Wisconsin’s gradual economic recovery still hasn’t substantially expanded economic opportunity for working people and families. Median incomes are still well below their pre-recession level, and our state’s elevated poverty levels have yet to begin declining.
Concerns about increases in income inequality were voiced from a surprising perspective today, when Standard and Poor’s (the bond rating agency) issued a lengthy report titled “Income Inequality Weighs On State Tax Revenues.” The report concludes that “disparity is contributing to weaker tax revenue growth by weakening the rate of overall economic expansion.”
The authors offer this explanation for the correlation between income disparities and economic growth:
“…rising income inequality is a macroeconomic factor that acts as a drag on growth. There is evidence, although not conclusive at this point, that the higher savings rates of those with high incomes causes aggregate consumer spending to suffer. And since one person’s spending is another person’s income, the result is slower overall personal income growth despite continued strong income gains at the top.”
An article in today’s Washington Post sums up the findings in clearer terms:
“Even as income has accelerated for the affluent, it has barely kept pace with inflation for most other people. 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
A bond rating agency has downgraded its rating of Kansas’ creditworthiness, citing revenue reductions from tax cuts and slow economic growth, among other factors. There is no indication that a downgrade for Wisconsin is in the works, but the downgrade of Kansas’ creditworthiness should give pause to Wisconsin lawmakers. Tax cuts haven’t done much to create jobs, in either Kansas or Wisconsin, and have led to unintended negative consequences.
Wisconsin lawmakers have cut taxes 43 times since 2011, reducing revenue by $1.9 billion over that period and limiting investments in Wisconsin’s schools, workforce, and transportation networks. Despite – or because of – the substantial tax cuts, private sector job growth in Wisconsin has been slower than the national average.
A balanced budget amendment in the U.S. Constitution would result in much longer and deeper recessions and would cause unnecessary job losses. When the economy goes into a dive and people are without jobs, the need for food stamps, health insurance and unemployment insurance rise sharply. Since tax revenue typically falls as the need for those programs rises, a balanced budget would require cuts to these safety net programs and other areas of spending at the worst possible time.
A big jump in state revenue that will be announced soon gives lawmakers an excellent opportunity to invest in Wisconsin’s economic future and to put the state on a sounder fiscal footing by filling budget holes.
Federal Lifeline for the Unemployed Ends Dec. 28th, but the Debate Will Continue
Federally funded unemployment insurance benefits, known as emergency unemployment compensation (EUC), will expire at the end of this week. However, the debate on this issue will continue into 2014, as Senate Democrats seek an opportunity to restore the EUC program. (See, for example, this article about Senator Reed’s proposal.)
Here are ten key things to know about the EUC program, which expires on December 28:
1) The maximum length of unemployment insurance benefits will immediately drop to the 26 weeks of state benefits, which is slightly less than half the current limit in Wisconsin of 54 weeks of combined state and federal benefits. (That has already been reduced from a maximum of 99 weeks during the worst of the recession.)
Minnesota releases updated revenue and spending projections in early December of each year, and the new figures released today are very positive – a net gain in the Minnesota budget balance of about $1 billion. Let’s hope that Wisconsin can come close to matching that when our new tax and spending estimates are released in late January or February.
As we noted in a blog post about two weeks ago, many people across the country are watching Minnesota and Wisconsin carefully because of the very different directions that the two states have gone in fiscal and health care policy over the last couple of years. Because of the many demographic similarities between the two states, the divergent choices by policymakers set up an interesting experiment. In that context, today’s budget news from our neighbor to the west could be an early point in their favor, but we won’t have any basis of comparison in Wisconsin for another month or two. Read more
November was Native American Heritage Month, but for most of the month all we have heard about was the mascot issue and casinos. The national stories about the “code-talkers” during World War II were a welcome exception to the dearth of positive stories about American Indians during the first half of the month, though those stories drew attention to just a very brief glimpse of Indian history and contributions.
In addition to wishing that the media would shed more light on Native Americans’ contributions to American history and culture, I would like to hear more about the economic challenges facing American Indians, particularly those living in “Indian country.” The following graphic, prepared by my colleague Tamarine Cornelius, shows that the unemployment rate for Native Americans in Wisconsin is almost twice the rate for non-Hispanic whites, and the poverty rate is more than two and a half times as high for Native Americans (25.3% vs. Read more