Saturday, August 14, 2010

Supply-Side Albatross

(As an appendage to the previous entry) the Milwaukee Journal Sentinel exclaims Job One: Focus on Growing the Economy and also highlights Report Calls for Overhaul of State Department of Commerce. Again they want the government to coordinate private market activity. To hold the hand of private speculators and guide them. They even encourage growing government with an expanded, more focused, and higher-paid Department of Commerce.

They want this expanded arm of the Commerce Department, a quasi-public agency, named Accelerate Wisconsin. Because just having that snappy name will surely go a long way.

This Journal editorial basically promotes a "provocative" study by Deloitte, spoon-feeding the conclusions, no questions asked, no counter opinions. The report includes such ground-breaking proposals as "prospecting harder," and "a vigorous marketing campaign." Oh, and they should try really, really hard.

The overall idea is to make the Commerce Department a massive economic development organization, "such as the Milwaukee 7." Yet, many observe that the Milwaukee 7 and similar agencies don't achieve enough for Milwaukee and often have misguided priorities. How this is the model for the state is a bit perplexing.

As evidence for the need for the new agency initiative, the Journal notes, Wisconsin, "once in the top twenty in per capita personal income...had fallen to 27th by 2008." (Wisconsin is the 20th most populous state.) They then talk of how such agencies help turn things around. They cite Indiana and Michigan as evidence of such positive experiences. Michigan is the 8th most populous state, it ranks 26th in per capita personal income. Indiana is the 16th most populous state, it ranks 37th in per capita income.

The unemployment rate in Wisconsin is 8.5%, it's 10.1% in Indiana and Michigan. If we look at median household income, Indiana ranks 32nd, Michigan 30th, and Wisconsin 21st. GDP change between 2006-2008 was -0.6 in Indiana (ranking 41st), -1.5 in Michigan (ranking 47th), and +0.7 in Wisconsin (ranking 27th). They are performing worse than we are, yet we should follow their lead?

Government should grow to aid private industry, but government is also bunglingly incompetent? Based on metrics, which don't even support the supposed conclusions, we should follow the same development strategies that are failing others? Government workers are overpaid and primarily useless, except for those aiding the private sector, which should be paid more?

Journal Sentinel, what an unsound, confused, and misinformed framework you provide to our community's policy debates. And your abhorrence to the public sector and government capabilities, except when taxpayer dollars are enabling speculative private ventures, is reprehensible. It would be nice if we could have an adult discussion in the community, beginning with the recognition that the public and private sectors both have important roles to play.

We have demonized the government for decades. We've cut taxes and deregulated. And, we've paid for it. Wages for the majority of workers have stagnated. Our society has pulled apart. Inequality is as large as it was during the Gilded Age. We are in the worst economic downturn since the Great Depression.

As we've taken a hands-off approach with government and put our full faith in the market, the volatility of our lives has increased. That wasn't part of the 'supply-side miracle' deal. HMOs were supposed to revolutionize health care, not nearly destroy it. 401Ks were supposed to increase retirement security, not obliterate it.

It's time to turn the car around.

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