Fiscal Reality Wins a Victory in Wisconsin

Understanding the real lesson of the Wisconsin recall

(Page 2 of 2)

Wisconsin lost 37 establishments employing 1,000 or more workers in a decade. That’s 27 percent of companies generally offering higher pay, better benefits, and secure retirement.

The state lost 14 percent of firms employing 500 to 999 workers and 15 percent of those employing 250 to 499.
No realistic expectation of small business growth can replace those jobs, and most jobs small businesses do create cannot make up the compensation.

Wisconsin voters know they are struggling. They sense that unchecked growth of local and state governments will grind them down even more. Government as usual was not an option.

But they need to know how bad things really are.

For example, without major reforms, the public pensions officially accounted at 100 percent funded actually need $1,563 more from the average household every year for 30 years just to pay benefits already promised, according to an updated study for the National Bureau of Economic Research by Robert Novy-Marx and Joshua Rauh.

Public retiree health-care funding is more than $2.3 billion short, according to the Pew “Widening Gap” study, and the state only paid 45 percent of the last payment due. Somebody is going to have to make up the difference.

An analysis released Monday by Governing magazine found that since 2008, Wisconsin state and local governments cut jobs by about 3 percent, while the private sector lost more than 5.7 percent.

To one degree or another what is happening in Wisconsin is happening all over America. The one-third of American workers paying for everybody else is starting to feel squeezed.

Nationally, the Governing analysis “… finds state and local government reductions being applied unevenly so far, with employment growing or remaining roughly unchanged in about half of states since the start of the recession. Private sector employment, by contrast, increased in only five states….

“Labor Department estimates also suggest numbers of public employees actually grew in some states, even those with notable drops in private employment.”

Any politicians who think voters who lost jobs, took pay cuts, gave up benefits, and surrendered any hope of retirement will quietly pay more for those who shared no sacrifice are going to be in for a shock on election day.

Reality always wins.

Frank Keegan is editor of Statebudgetsolutions.org, a project of sunshinereview.org. The State Budget Solutions Project is non-partisan, positive, pro-reform, proactive and anchored in fundamental-systemic solutions. The goal is to successfully engage political journalists/bloggers, state officials, and opinion leaders in a new way of thinking about state government and budgets, fundamental reforms, transparency, and accountability. This article originally appeared at WisconsinReporter.com.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • jcw||

    Re: The bureau of economic research study.

    Is the analysis based on a TIPS ROI of 1.7%...for the next 30 years? Does that make sense to do that?

    Re: "Widening Gap Study." Over the past 12 years Wisconsin Retirement System shows returns of almost 5.7%, putting it at ~80% funded. With the assumptions that the rates won't be increased in the near future (due to future market instability because of government interference), that ~80% is really really bad.

    If the market can bounce back in the near future with some stability and return rates approximately 7%, wisconsin retirement system is by all means adequately funded.

    Obviously, taxes are far too high in Wisconsin and the market is certainly suffering for it (through businesses leaving). The extremely high property taxes have certainly made me re-think the idea of purchasing a home and eventually moving, as there is no end in sight.

  • Almanian's Evil Twin||

    *yaaaaaaaaaaaaaaaaawn...mmmfmmmffmm*

    Huh?

  • Sevo||

    "If the market can bounce back in the near future with some stability and return rates approximately 7%, wisconsin retirement system is by all means adequately funded."

    So if the 'good times' return and last forever, everything is just ducky?
    Hey, why not have the pension fund buy lotto tickets?

  • Brutus||

    The prudent assumption is the 1.7% insofar as it permits pension plans to invest in very secure bonds as opposed to other vehicles that might cause the funds to drop precipitously.

  • Sevo||

    "Somebody is going to have to make up the difference."

    Those taxpayers who make a living outside of government are the "Somebody" in this case. And if the stats quoted in the article are correct, it looks like there won't be many of them left.

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    lin,
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    In just a decade while private-sector jobs dropped 4 percent—down more than 6 percent from the 2007 peak—state and municipal government employment steadily grew by 2.9 and 2.4 percent, respectively, through 2010.

  • Barack||

    80% of Stimulus Funds in Wisconsin went to public unions, and instead of using that money for job creation they used it to try to get rid of a sitting Republican Governor.
    Obama can take money from American tax payers and give it to his union buddies, keeping them solidly Democratic.

  • PattyJ||

    A friend of mine left WI for a lower tax state 5 years ago. The property taxes on her small home were $9,000/year!

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