Sunday, September 26, 2010

Fratboy Follies

Regarding the County's undeveloped Park East land, Pat McIlheran blames Mayor Barrett and union wages for lack of construction on the property. He, as always, cites the Tax Foundation to regurgitate the "business climate" argument. And, for fun, he also opines that Wisconsin's regulatory and legal framework are onerous. The true aim of this McIlheran piece seems to be to just repeat the usual right-wing talking points and to slam Tom Barrett.

He belittles Barrett's economic plan, while championing Walker's as somehow being bold and refreshing. Others have already eviscerated Walker's 68 - yet is really only 3 - page plan and revealed that it is the same old calls for lower taxes and doing stuff - the stuff is never specified. You see, the only aim conservatives have is to cut their own taxes. They don't really want to govern, sustain the middle-class, secure retirement, nor enable all access to health care.

There is really nothing of substance to McIlheran's rant. All that can be discerned is that Scott Walker our savior while Barrett and well-paying jobs connected to thoughtful development are garbage. Nowhere does he cite any business that Walker has attracted or retained, nor does he mention any significant development initiated under Walker's leadership.

Someone, please, tell me something positive Scott Walker has ever done. He is a political opportunist, flip-flopping his way from one elected position to the next. He has never been on the side of working people and policies that amount to anything for them. He talks the typical right-wing talk, but when leadership is needed, he kicks the can down the road or blames someone else. The difference between Barrett and Walker is the difference between a thoughtful adult and a fratboy.

For Further Reading:
Are Wisconsin Taxes Too High?
Business Climate
State Business Tax Burden Rankings
Tax Foundation Proposals Are Lose/Lose For Wisconsin
What Do Business Climate Rankings Really Tell Us?
Wisconsin Business Climate Statistics

Blackmailed Into Oblivion

The Journal Sentinel thinks Harley-Davidson was justified and correct in blackmailing the State for $25 million and decimating many well-paying middle-class jobs by unnecessarily demanding contract concessions.

The Journal wonders, "Is it a win if these actions mean fewer jobs? Are state incentives worth it?"

And, of course, to both questions, they answer, "Yes."

Maybe this repeated bribery by corporations of state taxpayers would make for good front-page stories in the newspaper. Maybe governors and local media could make this a federal issue, draw attention to this corporate welfare, and help bring an end to this economic war among the states.

The Journal also opines, "State government should do all it can to retain its base of existing companies and help them to grow." Isn't this the same paper that often writes about an overpaid, inept, inefficient government? When did it become the government's job to insure private sectors businesses remain successful? Doesn't the provision of clean water, roadways and other transportation, educational institutions, and legal entities already assist private corporations in their day-to-day operations?

Does the Journal really feel we, as a nation, should allow companies to blackmail any community of millions of dollars whenever the mood strikes them?

The State nor the Department of Commerce is here to kiss the ass of big business. The Journal's suggestion of such shows how far we, as a country, have drifted. This is class warfare, disguised and homogenized by the local media, sold as a prescription for what ails us and, somehow, deemed the only logical choice we have available.

As discussed earlier, the State (and its departments) provides the ground-rules which aid all business and allow them to, supposedly, compete on a level playing field. The more we give-in to private business blackmail, the more we allow state incentives to alter the market and distort free enterprise and fair competition. And isn't that what the conservatives always claim they want? To let the market decide?

It's one thing to improve parking for downtown businesses. It's another to build a parking garage for one specific business. The larger point being, I understand the government doing something to enhance the environment, the quality of life, the school system, and such to buttress the attractiveness of a city and to allow a city to be better positioned to provide what private businesses desire.

To simply be paying off bribes to companies threatening to leave is criminal. This is not cost-effective economic development. Rather than the newspaper just acting as a PR shill, they could make this corporate blackmail a major issue for discussion and possibly assist in ending such inefficient and wasteful policies.

For Further Reading:
Accountability For Development Subsidies
The Failures Of Economic Development Incentives

Sunday, September 19, 2010

Bad Tax Ideas

From Citizens For Tax Justice:

Wisconsin — Scott Walker was the winner of Wisconsin's Republican primary on Tuesday. Walker is also running on an anti-tax platform, including a property tax "freeze" that would only allow revenue growth to the extent that new construction occurs. Democrat Tom Barrett is also running on a campaign that heavily emphasizes cutting government spending, and enacting so-called "targeted" business tax cuts to create jobs.

Insincere Revenue Barons

It seems Ron Johnson has enlisted the help of former state commerce secretaries, Dick Leinenkugel and Bill McCoshen, to help confuse voters into thinking that industrial revenue bonds (IRB) are not a government subsidy. Russ Feingold ran a campaign ad revealing Johnson's company's use of IRBs, emphasizing Johnson's hypocrisy of belittling government one minute and then taking lower-than-market rate loans from the government.

First, if it's outside the market - made possible because the government is involved - and at lower interest rates than would otherwise be available, it's a subsidy. Johnson can't claim; as he, Leinenkugel and McCoshen seem to be trying; that this is no different than a private loan. IRBs are tax exempt, this lowers the cost of repayment. Even the ultraconservative Cato Institute thinks IRBs are corporate welfare. These exemptions - which have been intertwined into corporate strategies - have been termed "cash cows" by others.

As Good Jobs First reports, "In short, the federal government forgoes income tax revenue in order to lower the cost of capital for certain economic development activities. The federal rules governing IRBs are a floor, not a ceiling; some states add additional safeguards. State and local development authorities issue IRBs (also known as private activity bonds) on behalf of private borrowers, and the bonds are purchased by private investors. Conducting this transaction through government entities makes the interest exempt from federal taxation (and usually state taxation as well). Because wealthy individuals and companies that buy the bonds will accept lower interest when such income is tax-free, IRBs offer interest rates that are typically about three-fourths those of taxable commercial bonds."

The episode is also a great example of how much of what we consider the private sector is very dependent upon the largess of the public sector. The many institutions and programs - ensuring contracts, providing transportation, funding low-interest loans, etc. - are crucial to a majority of private sector activity. Those "businessmen," whom claim they operate in a vacuum and the government merely burdens them, are ignorant at best and pathological liars at worst.

For Further Reading:
Company Towns: The Cost of Tax Breaks
Corporate Subsidies Driving Sprawl
Eight Ways To Curtail The Economic War Among The States
Fortunate Son-In-Law Ron Johnson
Naming Tax Credit Names
No More Secret Candy Store
The Political Economy of Corporate Welfare: Industrial Revenue Bonds
Shopping For Subsidies
States At War
Uncle Sam's Rusty Toolkit
WalMart The High Cost of Low Price

Saturday, September 18, 2010

Labor Shortage Sham

The idea of a labor shortage is getting media buzz again. Companies claim they can't find workers with the skills willing to do the job. The Journal Sentinel pushes this mythology at least once a year. Another excuse why we need to cut corporate taxes and subsidize business operations.

In reality, this is simple supply-and-demand economics. People don't want to work at grueling jobs for low pay, minuscule benefits, and without a retirement plan. If these jobs were paying living wages and had some sense of security people would be lined up around the block for the positions.

So, if they want to end the labor shortage...increase the wages.

For Further Reading:
The Great Labor Shortage Lie
Is A Great Labor Shortage Coming?
It's About Job Shortage, Not Skills Mismatch
The Labor Shortage Myth
Labor Shortages: Myth & Reality
The Myth of Structural Unemployment
The Myth of The Coming Labor Shortage
The Skills Crisis & Job Training
The Skills Myth
What Labor Shortage?

Taken For A Ride

Another example of the Journal Sentinel's loathing of everyday workers, in the case of Harley-Davidson holding the state hostage for subsidies by threatening job loss, the Journal feels the workers just have to take it. And, they add, "We don't doubt Harley's struggles."

As usual, their analysis is lacking. Maybe they should doubt Harley. Maybe they should question whether these contractual concessions are necessary. Maybe rather than just listening to whatever a CEO tells them, the Journal could do some research and put the issue in the correct socioeconomic context. As Milwaukee Magazine's Eric Gunn writes, the favorably-business-biased, screw-the-worker attitude is typical of the media over the past few decades.

Luckily Jack Norman has actually looked at the facts of the situation. He found, "Harley made $104 million in profits in the first six months of 2010. It did have a $55 million loss in 2009, a strategic choice resulting from a $126 million write-down for discontinued operations. Before that, the company had made at least $100 million in profits for 15 straight years."

In previous work, Norman discovered, "Harley's Wisconsin taxes have dropped dramatically, according to data from the Wisconsin Department of Revenue. Its state income tax bill plummeted from nearly $23 million in 2005 to under $1 million in 2008 (the most recent year with data). Its pre-tax profits fell much, much less, from $1.5 billion to $1 billion...Harley's effective tax rate - Wisconsin income tax as a percent of global profits - went nearly to zero. In 2005, the company paid 1.5% of pre-tax profits in Wisconsin income tax. By 2008, that had dropped below 0.1%."

If workers making $30 an hour are dragging the company down, can't the same be said for executive salaries in the millions? Norman discovered, "Last year, Harley's CEO (a job split during the year between James Ziemer and Keith Wandell) took home $8,864,919 in extras over and above base salary of $1,105,169. In 2008, the bonuses totaled $6,201,323. That's over $15 million in bonuses the past two years to the CEO of a company that cries "crisis" to justify lower wages and benefits for production workers...Members of Harley's board of directors (if they aren't already employees) each collected an $80,000 fee in 2009, plus $50,000 worth of stock. During this "crisis," board members never lost their $1,500 annual allowance for clothes and accessories, nor their free use of a motorcycle."

Pennsylvania was hung over a cliff by Harley last year. After threatening job loss and possibly moving production out of state, Pennsylvania gave Harley $15 million in subsidies. Wisconsin, in similar fashion, is offering Harley $25 million.

This is typical economic development. It's a subtle class warfare. Taxpayers funding their own salary reduction and/or job loss, alongside increasing corporate profits. We need federal action to stop this economic war among the states.

For Further Reading:
American Socialism
Equitable Development
Industries Find Surging Profits In Deeper Cuts
Legalized Bribery
Spuriously Invoking The Tax Boogeyman

Tax Cuts

Myths And Facts About Tax Cuts

New Study Shows Bush Tax Cut Windfall For Wealthy

The Case For A New Top Income Tax Bracket


Real Lesson From The Great Depression: Fiscal Policy Works

The Slump Goes On: Why?

When Will The Bond Auctions Begin To Fail?


A Nation of (Yesterday's) Immigrants

How Illegal Immigrants Are Helping Social Security

The Effect of Immigrants on U.S. Employment & Productivity

Where The Bread Is Buttered

It seems blind faith and self-interest has paid off well for Michael R. Lovell, dean of the UWM College of Engineering and Applied Science. He was behind Carlos Santiago's growth plan and a supporter of "a massive infusion of investment dollars into his department." Now that Santiago is leaving, Lovell has been appointed interim chancellor. I guess the movers-and-shakers behind the growth plan feel Lovell knows the talking-points well enough to see this boondoggle through.

Professor Marc Levine, UWM history and urban studies professor, has shown that the entrepreneurial growth strategy centered on a university is largely an illusion. Yet, the Journal Sentinel is again pushing the idea that this initiative will be a huge spin-off and job creator. All based on purely anecdotal evidence.

The media and the well-connected always gripe about public spending, public employees, and any project that actually tries to do good and help workers and those in need. We can't do it. It's too much. We can't afford the debt. But when it's a playground for the rich, a research park, or some other speculative white elephant, we can't afford not to do it.

I'm all for the expansion and development of UWM as a university and research hub. But much of this growth plan should be tweaked, moved, or discontinued. Some of this funding could obviously be better spent, especially now, during these tough fiscal times.

For Further Reading:
College: Cash Cows?
Don't Stop Believing
Water Down Corporate Accountability

Tuesday, September 14, 2010


Jon Stewart on Iran.