To Reduce Income Inequality and Boost Economic Growth, Make sure every Student has an Opportunity to Attend College
Rising levels of income inequality are acting as a drag on the U.S. economy, but we can counter the economic harm by expanding opportunities to attend college, according to a new report from Standard & Poor’s, a financial services company.
Here’s the crux of the report, in a sentence:
Our review of the data, as well as a wealth of research on this matter, leads us to conclude that the current level of income inequality in the U.S. is dampening GDP growth, at a time when the world’s biggest economy is struggling to recover from the Great Recession and the government is in need of funds to support an aging population.
Pretty clear, right? Prominent policymakers, including President Obama, have warned time and again that high levels of income inequality are slowing economic growth. This report adds something new to the conversation in that it represents the viewpoint of a private sector company, and could be an indication that the business community is starting to view income inequality as a problem. Read more
Conservatives Critique “Tax Cronyism,” and Progressives Critique the ALEC Report
I was pleasantly surprised to learn recently that the American Legislative Exchange Council (ALEC) has issued a report calling on policymakers to end the wasteful subsidies given to corporations by state and local governments. Their report titled The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth criticizes special tax breaks for certain companies, which it points out tend to increase the tax burden on other companies and put them at a competitive disadvantage.
Corporations are very good at extorting costly subsidies from state and local officials, but some of those corporations and a growing number of policymakers are realizing that these incentives aren’t an effective way to promote economic growth. As WCCF intern Jelicia Diggs wrote in a recent WI Budget Project blog post, a number of businesses in the Kansas City area have prevailed on Missouri legislators to call a ceasefire to the use of incentives for pirating corporations across the border with Kansas. Read more
New Report: How Wisconsin Lawmakers Have Broken with Tradition and Undermined a Legacy of Investment
Four years ago Wisconsin was made a promise. The promise was that the best way to generate economic growth was through significant tax and spending cuts. The tax and spending cuts have occurred, but unfortunately for all of us, the promised job growth has not.
That’s the conclusion of a new Budget Project report released today, called “Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future.” The new report reviews the many changes policymakers have made recently in how Wisconsin supports it schools, communities, and workforce.
Lawmakers have made dramatic tax cuts since 2011, totaling $1.9 billion over four years. But the value of the tax cuts was not equitably distributed. Half the value of the major tax cuts packages in 2013 and 2014 went to the top 20% of taxpayers by income, and the remaining 80% shared the other half.
The tax cuts have contributed to deep cuts to public schools and higher education in Wisconsin. Read more
Immigrants are playing a very important role in boosting cities in Wisconsin and across the Midwest, according to a report issued last month. The recent report, written by the Chicago Council on Global Affairs, analyzed 2000 and 2010 decennial census data and found that the arrival of immigrants over the last decade helped reverse a trend of declining populations in cities throughout the Midwest.
Here are some of the highlights of the report, “Growing the Heartland: How Immigrants Offset Population Decline and an Aging Workforce in Midwest Metropolitan Areas,” pertaining to Midwest metropolitan areas:
- Over the last decade alone, the region’s foreign born population rose 27.4% (from 3.5 million to 4.5 million).
- Immigrant population growth accounts for 38% of metropolitan area growth in the Midwest.
- Only 67% of native-born Midwesterners live in metro-areas, compared to 88% of immigrants.
- Although this region’s native-born population in the 35-to-44 age group saw a 20.6% decrease between 2000 and 2010, the immigrant population in that age range experienced a 44.2% increase.
There has been a great deal of interest this year in the subject of income inequality – as evidenced by the fact that economist Thomas Piketty’s book, “Capital in the Twenty-First Century,” reached No. 1 on the non-fiction, best-seller list a few months ago. However, it isn’t an easy summer read, which is why I’m bringing you a very condensed version of a short synopsis that appeared a few days ago in a New York Times column by Nicholas Kristof.
Apparently, buying Picketty’s book is one thing, and getting very far into the 685-page tome is something else. An analysis of Kindle data by UW Madison mathematics professor Jordan Ellenberg suggests that Piketty’s best seller may also be this year’s most unread book. With that in mind, Kristof wrote his recent column, which he calls “An Idiot’s Guide to Inequality.”
I don’t want to discourage you from buying and reading Piketty’s book, but if it isn’t something you envision taking with you to the beach this summer, I encourage you to read Kristof’s “idiot’s guide,” which elaborates on these five points (that I have excerpted from his column):
- Economic inequality has worsened significantly in the United States and some other countries.
The minimum wage has lost about 11% of its purchasing power due to inflation since 2009, making it harder for low-paid workers to make ends meet. (In comparison, CEO compensation rose 46% between 2009 and 2013.)
Some states have increased their own minimum wages, rather than waiting for Congress to do it. Nineteen states have set their own minimum wage higher than the federal minimum wage, including our neighboring states of Illinois ($8.35) and Michigan ($7.40), where a Republican-controlled legislature recently approved a wage increase to $9.25 by 2018. In Minnesota, the minimum wage is scheduled to rise to $9.50 by 2016. In contrast, state lawmakers in Wisconsin have taken no action to increase the minimum wage.
It’s too bad that Wisconsin lawmakers have refused to raise the minimum wage, because such a move would have broad-based benefits for workers. Read more
Wisconsin isn’t the only state that has made deep tax cuts on the premise of boosting the economy, only to find out that the promised job growth has not materialized. Kansas and North Carolina also passed large tax cuts and have experienced disappointing job growth. As a result of the tax cuts, these states have fewer resources to support investments in public schools, higher education, and a healthy workforce – investments that have a proven track record for creating jobs.
In Wisconsin, lawmakers have passed a series of tax cuts that total nearly $2 billion over four years. Governor Walker and some legislators have said that these tax cuts will make Wisconsin a more attractive place to do business, but job growth in Wisconsin since the tax cuts took effect has been slower than the national average. Unlike the U.S., Wisconsin has not yet gained enough jobs to replace the ones wiped out by the recession. Read more
The term “border wars” has taken on a new meaning for many states and cities across the United States that have been engaged in the practice of job piracy. However, a number of areas in the country are shifting away from this practice of luring jobs over state borders after recognizing that it is inefficient and does little to fuel job growth. Wisconsin policymakers should learn from the experiences in those states and localities and from the remedial actions they are taking.
On July 9th Good Jobs First released a new report exploring the issue of job piracy, also called job poaching, which wastefully exhausts economic development subsidies without incentivizing new job creation. The report, “Ending Job Piracy, Building Regional Prosperity,” provides examples of failing models of job piracy, including the border war that has been raging between Missouri and Kansas.
Missouri legislators have gradually come to the realization that job piracy is a zero sum game that is wastefully exhausting the economic development resources of both states. Read more
Wisconsin continues to perform poorly in private sector job growth, according to new employment figures released today.
The number of private sector jobs in Wisconsin grew by 1.2% in 2013, compared to 2.1% nationally. The new jobs figures come from the Quarter Census of Employment and Wages, which this Milwaukee Journal Sentinel article calls “the most credible and comprehensive” figures available.
Wisconsin job growth has been slower than that in neighboring states, according to the Journal Sentinel:
“In the first three years of Walker’s term, the data show that Wisconsin ranked 35th of 50 states in the rate of private-sector job growth. That puts it behind the nearby states of Michigan (sixth of 50), which is bouncing back from a searing downturn in the auto industry; Indiana (15); Minnesota (20); Ohio (25); Iowa (28), and Illinois (33).”
State lawmakers have passed dozens of tax cuts since 2011, but that hasn’t spurred job growth. Read more
Wisconsin’s economic growth has lagged behind that of most other states, according to the Bureau of Economic Analysis. The new report issued last week provides inflation-adjusted statistics on gross domestic product (GDP) in every state for each of the years from 2010 through 2013.
The following graph illustrates that Wisconsin’s GDP growth of 4.5% over the last three years has been well below the national average of 6.1%. Wisconsin has also lagged behind the other states in upper Midwest, except for Illinois.
The second bar graph compares the annual growth since 2010 in Minnesota, Wisconsin, and for the U.S. as a whole. Some conservatives have argued that Wisconsin’s economy would grow more rapidly because our state has been cutting taxes and practicing austerity during a period when Minnesota raised taxes. The graph illustrates that Minnesota’s growth has been stronger for each of the last three years.
If Wisconsin’s economy had grown at the same rate as the national average over the three years since 2010, our state GDP would have been about $4 billion higher at the end of 2013. Read more