After the Massachusetts election, Democrats realized that their Titanic had hit the proverbial iceberg. Blinded by ideological zeal and party infighting, they focused on bill like the "Public Option" and "Cap and Trade", but not enough time on fixing the economy. Reflecting the dissent of American voters, President Obama shifted gears a bit in his State of the Union Address by redirecting efforts to job creation while relegating health care reform to a cameo appearance.
In Wisconsin, our two gubernatorial headliners are Milwaukee County Executive Scott Walker and Milwaukee Mayor Tom Barrett. (Of course, there is also ex-Congressman Mark Neumann, but he's about as relevant to politics as Don Majkowski is to the Green Bay Packers.) Following the national trend, both leaders are doubling down on job creation. However, it should be noted that Scott Walker has been preaching job creation for the better part of last year.
Scott Walker has a simple approach to job growth He says that by providing businesses with tax breaks, we can stop the bleeding and keep our jobs in Wisconsin. As a pointed example, Walker referred to job losses at both Harley Davidson and Thomas Industries as a sign that our governor has not fought hard enough to create a pro-business environment.
Walker also believes that tax cuts, among other fiscal policy changes, is the fastest and most effective way to create jobs. He says that tax cuts allow businesses to invest more in production and job growth. This will not only raise tax revenue for the state, but encourage consumer spending. Does this sound reasonable?
According to most economists, increasing taxes on small businesses will negatively affect their "after-tax" profits. And when companies can't maintain profitability, their incentives to save and invest decreases. And if were to happen, businesses will either contract or refuse to expand and unemployment will eventually increase.
Some economists, like the Harvard professor Gregory Mankiw, agree that lowering taxes on businesses will increase in the demand of goods and services. How does this work?
Simple, suppose that tax cuts assume the form of payroll taxes. By reducing tax penalties for employers, it would reduce their costs of labor. Decreased labor costs lead to decreased pricing on products and services, which would create an increased demand on the part of the consumer. And increased demand of goods increases the supply of goods, which requires more workers. Therefore, business tax cuts stimulate job growth.
What's Tom Barrett's platform on business? On his official campaign website, the entirety of his business platform is found in his gubernatorial announcement made last November. Barrett says nothing about how to create or maintain jobs in Wisconsin. He says nothing about cutting taxes or providing incentives to Wisconsin businesses. Barrett did note, however, that families and businesses are complaining about tax increases and that they want them to stop. However, Barrett falls short of making a commitment to stop them.
The only definitive statement that Barrett makes about taxes is that they should be collected fairly and spent frugally. What does this mean? Some think that a "fair tax" is liberal code for penalizing top income earners while giving breaks to the middle class. But nobody can be sure since Barrett has yet to outline his position on jobs.
Also, Barrett said we should spend our taxes frugally. This could be interpreted as a discrete criticism of governor Doyle's excessive tax and spend philosophy that has accrued a record breaking $6 billion dollar budget deficit.
Just recently, for instance, Governor Doyle praised the idea of building high speed rail after receiving an $823 million subsidy from the federal government. What's not mentioned in newspapers is that high speed rail is not cost-effective. Another problem is that there is virtually no demand for a rail line that routes from Milwaukee to the Dane County Airport (falling about 6 miles short of downtown Madison). And lastely, the structural maintenance of rail will add millions per year to an already bloated budget deficit. If Barrett wants to convince Wisconsinites that he wants to spend their tax dollars frugally, then he should reconsider his position on high speed rail and how us that he's serious.