Fiscal Reality Wins a Victory in Wisconsin

Understanding the real lesson of the Wisconsin recall


Maybe average Wisconsin voters didn't consciously know each household must pay $1,563 in extra taxes every year for the next 30 years just to fund public pension shortfalls.

But they probably realized they don't have a pension anymore, even if they have jobs. And any lucky enough to have jobs know that before Scott Walker became governor, they were paying higher taxes while working harder and longer at lower pay with slashed benefits.

Hey politicians, wake up: This is not just about jobs; it's about which jobs.

It's not about envy; it's about the desperation of paying property taxes and making house payments.

It's not a struggle over collective-bargaining "rights; it's a pure power struggle over an entrenched elite squeezing more out of citizens already getting by on less.

That reality overwhelms every other factor in Walker's astounding 1 point rematch gain defeating Milwaukee Mayor Tom Barrett on Tuesday.

It has national implications. Fewer Americans working harder for less and paying more taxes to increasing numbers of government employees who get more is not a shared-sacrifice program that wins elections.

Before Republicans and Democrats start imputing much to Walker's victory, they should think about that reality and how it represents an untenable future for America.

Wisconsin job numbers are so stark that no amount of campaign propaganda spending by either side could overcome what citizens know is happening to them and their neighbors.

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.

Wisconsin numbers show below national average government employment growth, but much worse private-sector job losses, according to federal Bureau of Labor Statistics data.

But beyond the net loss of almost 94,000 private-sector jobs in a decade as of the end of 2010, Wisconsin lost the most from businesses that offer the best pay and benefits.

Looking at preliminary numbers from January 2001 through January 2011, businesses that employ 50 or more workers lost more than 173,000 jobs. Businesses that employ 49 or fewer workers added more than 36,000 jobs.
Through September 2011, the bigger businesses were trending up, though still far below pre-recession peaks.

Smaller businesses were trending down.

More ominous is the fact that the biggest losses of business establishments over the decade were concentrated in bigger businesses, which makes recovery less likely.

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, a project of 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

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  1. 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.

    1. *yaaaaaaaaaaaaaaaaawn…mmmfmmmffmm*


    2. “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?

    3. 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.

  2. “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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  4. 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.

  5. 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.

  6. 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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