole, 2016 was an off year. Economic growth slowed to a tepid 1.6% annual rate, which was a five-year low and a sharp drop from the 2.9% pace of 2015.

The pain, however, was not equally spread. A global crash in oil prices had hit the country’s energy producers hard, and led to declines in business investment and manufacturing felt most acutely where Trump’s populist message was gaining traction.

Across the roughly 2,600 counties that he won in the election, growth barely breached 1% in 2016, low even by the standards of the sluggish recovery from the 2007-2009 recession. In some 1,200 of those counties, GDP actually fell by close to 4% in 2016.

By contrast, the overall growth rate of the roughly 500 counties carried by Democratic presidential nominee Hillary Clinton was 1.8%, faster than the nation as a whole. Only about a third of the counties she won saw a decline in economic activity, and for those it was a shallow dip.
Yes, I know some of the appeal of the guy in “Trump country” may be because he’s racist and sticks it to “those people” in the big cities that are doing better. But the "2016 economic slowdown" theory also goes along with post-election stories that indicated some blue-collar Wisconsinites chose to roll the dice with an unknown quantity who hadn’t served in government because (in their minds) it offered a chance of getting better that currently didn’t exist.

So, how did that gamble turn out? Reuters tries to indicate that things are better in the areas Trump won in than in 2016, despite the fact that they lag the places that voted for Clinton.
Even if recent developments weighed on the economy in counties supportive of Trump, the first two years of his presidency saw many of them regain lost momentum.

The number of counties with negative GDP growth has fallen by nearly half over that time.

The counties won by Clinton have grown faster overall, and as a whole reached Trump’s 3% GDP growth target in 2018. The counties that voted for Trump in 2016, by contrast, grew by around 2.7% last year.

Still, the economic improvement in counties won by Trump has been steady and touched parts of the swing states of Ohio and Wisconsin that were won by former President Barack Obama in 2012 but voted for Trump four years later. Both those states were in Trump’s column in 2016.
That leads me to try out an experiment – let’s look at the counties that flipped from Obama to Trump.

As you can see, the hypothesis of the Reuters article held true through 2018 – the 22 counties that flipped from Obama to Trump had growth that was below both the US and the rest of the state in 2016, but grew faster than the rest of the state in both 2017 and 2018 (although still below the US rate of growth).

But the 2018 elections also featured a lot of these Obama-Trump counties in Wisconsin flipping back to support Democrat Tony Evers over then-Governor Scott Walker, especially in SW Wisconsin. So let’s look at those 7 counties and see if there are any differences between those groups.

Both of these sets of counties were struggling in 2016, but the Evers-voting group did better in 2017 than 2018, while the Walker-voting counties did better last year vs the year before. Might be telling, or just a coincidence.

We’ll check back as county GDP comes in over the next few months. But for now, we know that Wisconsin’s GDP slowed down in the first 2 quarters of 2019, clocking in at a lame 1.1% in both Q1 and Q2, with the manufacturing and agricultural declines sinking in the longer the year went on.

So if it is just “the economy, stupid” in the swingy parts of Wisconsin, does the 2019 slowdown mean Trump is in bigger trouble than his already-low approval ratings would indicate, meaning that those 22 counties become more likely to be won by the Democratic presidential candidate (as the out/change candidate) over incumbent Trump? Much like how the 2016 economic slowdown helped Trump against Hillary Clinton, who was seen as a continuance of the Obama status quo?

Guess we’ll see as 2020 develops, eh?