After the announcement that Ingeteam had planned to build a plant in Milwaukee, some on the left were quick to credit Mayor Tom Barrett for negotiating the move. One blogger went as far to say that Barrett has "consistently used every tool and reached out to every corner to help bring jobs" to Wisconsin. But has Barrett been a champion for small businesses, or is the campaign season bringing out more partisan saber-rattling?
The question may be rhetorical. Politicians typically don't bring jobs to a state through negotiation because large firms tend to settle on an environment that has business-friendly policies in place.
In economics, human capital is a term used to refer to an individual's education, development of skills, and anything else that increases job productivity. So when large firms audit prospective places to locate their businesses, they will look at the quality of human capital primarily because it's an investment that quickly translates into an accessible work force, less training, and productive results.
In Milwaukee, for instance, we have a rich history of being the world's machine shop. Milwaukee is among the elite when it comes to knowledge and experience in building small motors. This distinction set us apart from 76 other cities in 8 states that Ingeteam had closely examined for location purposes. In fact, Ingeteam had hired a "site-selection firm" to search out areas that had already possessed a legacy in building motors. So unless Barrett was responsible for Milwaukee's legacy in motor building, I don't think he can take credit for Ingeteam building a plant in Menomonee Valley.
Economists also tout the role of tax credits in promoting business investments. According to economist Irvin Tucker, just as an increase in business taxes will lower a firm's profitability and investment, tax credits or tax cuts for businesses will encourage investments. Correspondingly, we've learned that Ingeteam was pleased by Wisconsin's new law that provides tax credits in exchange for job creation - an exchange could possibly save Ingeteam up to $4.5 million over 10 years.
Although tax credits provided Ingeteam with an incentive to build in Milwaukee, businesses typically don't hire new workers in order to receive a benefit that represents only a fraction of what it costs to hire. However, Wisconsin's new law could play a role with firms that are already weighing Milwaukee up against other competitive areas. So unless Barrett was responsible for the financial policies in Wisconsin that incentivize small businesses, he cannot take credit for this factor either.
Coming full circle to our question: does Tom Barrett champion the cause of small businesses? To discern the answer, let's take a look at Barrett's history.
Just recently in Sheboygan, Barrett said that if he's elected governor, he would push for tax cuts and for other incentives to create jobs. However, his legislative history runs contrary to his spoken word. In fact, as a state legislator in the early 90s, Barrett pushed for the largest tax increase in Wisconsin history - a tax increase during a recessionary period when unemployment had peaked at 7.8%. And as a freshman in Congress in 1993, Barrett voted for the biggest tax increase in federal history. Notably absent from Barrett's voting record, however, are tax cuts for small businesses.
Barrett does not have a good history of pushing for tax cuts - especially during recessionary periods. In the recession of 2001, which lasted from March until November, Barrett voted against four different bills that proposed tax cuts. So when it comes to championing the cause of small businesses, there is no evidence, besides disputable campaign rhetoric, that Barrett is our man.