In late February, Gubernatorial candidate Scott Walker addressed the Wisconsin manufacturers and Commerce and announced that as governor, he would create 250,000 jobs and 10,000 businesses by 2015. He said he would do this by cutting tax rates on employers, freezing property taxes, deregulation, ending frivolous lawsuits, streamlining the U.W system to promote economic development, eliminating the tax on Health Savings Accounts, and rebuilding a larger infrastructure to create reliable energy sources. It sounds like he has some ideas.
Feeling the pressure to match Walker, two weeks later Tom Barrett says he will create 180,000 jobs in the first three years of his term as governor. How does he propose to do this? Barrett says he would beef up the state's best jobs programs, tie tax cuts to job creation, and find "other ways" to help small businesses. Let's focus on these three issues.
What state programs is Barrett talking about? We don't know. What type of tax cuts would he tie into job creation? We're not sure. What other ways would Barrett help small businesses? We're not sure about this one either.
Although Barrett talks in generalities, allow me to make a few observations. First, not that I don't trust him, but Barrett has no legislative or executive history of providing tax cuts for small businesses. This is not a partisan stab, but rather an observation looking at his Congressional and Mayoral record. In fact, during the 2001 recession, Barrett voted against for tax relief bills, two of which were aimed at helping small businesses by cutting their capital gains taxes. This was during a recession, folks. So why would Barrett treat this recession any differently?
Second, Barrett says he would tie tax cuts to job creation. Unfortunately, this is about as friendly as democrats get with small business. Instead of creating a pro-business environment where firms are taxed less and encouraged to invest more, he wants to provide tax breaks to companies that had enough capital on hand to hire employees anyway.
The idea of tying tax breaks to job creation assumes that the tax break somehow lures a business, who would otherwise not have hired anyone. This is quite optimistic since tax breaks are often only a small fraction of what it costs to pay the wages and benefits of a single employee.
Admittedly, it is conceivable that those businesses that would have hired an employee regardless of the tax break could use the money to reinvest in the company. But even then, the government is helping businesses who are already apt to grow while largely ignoring small businesses in financial distress. I find it fascinating that the party that claims to look out for the little guy is willing to extend a hand to prospering businesses rather than struggling ones. After all, what good is job creation in one area when more people in another are losing their jobs?
Simply put, the best way to create jobs is to create employers. Since Barrett is only willing to tie tax cuts to job creation, he might want to consider ways that provide small businesses, start-up or otherwise, with loans. This way businesses in a current credit crunch or perhaps entrepeneurs who want to start up a company can do their part to create jobs. Economists admit this is the better way to faciliate job creation because tax credits don't do a company much good if there is no increased demand for their products.
And third, Barrett says he will find "other ways" to help small businesses. In other words, he doesn't have a specific plan yet, but he'll work on it after he hears Walker and Neuman toss out their ideas. But as a liberal, Barrett does not have the same sort of toolbox for creating a pro-business environment as Walker or Neumann. To liberals, the only way to help people is by increasing taxes. And unfortunately, this is the very thing that hurts private sector businesses.
Ultimately, Barrett will have a tough road ahead of him if he wishes to challenge Walker on fiscal policies best able to create jobs. Why? For liberals, job creation generally comes from the public sector. But this requires more public sector borrowing and spending, which means that the private sector will have less available funds for their own investments. This is what economists call a "crowding out effect". Unless Barrett is willing to concede that job creation starts in the private sector, he will lose the debate with his conservative counterparts.