Craft beer booming as the Taste comes to town

It’s early August, which means it’s time for Great Taste of the Midwest here in Madison, and the massive amount of pre-parties that are in Madison bars on Friday night. Other duties and the $60 price tag are keeping me away this year from the main event for the first time in a while, but as usual the Taste sold out immediately. This thing just keeps growing, with more than 150 brewers at Olin-Turville Park on Saturday, and it’s befitting the boom that the craft beer industry has had in the last few years.

Craft beer’s Brewers Association says the amount of breweries in America nearly doubled from 2006 to 2013, reaching more than 2,800. That number went up by 15% in 2013 alone, and the Association says it’s the largest amount of individual breweries the nation has had since the 1870s, when selling your product coast-to-coast and taking advantage of economies of scale was a whole lot less common. And while craft brewing makes up a less than 8% of the total U.S. beer volume, craft beer sales and production was up double digits in 2013 while total beer production went down, showing that consumers are making a point of choosing microbrews.





And unlike a lot of other areas in the economy, Wisconsin has been a strong player in the craft beer market, rising from 73 breweries in 2011 to 90 in 2013. The state rated 9th in the country for total barrels of craft beer made in 2013, at more than 444,000, and the Brewers Association estimates the Wisconsin craft beer industry had an economic impact nearing $856 million in 2012 ($206 per capita for residents over 21, which is the best in the Midwest).

With the impressive gains in the Badger State for brewing over the last few years, it makes sense that State Rep. Gary Tauchen from Shawano County proposed a bill this year that would set up a Wisconsin Beer Commission, which would serve a similar purpose to the state’s Milk Marketing Board. And Tauchen’s bill would include strong representation from middle-level and small craft brewers.

"When I think of the three things Wisconsin is good at making -- cheese, brats and beer -- I thought, how can we leverage that? Then I thought, the Milk Marketing Board does research on cheese and that has helped that industry tremendously by finding new markets for those products," Tauchen said. "I want this commission and the Department of Agriculture, Trade and Consumer Protection to take beer to the next level."

Tauchen said he would like to bring more beer travelers to Wisconsin. He explained how he wants to help promote travel in the state by touting its brewpubs, micro breweries and larger brewers. The commission would comprise four members representing Wisconsin brewers or brewpubs that make 300,000 barrels of beer or less, one brewer that makes more than 300,000 barrels of beer, a beer wholesaler, and a chairperson.

The Beer Commission bill had bipartisan support, with 6 Dems and 5 GOPs co-sponsoring it in the Assembly and 1 Dem and 1 GOP co-sponsoring it in the Senate, but it didn’t get through in this session. We’ll see where it goes in future ones.

But for now, I’m going to enjoy another Great Taste weekend from the growing craft beer industry, and I hope you help out your local brewer and have a couple yourself on what looks to be a tremendous August weekend.

Wisconsin Budget Project gives a great Fitzwalkerstan budget primer

The Wisconsin Budget Project has done great work in recent years outlining various budget moves, as well as the choices that could have been made, but have not. They summarized all of these choices today in a well-done document titled "How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future." As their introduction explains

In Wisconsin we value opportunity, responsibility and community. We want all of our children to be healthy, successful in school and part of supportive families who live in safe neighborhoods. But since 2011 [when Scott Walker and the Republicans came to power] , a majority of state lawmakers have turned their backs on Wisconsin’s long and proud history of investment in education, health care and other assets that once ensured the state’s civic and economic progress.

They have given large tax cuts primarily to the highest-earning taxpayers, while raising taxes for working families and low-income seniors. The result is that low-income taxpayers have a harder time meeting their basic needs, and Wisconsin has fewer resources to support investments in the state’s public schools, university system, and education for our youngest residents – investments that help create the building blocks for broad prosperity and a strong economy.

Lawmakers gave tax cuts to the wealthy and cut investment in Wisconsin’s communities amid claims that the changes would spur job growth. But over the last four years, Wisconsin’s job growth has been slower than both the national and regional average.

Four years ago Wisconsin was made a promise. The promise was that the best way to generate economic growth was through significant tax and spending cuts. The tax and spending cuts have occurred, but unfortunately for all of us, the promised job growth has not.

And then the rest of the report goes into the specific measures that have occurred which not only have left Wisconsin with the worst job growth in the Midwest over the last 3 years, but also leaves us behind the 8 ball with massive budget deficits looming in the 2015-17 budget.

Just read the whole thing. It's great, and you'll impress your friends.

Walker complaints about Burke land deals- the latest boomerang of GOP mud

Gov Walker's campaign has been trying to make political hay out of a deal Mary Burke made to try to develop business in Kenosha when she was Commerce Secretary 8 years ago. On the surface, it's a place where Burke could be legitimately attacked, as she signed off on a deal that fell through, and now the feds want the state to pay them millions of dollars back. But just like Walker's lame attempt to hang Trek's past outsourcing onto Burke, the WisGOPs would be wise to shut up about this, because their actions will allow this attack on Burke's efforts at Commerce to boomerang back onto their own failures, which are much worse.

First, let's go into detail about what Walker's ad is about. Wispolitics has a good summary page, complete with source documents. In the Kenosha case, the U.S. Department of Housing and Urban Development (HUD) is complaining that the state misused its Community Development Block Grant funds, and now wants their money back. The Commerce Department used over $12.5 million in CDBG funds to purchase a 40-acre plot of land in the Village of Pleasant Prairie in 2006, and then handed it over to the Kenosha Area Business Alliance (KABA) to work on locating Abbott Labs' new headquarters at the site, as well as a hotel and conference center nearby. Well, given that it was right before the Bush Recession, the deal fell through, and nothing was developed as a result.

By 2013, the Inspector General's Office was complaining to the state that not enough was going to be done and they wanted their money back. Interestingly, Walker’s own administration responded in May 2013 that another major job creation had happened because of the purchase Burke signed off on in 2006, and that they still held out hope that Abbott Labs would one day relocate to the site. As DOA Administrator Lisa Marks wrote

The illustration provided illustrates the development and job creation which has occurred near this site that would have not occurred if this land would not have been acquired and controlled with KABA with the CDBG funds. An example of the positive impact is the investment Uline made in constructing a new corporate headquarters and corporate campus that currently employs 852 persons. Uline plans to construct an additional 1.2 million sq. ft distribution facility that will employ another 400 persons.

The information provided strongly demonstrates the positive effect this CDBG investment has made in Pleasant Prairie and the jobs that have been created. It has allowed the Village to remove slum and blight from the area and has created an environment in which Abbott Laboratories will want to move forward and construct their campus, which will create hundreds of additional jobs.

The Uline part of the letter is especially interesting, as it contradicts the claims of the CEO at ULine. In fact, Gov Walker was just in Pleasant Prairie with CEO Richard Uihlein and his wife Liz 2 months ago for a "building expansion" announcement, with Liz Uihlien talking up the state's "spirit of entrepreneurship." So why would the Uihleins say one thing when Walker’s own administration is telling the feds the Burke land deal should be given some credit for this expansion? It wouldn’t have to do with the $300,000+ that the Bradley heirs in the Uihlein family have given Walker’s campaign over the last 3 years, would it? Naaah, these CEOs can’t be that cynical and full of shit…

But I digress. HUD wants $12.3 million back from the original 2006 CDBG grant that Burke signed off on for the Pleasant Prairie site. They also want to get back $2.66 million that was related to an entrepreneurship center run through the UW-Extension in Juneau County. This center did result in business plans that led to an estimated 3,753 jobs being created, but only about 8% of the participants were discovered to be defined as "low and moderate-income," and therefore it caused an improper use of the funds.

There also was a $225,000 grant to the Village of Kronenwetter that was to go to the Woods Equipment Company, but again, it didn't serve the low and moderate-income people, so it has to be paid back. Lastly, there's a $1 million stimulus grant from 2009 that was for a “green technology training and enterprise center” in the Sauk County village of Plain. That building in Plain has been up and hosting classes since 2012, and the architects who built the project are clearly proud of their work on it.

AEI’s holistic system design of basic, energy-saving features for the 11,000 sf facility was so fully integrated with the preliminary architectural composition that the building design remained virtually unchanged through construction. Energy loads were significantly reduced through optimal building massing, operable windows, a high performance envelope, high-efficiency lighting, and daylight harvesting. As a result, radiant heating and cooling and a 14-well geoexchange field became feasible to further reduce energy consumption. Other energy-efficient features include: a dedicated outdoor air system for ventilation and humidity control with a total energy wheel; a condensing boiler; low-flow plumbing fixtures; and, a 20+ kW photovoltaic system. Dedicated to training local workers in green technologies, the G-TTEC serves as a practical demonstration of sustainable design for local industries. The facility is anticipated to reduce overall energy usage by an estimated 74 percent versus an ASHRAE 90.1-2007 baseline.

The problem is that 31% of the people who received this training and work on the project were from low and moderate-income backgrounds, which means it fell short of the 51% threshold for the CDBG goal, and therefore shouldn't have been done under a low-income-geared CDBG grant.

In all these cases, there was actually economic activity generated from these grants, but props to the feds for doing their due diligence and trying to recover taxpayer dollars that were misused. And on the subject of CDBG abuse, the Walker folks may not want to push this “Mary Burke and the Doyle Administration wasted taxpayer dollars" angle too much, because it leads right back to a scandal involving our old friends at the Wisconsin Economic Development Corporation (WEDC).

Because WEDC was accused of misusing CDBG funds in 2011 and 2012. Badger Democracy’s Scott Wittkopf did great work uncovering this story in late September 2012, which showed that WEDC was being used as the agency to send money out from with CDBG grants, when HUD said the state had no right to do so, because of WEDC’s lack of accountability. It led HUD to block state officials from accessing its grants management technology, and HUD threatened to remove all CDBG funds from the state if the Walker Administration didn’t clean its act up.

Wittkopf then followed up with HUD’s findings in early October 2012. among other things, HUD said

1. The state fails to follow its own program guidelines. In one case, a loan for Kapco corporation in Polk County was approved with a per job benefit of $20,000; in spite of a state plan maximum of $10,000. The loan to Kapco was eventually forgiven, in spite of written state policy that “loans are only forgivable under extraordinary circumstances.” Since 1/1/11, eleven of twenty loans under this plan were forgiven. As part of interview comment, WEDC staff told HUD officials:
Certain jobs were considered more valuable to the state, so limits were exceeded, projects received forgivable loans. The HUD report was scathing, saying the process had no documentation where there should be a “transparent and defensible process.”

2. Underwriting – Two CDBG awards received no underwriting, bringing into question a wide range of accountability issues. Gilman Corp in Grafton was “skipped to accommodate the business timeline” according to interviewed state staff. Morgan Aircraft in Sheboygan County was claimed to have been performed by WEDC, but as of the report date, no underwriting had been submitted to HUD.

3. Administration and financial management – From 7/1/11 – 3/7/12, WEDC awarded $9,634,470 in CDBG funds that were unauthorized – as it was not recognized as a state agency and oversight by DOA had not been approved by HUD.

In fact, this screw-up had repercussions in the next budget, as the Legislative Fiscal Bureau described in its paper on the state's CDBG programs in Spring 2013.

6.The Legislative Audit Bureau (LAB) is required by law to conduct the following biennial audits of WEDC, beginning in 2013: (a) a financial audit of WEDC; and (b) a program evaluation audit of the economic development programs administered by WEDC under Chapter 238 of the Wisconsin Statutes. In addition, as part of its annual financial and compliance audit of the State of Wisconsin, the LAB reviews the finances of DOA. In its 2011-12 single audit of the State of Wisconsin (released March, 2013), the LAB identified a number of concerns relating to WEDC's administration of CDBG funds and issued recommendations to correct the deficiencies.

7. According to DOA, a complete evaluation of the CDBG economic development and community development programs will be conducted by the Department, and changes will be made to the program administration to meet the requirements of HUD and the recommendations of the LAB. The administration indicates that several items identified by the evaluating agencies should be addressed. The administration acknowledges that DOA should: (a) hire an administrator for the CDBG non-housing programs (a Bureau Director for the Bureau of Economic and Community Development); (b) review projects dating back to 2004 to confirm that documentation maintenance has been properly performed and demonstrates compliance with citizen participation and environmental oversight and review requirements; (c) address any lack of required documentation; (d) review the federal Integrated Disbursement and Information System data entries to verify proper documentation for projects dating back to 2004; (e) establish accounting record accuracy (grant and loan balances and WEDC account close-out); (f) conduct monitoring visits of CDBG fund recipients to establish that funds are expended for allowable activities only; (g) provide for accurate submittal and collection of program income; (h) adequately track loans; and (i) review current application, implementation, and program management documents.

8. In addition to the above, DOA indicates that the transfer of CDBG responsibilities from WEDC will also require commitment of staff. The positions would identify all projects to be transferred, verify that project documentation is complete, and transfer paper and electronic documents and data. The positions would also perform day-to-day duties relating to the administration of the program funds...

And oh yeah, the Walker Administration didn't account for these positions when it took pre-written ALEC legislation in 2011, abolished the jobs at the Department of Commerce that handled these duties, and moved the responsibilities to WEDC. So we are now shelling out another $250,000 a year in taxpayer dollars to hire people that will adequately handle these CDBG grants. The DOA has had this oversight of Wisconsin's CDBG since July 2013, so at least WEDC isn’t abusing more CDBG dollars today (that we know of).

But you have to wonder why WEDC was even given those CDBG federal taxpayer dollars in the first place. Was it to allow certain favored companies to get their hands on it, and use it for purposes other than what the grant was intended for? It also makes me wonder what kind of kickbacks or other promises were made to make them a favored company to be “trusted” with these funds. Bottom line: the Walker boys made mistakes that drew the ire of HUD, and jeopardized future state funding under the CDBG. It's similar to the mistakes that is leading the state to have to pay back up to $16 million in CDBG money from the Doyle years, except the Walker finding comes with a lot more sketchiness and even less oversight!

I understand that sometimes administrations feel they have to take risks in order to try to grow the economy, and sometimes those risks don’t work out, or work out in a different way than imagined. Especially with the feds dangling money in front of the state to use, it’s probably a worthwhile bet. But maybe it’s time we stop using these grants to as carrots for companies, and instead use money for poverty programs as direct aid to people and actually have the government be the ones that hire folks for projects. This would take out the middleman, and reduce the short-term burden on the taxpayers who have to pay for all this corporate welfare before the jobs materialize (if they ever do).

Perhaps that’s something we all can learn from the mud being slung on this issue during the 2014 election campaign- that we need strict oversight of government programs instead of WEDC-style handouts, and that we should stop being at the mercy of businesses who won’t do the right thing until they’re able to extract a sizable ransom from people who actually work and pay taxes.

Stagnant jobs in Wisconsin could be due to bad strategy

Lost in the GDP and jobs data last week was another report released by the Bureau of Labor Statistics that illustrates another way Wisconsin is lagging our Midwestern neighbors. The BLS’s Business Employment Dynamics Report continues a pattern we’ve seen throughout the last couple of years in the Age of Fitzwalkerstan, where Wisconsin firms will not add jobs at the same rate as the rest of the nation. The state was 45th in jobs added as a percentage of total jobs in the last three months of 2013, and Wisconsin was bottom 10 in the nation for this stat for all 4 quarters of last year. We also were dead last when compared to our Midwestern neighbors, helping to explain our stagnant economy.

Jobs added as % of total jobs, Q4 2013
Ind. 6.1%
Mich 6.1%
Ohio 6.0%
Ill. 5.9%
Iowa 5.9%
Minn 5.7%
Wis 5.5%

Worth noting is that Iowa and Minnesota each had unemployment rates below 5% at the start of Q4 2013, which makes me wonder if firms can’t find enough workers to add all the jobs that they would want to – a problem Wisconsin wouldn’t have had with their 6%+ unemployment rate at the time.

The interesting flip side of that stat is that Wisconsin also loses fewer jobs than most of our neighbors, which is befitting a state that won’t take risks (and likewise has more failures). But because of the lack of jobs being added, it makes the bragging of the Walker Administration about “low unemployment claims” meaningless.

Jobs lost as % of total jobs, Q4 2013
Minn 5.7%
Mich 5.6%
Iowa 5.5%
Ill. 5.4%
Ohio 5.3%
Wis. 5.2%
Ind. 5.1%

Then again, these stats shouldn’t surprise you much. And State Senator Julie Lassa from Stevens Point thinks a lot of it reflects the Walker Administration's strategy of favoring corporations over small businesses.

I think the outsourcing issue brings up larger questions, however, about what the state’s economic development strategy ought to focus on. It is tempting to focus on “smokestack chasing,” the strategy of trying to lure the big corporate headquarters or huge new expansion facility to locate in our state. And it’s easy to see why: it brings hundreds of jobs in one fell swoop and promises to make a big impact on the local economy.

But luring a big national or multinational firm puts Wisconsin in a bidding war with other states and even other countries that are also vying for those jobs. Incentive packages can involve millions of dollars in infrastructure improvements, loans and tax credits. As a result, this kind of competition can eat up a large proportion of the state’s job creation investment. One Wisconsin Now’s recent report on WEDC found that 60 percent of the agency’s economic development funds went to only 30 percent of businesses receiving assistance. That’s $570 million out of a total $975 million in awards going to some of the largest corporations in the state. And, as the recent headlines have shown too clearly, the jobs that come into the state today can leave just as easily tomorrow.

There’s another way to promote economic prosperity, a strategy you might call “growing your own.” A business that starts in Wisconsin is far more likely to grow here and add good new jobs that stay in our state. And these kinds of small businesses are the ones that create the lion’s share of new jobs, while large companies tend to remain static or decrease employment over time.

We don’t have to look far from home for examples of this phenomenon. The school software company, Skyward, was started in a Stevens Point garage; it now employs 275 people and plans to add hundreds of more jobs in the near future. Organic Valley started out as a small food coop in LaFarge; today it has customers all over the country, buys produce from farms all over central and western Wisconsin and has a large distribution center in Cashton in Monroe County. Central Waters Brewing was started by two home brewing enthusiasts in an old car dealership in Junction City. Its 18 employees expect to sell 13,000 barrels of their products this year from the new facility the company built in Amherst in 2007.

Instead of "growing our own", the Walker Administration has encouraged a policy of giving tax breaks and WEDC handouts to established corporations and campaign contributors over encouraging small-business start-ups and increasing the talent base in the state. The result is jobs being added only as a last resort, and very little being done in terms of increased firms and competition (in fact, competition seems to be discouraged by this WMC-supported crew). No wonder the Kaufmann Family Foundation ranked Wisconsin 45th in the nation in 2013 for entrepreneurship.

Not surprisingly, the only area of Wisconsin that seems to be consistently attracting a sizable amount of “new economy” talent (Sen. Lassa's examples aside) is Madison, which is heavily involved in quality of life and education as a focus, and openly welcomes people from outside of the area to contribute to the city's scene. Maybe that’s something the Walker Administration and the WMC oligarchs that control the state's economic policies could learn. But I’m not counting on it, since those people only care about grabbing power and wringing short-term profit instead of growing a strong, long-lasting Wisconsin economy. So I guess we need an actual Madison business person to be put in charge of the state in order to get Wisconsin out of its doldrums.

July jobs- keeps on keeping on.

Friday featured another US jobs report for July. And it showed that things are still going well when it comes to employment growth in 2014. 209,000 added on a seasonally-adjusted basis, 198,000 in the private sector, and May and June revised up (by 5,000 in May and 10,000 in June), so we ended up 224,000 total jobs ahead of where we thought we were. That now brings job growth to over 1.6 million since the start of the year, and 2.57 million in the last 12 months- the best 12-month growth since the housing bubble was still around in April 2006. As mentioned in the GDP piece I wrote earlier this weekend, the better savings rate in 2014 makes this expansion seem a bit more healthy and longer-lasting than what we had in the “spend it all” 2000s, and the recent economic data seems to back this up.

Even the tick up in unemployment from 6.1% to 6.2% wasn’t all that bad, as it was a reflection of 329,000 people getting back into the work force, and a decent amount of them ended up being employed. Obviously, being over 6% is still below full employment, which means there is plenty more work to do in order to dig out of the mess of the Great Recession. But the trend is still in the right direction, as it’s gone down 1.1% in the last 12 months, and 2.0% lower than it was 2 years ago.

Notably, growth has been pretty broad-based in the last couple of months. Construction was up 22,000 in the last month an 32,000 since May- seasonally-adjusted gains that go beyond the typical Summertime hiring in that field. Manufacturing grew by 28,000 jobs in July, is up 66,000 jobs in the last 3 months, and 178,000 in the last year. Certainly there needs to be a lot more done to come close to alleviating the damage done to employment in that field over the last 30 years, but it’s at least a long-lasting recovery in that sector (with year-over-year gains for each month for nearly the last 4 years).

These numbers also make it even more remarkable that Wisconsin continues to lag so badly in job growth. Remember, Wisconsin has the second-highest ratio in the country when it comes to jobs in manufacturing, so if employment in those fields are taking off, we should be doing pretty well. But we’re not, as Wisconsin lost private sector jobs in May and June, and the Walker jobs gap grew even further with the May and June revisions, now reaching 66,000.



Now we need to add another 4,300 jobs in July just to keep up with the strong pace in the rest of the nation, and 17,000 in order to make up for the ground we lost in May and June, a tall order that I'd call that "highly unlikely." And that doesn’t even count the 600 people at Cargill’s Milwaukee slaughterhouse that lost their jobs on Friday. While the rest of the nation keeps in its steady growth rate (a rate that's been picking up in the last few months), Wisconsin keeps on lagging.

This week in WisGOP corruption- fracking and aircraft version

Yep, time for another episode in this continuing series. This time it involves two stories that broke over the weekend.

The first was a story by Lee Berquist in the Milwaukee Journal-Sentinel that hit on Saturday, which involved our Governor using one of his many taxpayer-funded "it's working" trips to a friendly business, and some interesting PR from the State's Department of Justice.

Two weeks after Gov. Scott Walker visited a frac sand company in western Wisconsin to celebrate an expansion, Attorney General J.B. Van Hollen entered a settlement withthe company for violating state environmental laws.

But unlike three other cases where sand mining companies paid fines for violating state regulations, the Justice Department didn't issue a news release detailing the agreement with Hi-Crush Proppants LLC, which agreed to pay $52,500 in forfeitures on June 5, according to records filed in Eau Claire County Circuit Court.

And the reason that we didn't hear about Hi-Crush's fines from the DOJ?

Dana Brueck, spokeswoman for Van Hollen, said she has a simple reason for why she didn't issue a release: She didn't have the time.

In an email, Brueck said: "I had no communications with the governor's office regarding Hi-Crush. This office makes decisions related to DOJ news releases. I do not issue a news release on every case that the DOJ handles, and as I mentioned, by the time I could issue a release, it was dated."

Riiiight. It has nothing at all to do with Walker's visit to the Hi-Crush expansion site in Trempealeau County, or the fact that Hi-Crush's out-of-state CEO and COO each gave Walker's campaign $5,000 over the last 2+ years. Just like it's total coincidence that Walker and his cabinet members have a tendency to show up at these "jobs announcements" of campaign contributor. And I'm sure that's it's a lack of manpower that's the reason for why a Walker contributor had their settlement for pollution buried by the Department of Justice and other polluters did not get the same treatment. Suuuure.

It's telling that environmental reporter Bergquist is the J-S guy who does this story, and not the "news" guys like Dan Bice (last seen chasing around Mary Burke's and Trek's tax records, and finding that they paid a lot of taxes) or Jason Stein or any of the others that are on the Capitol beat, because Bergquist doesn't have to care about kissing GOP backsides, and probably isn't under as much corporate pressure to tone down the stories on Walker's corruption like the regular J-S guys are.

And while the J-S lackeys are busy repeating the Walker campaign and WisGOP's latest anti-Burke falsehood under the facade of "investigative reporting," they continue to miss the big stories of corruption and taxpayer fleecing coming from the Wisconsin Economic Development Corporation (WEDC). Which leaves it to the Capital Times' Mike Ivey to reveal the latest sketchiness in the saga of Kestrel Aircraft and the company's inability to create jobs in NW Wisconsin, despite getting numerous amounts of taxpayer assistance and other forms of help from WEDC. Ivey mentions that Kestrel is instead rehiring employees at its facility IN MAINE, instead of doing as they as Gov Walker said they would do 2 1/2 years ago - set up shop in Superior.

Kestrel had promised to build an airplane manufacturing plant in Maine before it announced in January 2012 a move to Superior based on financial incentives from the Wisconsin Economic Development Corp.

When the announcement was made about Kestrel moving to Wisconsin, Gov. Scott Walker said the company would eventually employ 600 people, but so far the company has just a few dozen workers here.

WEDC has provided $4 million in loans to the firm, with the city of Superior contributing another $2.4 million in loans. In addition, Kestrel is certified to receive up to $18 million in enterprise zone tax credits from WEDC, and $30 million in federal New Market Tax Credits from the Wisconsin Housing and Economic Development Authority (WHEDA).

Instead of doing anything to deserve the more than $50 million in incentives, Kestrel paid nothing back to the state on those loans for more than 6 months between October 2013 and April 2014, and even skipped payroll for its few employees in Superior, causing WEDC and state officials to restructure the loans. (You'd get all these extra chances if you failed to execute a contract with the state, right?)

What's doubly interesting about the Kestrel story is that this company pulled the same thing with the state of Maine, promising 300 new jobs in 2010. Then it abruptly reduced those plans when it claimed Maine wouldn't follow through with enough incentives working out the deal with Walker's WEDC in January 2012. It's pretty obvious that Kestrel is playing the two states off of one another to bilk as many giveaways as they can, but the bigger question is "Why is the Walker Admin and WEDC still going along with this game?" Is it that the Walker folks are so desperate to grow jobs anywhere that they're willing to give away the taxpayer's farm in order to help their flagging stats? Or, as it appears to be with Hi-Crush, was there a deal made between the two parties to help each other out through campaign contributions?

Maybe "No Quarter Investigative Reporter" Dan Bice can find out, if he ever stops following the Walker Admin's and JournalComm bosses' orders and decides to do something other than going through Mary Burke's personal belongings. Because caring about the abuse of taxpayer dollars through WEDC and possible pay-for-play when it comes to environmental enforcement would seem to be a bigger priority for all Wisconsinites.

Where's the economy at? GDP version

This week featured the first look at the 2nd Quarter GDP numbers in 2014. As usual, it was an attention-grabber, perhaps even more so after the shocking decline in GDP in Q1. So what'd we find out?

Well, we found out that real GDP grew by 4.0% in the Spring- a strong bounce back, especially with the increase in investment (which makes up from the weather-related drop due to the polar vortex winter). This puts growth for all of 2014 to a positive (albeit weak at around a 1% annual rate), and the year-over-year increase is in line with the last 2 ½ years at 2.4%. In fact, the Bureau of Economic Analysis notes that quarterly growth has been at a 2.1% annual rate since the current expansion began 5 years ago- and it’s been remarkably steady at those levels if not spectacular. Consumption is still decent, but not mid-2000s “spend as much as what’s coming in” either, as the savings rate is at a robust 5.3%. It seems people have learned a lesson from the 2000s fake housing and stock boom, and are still more cautious with plunging into big things. While that's a bad thing for GDP, it's probably a good thing for society.

Worth worrying about is that 1.66% of the 4.0% increase is due to added inventories. While that offsets the decrease in inventories we saw over the last 6 months, it means the underlying growth was only 2.34%, so those items better be getting sold in the coming months. That being said, 2.34% is "final sales GDP" is generally in the ballpark of what we did in 2012 and the first part of 2013 before things picked up at the end of the year, and then hit the vortex in Q1 2014.



So the question is whether growth stays at Q2’s levels in the later part of the year, and if the strong job growth of the first half of 2014 keeps up. The Wisconsin Legislative Fiscal Bureau predicted a real GDP increase of 2.7% for this year when it made its revenue estimates in January (and the state’s projected budget surplus was as high as it was in no small part because of this planned growth). For that to hold up, we’d need growth of around 4.4% in the second half of this year- an amount we haven’t had in a full year since the full-employment, dot-com boom times of 1999. While we’re consistently creating jobs at a rate not seen since the Clinton years and the height of the housing boom of the mid-2000s, I’d have a hard time buying that we’d match that kind of GDP growth for GDP in the second part of this year, which means those LFB projections would fall short.

The report also included revisions to prior year numbers, which led to some intriguing finds. The BEA says the last 3 years in particular had a few changes, which left total economic growth a bit smaller than we originally thought.

The percent change in real GDP was revised down 0.2 percentage point for 2011, was revised down 0.5 percentage point for 2012, and was revised up 0.3 percentage point for 2013.

Interestingly, this also meant that the polar vortex–related decline in Q1 2014 GDP wasn’t as much as first thought, only down 2.1% vs the -2.9% we saw "finalized" last month. Also interesting is that there were upward revisions in the last 2 quarters of 2013 in particular- with growth now reported at 4.1% in Q3 and 3.5% in Q4. This makes the decline at the start of 2014 look all the more like a weather-related pause than any sort of harbinger of recession.





In all, it's a better than expected GDP report, and combined with the 0.7% increase in employee compensation costs for Q2 2014, (the highest since 2008) it led to a jump in 10-year Treasury notes from 2.46% to 2.56% between Tuesday and Thursday, amid speculatation that the Federal Reserve might let off the monetary gas sooner than later. The bond yields retreated a bit today (to 2.51%), but Wall Street certainly is getting spooked by all this good economic news for Main Street. The Dow Jones Industrial Average dropped 317 points on Thursday, went down nearly 70 more today, and dumped nearly 500 points off of Monday's close. Maybe this is just a correction from the run-up we’ve had in recent months (the Dow is basically flat for the year, even with this week's losses), but it's an interesting contrast to what the GDP and related economic reports have given some interesting hints on where this economy is, and where it might be going.

I'll have more this weekend on today's jobs report (generally good at 209,000 total, and 198,000 private sector), but I'll leave you with this GDP taster for now.