Smaller Government Yields Economic Success

By: Scott Manley
WMC Senior Vice President of Government Relations

This column was published in the 2017 edition of Wisconsin Business Voice. 

In his first inaugural address in 1981, President Ronald Reagan boldly declared that “Government can and must provide opportunity, not smother it; foster productivity, not stifle it.”

In the same speech, Reagan sounded an alarm about the growing size and scope of government, noting that “it is no coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government.”

Thirty years after President Reagan set a visionary path for rethinking government, Gov. Scott Walker and Republican lawmakers blazed a long trail of successful reforms that have reduced the scope of government, and allowed markets to function without undue intervention from state government.

They unleashed Wisconsin’s economic potential, and today we are reaping the rewards of those conservative policy changes.

The data is clear, and the latest numbers show our state’s unemployment rate at 3.1 percent, nearly a record low.

Wisconsin’s labor force participation rate is 68.8 percent – well above the national average. When looking at prime working-age adults in the 25-54 age bracket, Wisconsin has the highest percentage of people working in the country.

Many of the reforms WMC and the governor fought for were considered politically impossible, and all of them came with dire warnings from the left of apocalyptic consequences if they were enacted.

History has proved the labor unions and radical environmentalists to be extraordinarily wrong.

Consider the example of Act 10, Gov. Walker’s government union reforms that have saved taxpayers $5 billion and counting. When it was debated in 2011, Democrat legislators and their political allies in the teachers union foretold the ruin of education as we know it.

They claimed that forcing teachers and other government employees to contribute to the cost of their health care and generous pension benefits would result in lower test scores for students and a mass exodus of teachers from the profession. Neither prediction came true.

Wisconsin continues to be among the top ten states in the country for ACT test scores among states where all students take the exam. Moreover, we actually had more licensed teachers in the 2015-16 school year than we did in the 2011-12 school year, despite the fact that student enrollment has actually dropped since Act 10 was enacted in 2011.

Because of those collective bargaining reforms, Wisconsin now enjoys a marketplace for educators where high-performing teachers can command a higher salary than they could under the old system dominated by union seniority rules.

Republican lawmakers also took on significant tax reform, having enacted across-the-board income tax reductions, a freeze on property taxes and the Manufacturing & Agricultural Tax Credit to bolster those two super-sectors of our economy. Opponents called the tax cuts irresponsible and warned that allowing people to keep more of their money would create government deficits.

On the contrary, each of Gov. Walker’s budgets has balanced, and the state has actually generated budgetary surpluses. Wisconsin proved that you can cut taxes by the seventh-largest amount in the country, as Wisconsin did from 2010 to 2014, and still have more than enough revenue to meet spending priorities like education and social services.

Far from being reckless fiscal policy as alleged by some, Wisconsin has placed itself in a stronger financial position than nearly every other state. For example, we are one of only two states that has a fully funded pension system for state employees. Moreover, Wisconsin is in the top ten for states with the lowest long-term debt.

The manufacturing tax reforms are already paying dividends, with many recent announcements of companies moving their operations to Wisconsin. Since 2011, the year the Manufacturing & Agricultural Tax Credit was enacted, Wisconsin has grown 35,700 manufacturing jobsthe 10th-most in the country. The fact that we stopped bleeding family-supporting manufacturing jobs, and are actually growing them now, is nothing short of remarkable.

WMC also led the charge on workplace freedom by helping enact Wisconsin’s Right to Work law in 2015. At the time, Detractors said Right to Work would lead to lower wages for workers, while labor unions claimed it would put an end to worker training.

In reality, the opposite has happened.

Real wages in Wisconsin have grown faster than inflation during every economic quarter since Right to Work became law. In fact, wages in our state have grown 11.6 percent over the last three years, which is the 19th-highest in the country. Solid wage growth and low cost-of-living have resulted in Wisconsin workers enjoying the 20th-highest purchasing power in the country.

While wages have continued to rise, rumors of the demise of worker training proved greatly exaggerated. All throughout Wisconsin, businesses continue to train workers for the skills they need to remain competitive. Meanwhile, union-based training programs have flourished. For example, the International Union of Operating Engineers Local 139 recently expanded its 380 acre state-of-the-art training facility in Coloma, Wisconsin and trained 7,500 workers in a single year.

While Wisconsin was busy cutting taxes, our neighbors to the west in Minnesota were busy raising them. Many Democrat lawmakers in Wisconsin held Minnesota out to be the exemplar for our state to follow. They argued that if we would only raise taxes and double-down on government regulation, as Minnesota has, we would be in much better shape.

Republican lawmakers correctly took a divergent path from that of their Golden Gopher counterparts, and the Badger State is all the better for it. Lower taxes, regulatory reform and lawsuit reform have helped position Wisconsin with a lower unemployment rate than Minnesota. Our economy is growing faster too, with private sector GDP growth outpacing Minnesota since 2015. Perhaps our favorable jobs climate is the reason that more people are moving to Wisconsin from Minnesota on a net migration basis.

There are many more signs that our economy as a whole is on the right track. Our per capita GDP growth from 2009-2015 ranks 13th-best in the country. Ongoing unemployment claims last year were at their lowest level since 1973. Wisconsin has grown about 210,000 jobs since Gov. Walker was elected and a new era of bold reform took root.

President Reagan famously said that the best social program is a job. He was right.

Last year the poverty rate in Wisconsin dropped to its lowest level since 2008 thanks to the creation of 70,000 jobs from 2014 to 2015. Reagan’s wise words are a great reminder that businesses will grow and families will be better off when the size and scope of government is reduced. Gov. Walker and legislative Republicans in Wisconsin have proved his theory correct.

See the full issue of Wisconsin Business Voice.