Showing posts with label Wisconsin Governor Scott Walker. Show all posts
Showing posts with label Wisconsin Governor Scott Walker. Show all posts

Friday, February 28, 2014

Wisconsin’s Austerity Lesson

Popular Economics Weekly
Governor Scott Walker is having his own problems with the ongoing investigation into staffers using public funds for political campaigning as a County Manager, but it doesn’t seem to faze him as he touts the success of his austerity policies.
The only problem is that government austerity policies pushed through in 2010 when he was elected Wisconsin’s Governor (tax cuts plus lower government spending) don’t work. Especially during such difficult times as now when America still needs to recover from the Great Recession. It’s a lesson from the Great Depression that’s been forgotten, when President Roosevelt’s administration hired 8 million workers to build American public works projects from 1935-43 under the Workers Project Administration.
Almost every community in the United States had a new park, bridge or school constructed by WPA. The WPA's initial appropriation in 1935 was for $4.9 billion (about 6.7 percent of the 1935 GDP), and in total it spent $13.4 billion. Can we imagine what several $trillion in government spending would do today to boost economic growth, instead of the $831billion spent under the 2009 American Recovery and Reinvestment Act?
Wisconsin has gone in the other direction, depriving union workers in particular of incomes and jobs at a time when job creation should be Governor Walker’s priority. That’s why Wisconsin has fallen to the bottom of states in job creation, according to the Bureau of Labor Statistics.
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Its beaten down public unions in particular are the poster children for what happens when governments take away workers’ ability to collective bargain, one of the most fundamental rights in any democratic society. The EPI Capital Times graph compares US job creation with national and other Midwestern states.
There is no other power to counteract the monopoly power of governments and private sector businesses. Under Wisconsin’s Act 10 enacted in 2010, which eliminated collective bargaining for most public workers, thousands of government workers have seen smaller paychecks as they are forced to pay more for health care and pensions.
And a new report from the Economic Policy Institute also blames the slow pace of the national recovery on cutbacks in the public sector. Unlike in previous recoveries, state and local government austerity has been a major drag on job growth and the broader economy. The number of public-sector jobs fell by almost 3 percent in the three years following the recession, while the number of private-sector jobs grew (albeit anemically). The fact that public-sector wages have lagged behind those in the private-sector exacerbates government’s drag on the economy, said the EPI report by Heidi Shierholz and Josh Bivens.
This is because austerity—cutting government workers’ wages and salaries in the name of reducing government spending—cuts the overall demand for goods and services. And since government doesn’t make things, decreasing their incomes decreases their ability to buy private sector goods and services, therefore cutting private sector jobs.
You would think small business people, as well as consumers, would understand this. It should be a no-brainer that even Henry Ford understood in 1914, when he upped his employees’ salaries to $5 per day so they could buy more of his Model Ts.
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James Couzens, the Ford treasurer, said: “It is our belief that social justice begins at home. We want those who have helped us to produce this great institution and are helping to maintain it to share our prosperity. We want them to have present profits and future prospects. … Believing as we do, that a division of our earnings between capital and labor is unequal, we have sought a plan of relief suitable for our business.”
We are at a similar juncture in history today with record income inequality that has caused the middle class Henry Ford helped to create greatly lose its purchasing power. Who will help them to bring back a government and economy that works for all, which restores a more equal division of earnings and labor, one of our most fundamental rights?
Harlan Green © 2014
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Tuesday, December 11, 2012

Michigan Republicans Repeat Economy Wrecking Doctrine

Financial FAQs

Michigan has become the latest Republican-led effort to wreck economic growth in passing a right-to-work laws that restrict unions. With all apologies to Naomi Klein’s Shock Doctrine, Repubs are no longer waiting for recessions to enrich their wealthiest supporters—such as passing GW Bush tax cuts during the 2001 recession and in 2003 that caused the largest budget deficit in history, precipitating the Great Recession.

Michigan is a text book example of how ALEC and Americans for Prosperity, the big business lobby and the Koch Brothers have worked to bust unions. Michigan is the 24th state to enact Right-to-Work Laws that take away unions’ ability to organize and charge union dues to finance union benefits. But more insidiously it weakens the ability to bargain for their own wages and salaries. This is when corporate profits and CEO salaries are already the largest in history.

We know the result in the other 23 states. They are the poorest states, who require the most government assistance. So this exposes Republicans and conservatives agenda in general. Restricting union organizing and collective bargaining impoverishes the majority of wage and salary workers, which drives the poorest into government assistance at the slightest economic downturn. It therefore preserves the profits of the investors who live off of corporate profits, while passing on the costs of wrecking the incomes of the majority to government-financed programs—i.e., our tax monies.

Wisconsin’s direct restriction of collective bargaining rights for government employees was the most blatant example until now. By directly restricting their incomes and benefits, it puts a wrecking ball to economic growth in Wisconsin, putting it into the group of have-not states that have consistently lower standards of living.

Many studies have shown this, but the most convincing evidence is listing the have-not states. They include the most rural and red states in the South and Midwest dependent on government benefits to supplement the meager incomes and lower standard of living of their citizens.

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The AFL-CIO has put out the latest statistics on union, vs. non-union incomes and benefits: Employees covered by union contracts receive 28 percent more in wages and benefits than workers without unions.  For women workers, the union advantage is 34 percent. For African American workers, the union advantage is 29 percent.  And for Hispanic workers, the union advantage is a whopping 50 percent.  When “right to work” laws weaken unions and drive down wages and benefits, workers have less to spend and the entire economy – particularly small business--suffers.

It should be blindingly obvious why Republicans are pushing their anti-union agenda. It increases their wealth and power at the expense of everyone else.

Harlan Green © 2012

Tuesday, May 15, 2012

The War on Workers

Popular Economics Weekly

We are seeing what can only be called a war on workers by Tea Party Republicans in particular. Who are workers? The 80 percent of consumers who are wage and salary earners. And they have not done well since the 1970s while corporations have made record profits, as I have been saying.

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Graph: EPI

It is the current crop of conservative Republicans, such as Wisconsin Governor Scott Walker, who has even been caught on video declaring Republicans’ strategy of “divide and conquer” on public service workers and teachers, that have declared outright war. Their campaign would essentially wipe out the middle class by blocking all attempts to raise workers’ incomes in both the private and public sectors, and so their standard of living. Yet in doing so, Republicans will destroy the very foundation of our economic strength. Governor Walker’s efforts in particular have put Wisconsin at the bottom of Midwestern states’ job creation list.

Employers have always tried to maximize profits by limiting workers’ pay, but wage suppression today because of Republican efforts to limit collective bargaining is as bad as it was during the Great Depression. And the result has been disastrous for both jobs and economic growth.

For instance, the 40 years from 1961 to 2000, when the White House was shared equally by Republican and Democratic presidents (20 years each), pro-labor rights Democrats had the far superior record both for economic growth, and jobs. This can be found in numerous government data, but summarized by the Currency Thoughts blog. Bush 43’s record (GW Bush) was even worse.

% Per Annum      Democrat      Republican      Bush43

GDP Growth      4.1 percent      2.9 percent      2.2 percent

Employment      2.9 percent      1.7 percent      0.5 percent

Even more convincing proof that Republicans’ ideological war on workers will prolong this recession is their record on job creation. The Wall Street Journal has run articles on this fact. Since Harry Truman, 57.5 million jobs were created during Democratic Administrations, vs. 36.2 million jobs created during Republican Administrations.

President Clinton is the winner with 23.1 million jobs created during his 8 years, whereas President Reagan leads Repubs with 16 million created during his term. There are pundits who say these job totals are not totally accurate because policies created in one administration will affect job formation in the next. But that would have to work both ways, cancelling out any effects of one administration’s policies over another.

We aren’t even counting President Obama’s almost 4 million jobs created to date after our Greatest Recession that followed on the heels of GW Bush’s worst track record of just 3 million jobs created 2000-2008.

Why? This is one of the most basic economic truths, yet conservative Republicans in particular don’t seem to care. They want to believe that lower taxes will stimulate more jobs by transferring more revenue to the private sector. But that hasn’t happened—historically their policies have depressed the jobs and incomes of wage and salary earners that would stimulate more demand for their products.

And this is in spite of record corporate profits, which belies the ideology that greater tax cuts (even abolishing corporate taxes) will bring greater prosperity. In fact, as corporate profits have risen over the past 30 years, workers’ incomes have fallen. A recent New York Times’ article highlighted recent revisions of 2010 and 2011 Department of Commerce data. The new figures indicate that corporate profits accounted for 14 percent of the total national income in 2010, the highest proportion ever recorded. The previous peak, of 13.6 percent, was set in 1942 when the need for war materials filled the order books of companies at the same time as the government imposed wage and price controls, holding down the costs companies had to pay.

‘Employees have always received more than half the total national income, until now,” said the New York Times. (But) “In 2010, the percentage of national income devoted to wages and salaries fell to 49.9 percent, and it slipped a little more to 49.6 percent in the first quarter of this year. That continued decline may help explain the economic worries of many Americans who have jobs but still fear they are falling behind.”

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Graph of wages/benefits vs. profits: New York Times

The private sector war is being waged by conservative states with their Right-to-Work laws that say though it can’t be illegal to organize into unions (because it’s federal law), it can make it illegal for workers in individual states to have to join and pay dues to support the unions. Twenty four states in the Midwest and South now have such laws.

This should be a no-brainer, in other words, which is why in not heeding the most basic economic truths—one cannot create demand without more income to support it—Republicans have declared a defacto war on workers. It is the worst kind of blindness. Republicans are also destroying their own economic homeland, the U.S. economy, and our competitiveness in the ever more worldwide economy.

Harlan Green © 2012

Wednesday, March 21, 2012

States are Making A Comeback

Financial FAQs

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for January 2012 that are a measure of current activity, and so a good measure of how widespread is the recovery. In the past month, the indexes increased in 48 states, decreased in one (Alaska), and remained unchanged in one (Wisconsin) for a one-month diffusion index of 94. Over the past three months, the indexes increased in 48 states, decreased in one, and remained unchanged in one for a three-month diffusion index of 94, said Calculated Risk.

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Graph: Calculated Risk

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

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Graph: Philadelphia Fed

Pundits and economists will soon ask why Wisconsin is lagging. It also had the lowest job creation rate in 2011. Was it because of Governor Scott Walker’s abolishment of union collective bargaining rights? Wisconsin has been hurting ever since. Time and the fall recall election of Governor Walker will tell if its voters realize this.

Harlan Green © 2012