Scott Walker’s failure on jobs and Wisconsin’s economy

Over at Playground Politics, the Recess Supervisor has an excellent entry outlining why he believes the policies of Republican Gov. Scott Walker have done more harm than good to Wisconsin’s economy and job creation.

Walker’s proposals are failing for the same reason that Obama’s Making Work Pay tax credit bombed. The theory behind Making Work Pay was that people would be more inclined to spend their additional money if they got it a little bit at a time instead of in one lump sum. But what behavioral economists found is that if the money received on an incremental basis is relatively insignificant, it doesn’t get spent at all.

So while some conservatives are wildly rejoicing at a $20 or $30 savings on their property tax bills courtesy of Governor Walker, the reality is that their $20-30 came at the expense of many public employees losing their jobs, or the tens of thousands of public employees who are now taking home thousands of dollars less each year as the result of higher health insurance and pension costs.

In other words, less economic activity is generated in Wisconsin by 200 people with 20 extra dollars than is generated by one person in Wisconsin with 4,000 extra dollars. Not really rocket science, but we should note that the Obama administration got this one wrong as well.

As noted by the Recess Supervisor, according to 6-month economic forecasts released by the Philadelphia Federal Reserve, Wisconsin is one of only four states on the mainland 48 projected for economic contraction in the next six months.

Wisconsin has already suffered through 6 consecutive months of job losses thanks to the failed policies of Scott Walker, and if the Philadelphia Federal Reserve’s projections for the next 6 months are any indication, the worst may not be behind us.