The shutdown slowed down news indicating a slowing economy

The shutdown-delayed Income and Spending report for Dec 2018 and incomes for Jan 2019 came out last week. And both gave a picture of a slowing consumer economy, and incomes rising only in a cosmetic way.

In December, there was a sizable jump in incomes, but spending reflected the bad numbers we saw in retail, which had their largest one-month drop in nearly 10 years.

Personal income increased $179.0 billion (1.0 percent) in December according to estimates released today by the Bureau of Economic Analysis. Disposable personal income increased $173.1 billion (1.1 percent), and personal consumption expenditures decreased $76.6 billion (-0.5 percent).

Real DPI increased 1.0 percent in December and real PCE decreased 0.6 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The increase in personal income in December primarily reflected increases in personal dividend income, compensation of employees, and farm proprietors’ income (table 3). Personal dividend income increased $83.4 billion, primarily reflecting a one-time special dividend payment by VMware Incorporated. Farm proprietors’ income increased $29.2 billion, which included subsidy payments associated with the Department of Agriculture’s Market Facilitation Program.

So 2/3 of that big increase in incomes is due to Wall Street dividends and farm subsidies. Otherwise, incomes were up a solid-but-not spectacular 0.4% in December.

The drop in spending at Christmas shopping season also indicates a worried consumer. However, we did not have January's spending numbers to see if that continued, which would put Q1 2019 growth in question.

Instead, all we had was the January income reports. And what goes up due to one-time factors must go down.

Personal income decreased $23.8 billion (-0.1 percent) in January. Disposable personal income (DPI) decreased $35.1 billion (-0.2 percent); Real DPI is unavailable for January.

The decrease in personal income in January primarily reflected decreases in personal dividend income, farm proprietors’ income.

Now, it wasnt all bad for January incomes, as wages and salaries were still up a decent 0.3%. But that overall drop makes the February and March reports very big, in seeing whether the overall incone decline or wage increase is the accurate predictor for Q1 2019 growthm.

The report also featured the year-long estimates of income and spending growth. And despite the GOP Tax Scam being in effect for 2018, there was little change in incomes or spending last year.

Personal income (table 6) increased 4.5 percent in, compared with an increase of 4.4 percent in 2017. DPI increased 5.0 percent in 2018 compared with an increase of 4.4 percent in 2017. In 2018, PCE increased 4.7 percent, compared with an increase of 4.3 percent in 2017.

Real DPI increased 2.9 percent in 2018, compared with an increase of 2.6 percent in 2017. Real PCE (table 8) increased 2.6 percent, compared with an increase of 2.5 percent in 2017.

And now millions of Americans are paying back those tax cuts as they file with the IRS at the start of 2019. So where is growth going to continue?

We will get a lot of economic data in the next couple of weeks as the backlogs from this year's shutdown clears. And it'll be very intriguing to see if incomes and spending continue on the way up with no real stimulus or momentum existing to help it along.

Tony's taxes and tax cuts. By the numbers

An astute reader wanted me to go over the tax proposals Governor Evers wanted in the State Budget. I'm going to go off the totals given in the Budget in Brief (Table 9 on Page 98 if you want to check it out).

TAX INCREASES
End M&A Giveaway to large manufacturers $556.6 million

End capital gains tax cut for richer Wisconsinites $505.1 million

Make state tax code match changes in GOP Tax Scam $362.4 million

Enforce sales tax laws on 3rd Party Internet sales $93.9 million

Remove tax cut for broadcasters $29.5 million

Make tax on e-cigs and small cigars match other tobacco $41.5 million

Remove tax cut for private school tuition $24.3 million

Enhanced DOR Tax Audits $43.5 million

Other minor changes $23.1 million

TOTAL TAX INCREASES FOR 2019-21 $1.64 BILLION


Tax cuts in Evers budget
Income tax cut for Wisconsinites making less than $80K single/$150K married
$833.5 million

EITC Expansion $53.1 million

Homestead Tax Credit expansion $38.9 million

Child Care Credit $9.9 million

Medical insurance credit for self-employed $9.5 million

Other minor tax cuts $6.4 million

TOTAL TAX CUTS $951.3 MILLION

NET CHANGE IN 19-21 REVENUE +$688.7 MILLION

You can clearly see the change in emphasis from Walker and WisGOP, who gave their tax cuts to the rich and corporate, and took services and lower-income tax cuts like Homestead and EITC away. The second part of this added revenue is that it pays for items such as expanded services on Medicaid (beyond the savings of Medicaid expansion), restoring funding to K-12 and special education, and increases in shared aids for local communitie and the UW System.

I generally like the concepts of ending the free ride that the rich and corporate have had for 8 years in this state, but I do have a couple of concerns over how Evers plans to do that.

1. The amount of money involved is so high that it makes for an easy GOP target "Oh, look at Evers raising taxes by nearly $1 billion. Argle bargle wubba wubba." Even though most Wisconsinites won't see a tax increase due to how these moves are targeted (and quite a few will see a tax break with better services), it gives a talking point that is easy fort he average low-info voter to remember and be scared about.

Evers probably should have backed off on a couple of these things, or waited a year for the increase to take effect (like the capital gains thing). But it seems like they got stuck in trying to get every initiative in there while coming up with the money to make things balance out (the cushion to end the year

2. What are these "federalized" changes to the state tax code. It's hard to find an explanation in the budget documents, but I have worries that it means Wisconsinites won't be able to use itemized write offs like mortgage interest and charitable donations because the GOP Tax Scam has pushed many people into taking the standard deduction, with no benefit from those itemizations. I'll wait till the Legislative Fiscal Bureau to describe just what would cause this sizable increase in revenue, and I fear this could become an unforced error by Evers once that's revealed.

That being said, this budget is miles better than the trickle-down garbage Walker and WisGOP gave us, and it is heartening to see someone recognize that the field needs to be leveled. Even youth the gerrymandered GOP Legislature will likely ignore most if not all of this, it lays down a marker, and makes the WisGOPs justify why their regressive policies should be continued while the state continues to lag behind the rest of the country.

Foxconn keeps talking big, but keeps shrinking in reality

The article in the Racine Journal-Times reports on a meeting the Wisconsin DOT held to discuss the widening of County Line Road near Foxconn, and focuses in on a Mount Pleasant homeowner named Leslie Maj.

Maj was one of about 170 area residents who attended a public hearing Thursday evening at the Somers Village Hall about a widening of Highway KR from 400 feet east of Highway H to just east of Old Green Bay Road, a total area of about 2.8 miles. The DOT project would replace the existing two-lane rural road with a four-lane urban road.

As the project is currently planned, 68.9 acres of residential and agricultural land would need to be taken through eminent domain to make room for the expansion. More than two dozen property owners stand to lose land to the project, with most of the land being on the Racine County side of the highway. Additionally, four homes and one business — all in Mount Pleasant — would need to be torn down….

Maj’s house is currently about 250 feet from the highway, she said, and the DOT estimated about 200 feet of her yard would be taken for the project. But getting that number was not easy, she said, because DOT representatives have been “very, very cagey and not very transparent” about how much land would be taken.

Another Racine County resident who has already had to deal with upheaval due to Foxconn warned the others at the meeting that people who try to work out “fair value” will not act in good faith.

Kimberly Mahoney, a Mount Pleasant resident who lives in Foxconn Area 1 and fought the village’s eminent domain claim of her house, spoke and encouraged residents affected by the Highway KR project to hire attorneys.

“These people who have been hired by your village or your town or the county are pros,” Mahoney said. “They will lie to you, they will bully you, they will throw out statutes and a lot of times it’s not true.”

I’ll remind you that this Highway KR “upgrade” is part of the $134 million that Scott Walker’s Administration redirected from other highway projects in the state in late 2017. And DOT (for now) plans to plow ahead with the construction in Robbin’ Vos’s district, despite the fact that Foxconn continues to downgrade both the project and the number of people that will be working in Racine County.

Just to remind you on how much of a COMPLETE SUCKER you have to,be to think that Foxconn will ever create anything close to 13,000 jobs, let me show you yesterday's John Oliver segment on the automation of jobs. Something Foxconn proudly proclaims to be a "world leader" on.



As Oliver's piece notes, historically jobs that have been automated out of existence get replaced by new technologies, generally in more knowledge-based industries. Except that Foxconn’s big pre-election promises on new "innovation centers" outside of Racine County don't seem to be working out either.

Take this story from Green Bay, where an article from the Press-Gazette told us last week, the plans for Foxconn's satellite office are still up in the air.

A Foxconn project manager said the technology company doesn't know when it will begin work on its downtown Green Bay innovation center.

C.P. "Tank" Murdoch, a senior project manager with Foxconn Technology Group, told a Wisconsin Technology Council audience Thursday it would be a mistake to provide a date on which contractors will begin work on the second floor of the Watermark building….

The company announced plans in June to buy the six-story riverfront building and open an innovation center that would develop next-generation uses for a broad range of Foxconn's technology. It solicited bids to design and build out the second floor of the building in fall, prior to completing its purchase of the property for $9 million in November.

The second-floor space would give the company room for about 100 employees, Murdoch said. Foxconn previously said it expects to create 200 jobs over time at each of the three innovation centers — in Green Bay, Eau Claire and Milwaukee — that would support its main campus in the Racine-Mount Pleasant area.

Funny how the reality of Foxconn’s “major investment” is ending up to be quite a bit less than what the big headlines and photo ops told us. And you can bet this won’t be the last time that new details emerge that make another person realize that this Fox-con isn’t close to what it was cracked up to be.

Except for the subsidies and infrastructure that go into this boondoggle. That isn’t changing much at all, you’ll notice. And since it only takes 520 TOTAL jobs at the of this year for Foxconn to get 2 years of jobs incentives from Wisconsin taxpayers, the price will remain huge for an outcome that we never needed to spend money on to get.

Administrative burdens- how GOPs use big govt to screw people

Yes, I'm on vacay, but that also gives time for good reading. Got through the first 40 pages of this, and while wonky, it's also quite compelling and thought-provoking.

(Disclaimer- I had classes and/or have drank socially with both authors)

Great stuff on how politicians can choose to make government operations simpler and more effective, or more difficult to screw people over. Here's an excerpt that sets the book up.

Our goal in this book is to develop the concept in administrative burden as a framework for understanding how citizens and government interact with each other. In doing so, we illustrate the wide applicability of the concept across a variety of policy areas from welfare and health benefits to rights protected by the Constitution, such as the right to vote. Our examination of these policy areas shows that in some cases, political ideology or policy preferences lead politicians to use burdens to make government a source of hindrance rather than,of help. In this respect, burdens contribute to dysfunction by design, making government an ineffectual and,unwelcome presence in people's lives rather than an institution that solves problems.

If you make people jump through 10 hoops to get the benefits they are entitled to, or even TO BE ABLE TO FREAKING VOTE, it is not surprising that some people don't care to make it all the way through. These are conscious choices made by policymakers, and it is often done in a much more hidden way than doing it through actual legislation or debate.

Which sure makes me wonder if the big "cost savings" that we've seen in Medicaid and other programs in recent years in Wisconsin aren't necessarily because of an improving economy, but because of GOP-imposed barriers that are designed to screw over poor people.

Side benefit for Republicans- making government adversarial and dysfunctional allows these bastards to say "See, it doesn't work for government to help people," and continue this downward spiral.

Evil stuff, and understanding how and why,it is done makes this book a very good read. Back to it.

Evers budgets to fix the roads. Forces GOPs to say more than "No"

I'm in a warmer place on vacation, so won't have as much as normal. But I wanted to give a brief overview of the DOT budget initiatives from Governor Evers.

Changes in DOT Revenues 2019-21
Increase gas tax by 8 cents $474.9 million

Indexing gas tax in 2020 $41.6 million

Increase in Heavy Truck Fees $36.35 million

Increase in Title Fees by $10 $35.7 million

Collect hybrid vehicle fees $7.75 million

Stop transferring money from Gen Fund -$41 million
TOTAL INCREASE $555.3 MILLION

Much of that extra money would be pumped back into highways, as those various projects would increase by more than $400 million “in cash” over the 2019 base.

On the other side, Evers wants to limit borrowing for highways to $198 million, well below what we saw in the Walker years. And that borrowing,needs to to down, as the amount used to pay off that prior DOT debt goes up by $29.5 million for 2019-21.

One of the other initiatives with the added DOT money will involve adding $66 million in general transportation aids, which should help local governments, along with the relaxing of revenue limits.

I wanted Evers to give local governments the ability to raise a sales tax to pay for their roads and/or other duties, to take the pressure off of the property tax while maintaining services, but that doesnt seem to be in there. Let's see if GOPs do it instead, given that some GOP legislators have previously signed on to a local sales tax for roads over a wheel tax.

Another long-neglected area that gets a boost in Evers’ budget is transit, as aids for general operations would go up by $13.8 over the course of the budget, reversing a 10% cut Walker imposed on systems 7 years ago. In addition, Evers wants to add $10 million to a program that helps local transit systems buy new buses. Both moves would reduce the pressures that transit has had to face as local government funding has become increasingly constrained in the 2010s.

We'll see how much (if any) of this survives the gerrymandered GOP Legislature in the coming months. But if the GOPs do turn this package down, they're going to have to explain where they're going to come up with the money and/or flexibility to local governments to fix the Scottholes that have developed over their 8-year Reign of Error.

Evers' tax plans - wide-ranging, and quite progressive

Wanted to give a little time to post about some of Governor Evers' proposed tax changes.

We knew Governor Evers was going to ask for a reversal the manufacturing part of the Manufacturers and Agriculture credit in the budget. But the justification to do so as part of the Budget in Brief, and the supporting evidence for why the giveaway to manufacturers needs to go away is interesting to read.

In raw terms, manufacturing employment gains in Wisconsin have been slower in the five full years after implementation than in the three years preceding it. Between January 2010 and January 2013, Wisconsin manufacturers created 33,000 jobs. In the five years between January 2013 and January 2018, Wisconsin manufacturers created only 17,000 jobs. Wisconsin's stagnant share of national manufacturing employment in that time demonstrates that the Manufacturing and Agriculture Credit has been ineffective at its stated goal of spurring manufacturing job creation in this state. Considering that the credit costs the state approximately 2 percent of its total general fund tax revenues annually, it is time to reevaluate this costly tax expenditure.

What the credit has done, however, is provide extraordinarily large tax benefits to a narrow sliver of Wisconsin taxpayers. In tax year 2017, a mere 6,230 taxpayers, less than 0.3 percent of all individual income tax filers with a net tax liability, claimed the manufacturing portion of the credit for a total of $209.8 million in utilized credits, approximately $33,700 per claimant. Eighty-one percent of the aggregate dollar claim went to taxpayers with adjusted gross incomes in excess of $1 million and approximately half of that was to taxpayers with adjusted gross incomes in excess of $5 million.

The result of this is that Wisconsin taxpayers with adjusted gross incomes over $5 million pay a lower effective rate than many middle-class filers do. In 2017, the average effective rate for filers with incomes over $5 million was just under 5 percent, lower than filers with incomes between $130,000 and $140,000 a year.

The other large reversal of a Fitzwalkerstan-era tax cut comes with a plan to remove a capital gains tax cut.

Another expensive tax break that has benefits skewing toward a relatively small share of the overall taxpayer population is Wisconsin's 30 percent exclusion for long-term capital gains realizations. That tax expenditure provides a preferential rate for disproportionately high-income earners' income derived from capital asset sales, which tend to be corporate equity holdings. For very high-income Wisconsin taxpayers subject to the highest tax bracket, instead of facing the ordinary 7.65 percent marginal rate that applies to wage and salary income, investment gains qualifying for the capital gains exclusion have an effective preferential rate of 5.355 percent. This effectively means that middle class workers who receive a raise face a higher marginal rate on their hard-earned wages and salaries than do wealthy investors on their stock sales. To improve equity between different forms of income, the Governor recommends limiting the current 30 percent long-term capital gains exclusion to those taxpayers with adjusted gross incomes below $100,000 for individuals and $150,000 for married-joint filers. This preserves the exclusion for 81 percent of those currently claiming the exclusion on their Wisconsin income tax returns, helping ordinary retirees and small investors. Wealthier investors would simply pay the same tax rate on their capital gains that they would on wages and salaries. That is a fairer tax system for all Wisconsinites. The Governor's proposal would also retain specific capital gains incentives for investments in Wisconsin businesses as well as retaining the current law 60 percent exclusion for capital gains derived from farm assets. The limits to the 30 percent long-term capital gains exclusion will raise an estimated $285.1 million in fiscal year 2019-20 and $220.0 million in fiscal year 2020-21.

I like this a lot. Much like with the M&A tax cut being on top of the GOP Tax Scam giveaway to corporations, capital gains already gives richer Americans a major tax break at the federal level. Why are we giving these guys even more of a break at the state level?

The Evers Administration was cagey enough to leave farm assets out of the capital gains changes, so it takes away the sob story that GOPs like to spin where they equate “capital gains” with “selling the family farm” (which is more sympathetic than “trading paper and real estate”). Likewise, I love the Evers Administration’s framing of “work vs selling stock”, as not only does it stress restoring tax fairness in this state, but it has the added benefit of being true.

The tax cuts Evers has proposed also takes the state’s tax system in a more progressive direction. We’ve already discussed Evers’ 10% tax cut for single Wisconsinites that make less than $80,000 and married couples making $125,000 or less, so I don’t want to talk about this too much other than the fact that it’s got the eye-rolling name of the Family and Individual Reinvestment credit (the FAIR credit, get it?).

So instead, I’ll discuss two other tax cuts Evers is proposing. The first expands the state’s Earned Income Tax Credit for lower-income working individuals.

For working families with one or two children, the Governor also recommends increasing the Wisconsin Earned Income Tax Credit (EITC) as a percentage of the federal credit to bring Wisconsin's EITC more in line with other states' credits. Beginning with tax year 2019, the Governor's budget will increase the percentage of the federal credit that filers with one dependent child may claim from 4 percent to 11 percent. For filers with two children, the rate will increase from 11 percent to 14 percent, restoring the cut made in the 2011-13 biennium that increased taxes on hardworking families with children. These increases in the proven EITC program will encourage work while providing needed relief to low and moderate income families with children. Under the Governor's budget, nearly 200,000 filers with children will receive $26.4 million in fiscal year 2019-20 and $26.7 million in fiscal year 2020-21.

This could conflict with the 10% Evers tax cut, as that is “non-refundable”, so if a person’s state tax liability is $0, then it doesn’t give anything. So I'd be interested in seeing what the distribution of benefits might look like if everything was passed.

The other low-income tax cut would allow more people to take advantage of the Homestead Credit.

The Governor also recommends enhancing the Homestead Credit to provide increased relief to lower-income Wisconsinites to meet their property tax and rent burdens. First, the Governor's budget will restore indexing for the credit beginning with tax year 2020, which is vital for those on fixed income streams such as Social Security or disability payments. For those taxpayers, restoring indexing will prevent the credit from losing value to inflation. Second, the Governor's budget will increase the maximum eligible household income under the program to $30,000 in tax year 2020 in order to extend property tax and rent relief to a large segment of Wisconsinites who have lost that relief due to inflationary pressures over the past two decades.

As the Wisconsin Budget Project has noted several times in recent years, there has been significant erosion in the usage and amount of the Homestead Credit since WisGOP came to power in the state after 2010.

While any version of these tax proposals are unlikely to get through the gerrymandered GOP Legislature, that’s almost not the point. The point is to show what vision of Wisconsin Evers and Democrats want (one of tax fairness and ending the free ride that the rich and corporate have had for 8 years) with a Republican Paarty that’s perfectly happy to see the state underperform and have most people continue to fall behind while GOP donors and interests get even richer.

And Evers and other Dems need to keep pushing on this theme, and not drop the pressure after a few days or weeks (as Dems have a bad habit of doing). Because as more Wisconsinites have to write checks to the IRS due to the GOP Tax Scam in DC, they are primed to listen and agree with a theme of “Republicans don’t care about you and only want to help their rich cronies.” So SAY IT, Dems!

Evers goes surprisingly big on budget

A few quick thoughts on Evers' budget proposal from last night (I haven't gone into the full document yet, but you can do so at this link ). I'm going off of this detailed rundown from Patrick Marley and Molly Beck in the Milwaukee Journal-Sentinel.

The first item is Evers' plan for the DOT, which he had largely kept under wraps until now. Evers would raise the state's gas tax by 8 cents a gallon, which the Legislative Fiscal Bureau estimates would raise $272 million a year, but theoretically Wisconsinites wouldn't pay more at the pump.

How? By doing something Republicans have asked for several years.

Evers’ plan would end the state’s minimum markup law that requires retailers in most cases to mark up the price of gas 9.18 percent above the average wholesale price. Gas stations are allowed to set prices below that level to meet competitors' prices.

The Evers administration estimates the change would cut gas prices by 14 cents a gallon. Coupled with Evers' increase in the gas tax, prices would drop by 6 cents a gallon, the administration contends.

Evers will use this extra money to reduce borrowing to $224 million in the budget, a whole lot less than we saw in the Walker years.

So Republicans should be OK with this, right? OF COURSE NOT. Here's Senate GOP Leader Scott Fitzgerald.

"Governor's willing to raise taxes 8 cents and then he's trying to convince everybody in the state that suddenly repealing minimum markup will put more money in their pocket? I just don't see it right now," [Fitzgerald] said. "The idea that he linked the two together is a little bit disingenuous."

How do you not see it, Fitz, unless you're admitting that gas stations will bank that in extra profit? But in reality, it's because Republicans just want to whine about things and stamp their feet like babies as opposed to dealing with issues.

So how will this be paid for, Fitz?

There are a lot of things in this budget that are surprisingly progressive. In addition to Evers' already-promised move to get rid of the M&A tax cut for manufacturers who make more than $300,000, it also looks like Evers wants to get rid of a capital gains tax cut for people that make more than $100,000 (outside of family farms, which is still exempted). And I'll remind you, that this would be capital gains on stocks and assets that aren't in IRAs and 401k's, so you're dealing with a very small segment of ricer Wisconsinites.

The J-S article also mentions that Evers is looking to correct many of the GOP's moves to rig things in favor of themselves and their donors over the last 8 years.

Lame-duck laws. The budget would repeal most of the lame-duck laws Republican lawmakers approved in December that curbed the powers of Evers and Democratic Attorney General Josh Kaul.

Right-to-work law. Evers' budget would repeal the state's right-to-work law, which bars labor contracts that require all employees in a work unit to pay union fees. The budget would also reinstate Wisconsin's prevailing wage laws that until recently set minimum pay levels for those working on roads and other publicly funded construction projects.

Minimum wage. The budget would raise the minimum wage, now $7.25 an hour, to $10.50 an hour by 2023. A task force would develop a plan to eventually raise it to $15 an hour.

And a ton more, which I'll get into in the coming months. I have no illusions that these proposals will survive the gerrymandered GOP Legislature - especially when they're responding with thoguhts such as these.

.@SenDarling had the most animated reaction to @GovEvers #WIBudget proposal: "Well wow, hold onto your hats! This is like back to the future, back to spending and taxes. We were so much on the right track … this budget puts us on the wrong track."

— Jessie Opoien (@jessieopie) March 1, 2019

Taxes AND spending, Bertie? THE HORROR! Where did you think the money comes from, the confidence fairy in the sky?

I get that the GOP will likely TeaBag the whole budget and make up a pile of right-wing dreck for Evers to veto. But I like that Evers is going big and making the GOPs defend what they'll vote for in the coming months, and answer questions as to why they're choosing the positions of the rich and connected over the wishes of the majority of Wisconsinites.

The key is continuing the pressure long after today. GOPs have hate radio do this role for them, but Dems and other decent people are largely left to doing it on their own. So we have to bring the facts and the realities with force, and remind Wisconsinites that we deserve so much more than the underperforming mess that we have had imposed on us over the last 8 years.