Thursday, February 3, 2011

Analyzing Scott Walker's State of the State speech

Scott Walker laid out his case to the State of Wisconsin at the Capitol in Madison on Tuesday night, in spite of an impending snowstorm. After congratulating the Packers for their superbowl berth, Walker described the challenges that lay ahead, his strategy to reform State government, and his agenda to continue to foster a job-climate in Wisconsin. In the 30-minute State of the State speech, Walker touted the legislative promises he has delivered upon in his first month in office, while describing to a general degree the tactics he will likely use to help fix the Wisconsin budget woes. Wisconsin Democrats have complained that it was lacking detail but a simple look at the big picture shows that the Governor has begun the process of changing the State business climate while setting up the atmosphere to accelerate the creation of private sector jobs before starting the next task-at-hand: reforming the Budget process to extinguish the deficit. The Governor alluded to that at the beginning of the speech:

In less than 30 days, I have already signed four pieces of legislation into law that will help the private sector create jobs.

And on my desk is another bill giving tax relief to small businesses that I intend to sign on Friday.

The first act I signed as governor eliminated the taxes on health savings accounts, making health care more affordable for small business owners, blue-collar workers and family farmers. I want to thank Representatives Kaufert, Ziegelbauer and Stone and Senators Darling, Olsen and Vukmir for their leadership on HSAs. This change was a long time coming for Wisconsin and brings us into line with the rest of the nation.

Our second act reduced frivolous lawsuits in Wisconsin. The litigation environment in a state is one of the key drivers for business and unfortunately we were once known as "Alabama North" because of our poor lawsuit climate.

Now, we've turned the page on lawsuit reform and offer one more sign that Wisconsin is open for business.

Thanks to Senator Zipperer and Representative Jim Ott for their leadership on this important issue.

Yesterday, I signed an expansion of our relocation and economic development tax credits. These measures will help our state attract and retain businesses and jobs.

By eliminating the taxes on HSAs, the Governor and the legislature have immediately decreased the cost of health care insurance coverage offered by businesses and flexibility for workers of those businesses to afford it and use it. The Democrats always complain about the increasing cost of health care and yet while in charge of the legislature, they continued to allow this tax to be levied. The governor, in the stroke of a pen, has remedied this continued and unnecessary problem. Tort reform was a long-held promise of the Governor as a candidate and the elimination of frivolous lawsuits and the amounts associated with them have been debated for many years. Something has been done about it now and this will decrease costs and the fears of costs that businesses have to face in their day-to-day operations. This can only help the bottom-line and alleviate economic concerns, helping businesses of all kinds to grow. The next bill signed by the Governor was a bill that wiped out the first two years of income and franchise tax credits for businesses that relocate to Wisconsin. This certainly sweetens the pot for job-creating businesses from other states, such as Illinois who recently increased their tax rates by a staggering amount, as well others around the nation to come to Wisconsin and establish themselves with minimal expense and red tape. The fourth bill the Governor signed into law was the bill that threw another $25 million in tax incentives into the Wisconsin Economic Development program. Complaints from Democrats about this centered around the fact that it was a waste of tax dollars and ran up the deficit more because there was already 75 million in tax credits of the same type sitting around from the Doyle administration. It doesn't take a rocket scientist to figure out that if Scott Walker pursues the recruitment of business development and relocation with an ounce more of effort than Jim Doyle (and he already has as far as I'm concerned), that this money will be put to good use quickly.

Regarding all of these bills and the other four that have been offered in this first month of the declared Legislative Economic Special Session, the Democrats have constantly whined that "none of these bills will do anything to produce jobs immediately" and "promote special interests over the concerns of working families" and then additionally some have railed (no pun intended) about Walker's axing of the precious high-speed rail Federal tax dollar-financed project killing immediate jobs. Well here's the deal Democrats: Walker promised the creation of 250,000 jobs in his four years in office. He's not going to create 250,000 jobs in 1 month. I wouldn't have expected Obama to help institute the creation of jobs in his first month of office but what I would expect is for the Governor to pass legislation that sets up or reforms the economic environment that will lead to the accelerated creation of jobs and the reversal in a trend of job losses and slow job creation precipitated by the housing crisis and Doyle's lack of attention to the private sector. The Governor has done exactly that by passing these bills and rebuilding the private sector engine that creates those jobs. The idea is the private sector and private sector jobs that will be sustained, not short-term, limited, costly public sector jobs built on taxpayer funded deficit spending. That's the idea behind the Governor's philosophy. Democrats don't get that. You want jobs now? Well. . .how about we set up job creation that leads to meaningful, long-term private sector growth that has staying power and not 5,500 jobs financed by nearly a trillion in taxpayer funds that will barely benefit any other sector of the State economy except for those places where the rail is built. And then regarding working families, well, the Governor is about ready to sign on his desk the next bill, bill #5, that will deliver meaningful tax income tax breaks and franchise tax breaks to Wisconsin small businesses. If there's anything Democrats should like, it would be this.

After describing his philosophy and legislative accomplishments, the Governor turned his attention to the challenging fiscal mess the State has been in for several years now:

Two weeks ago, the Assembly Speaker and Senate Majority Leader joined me in writing a column for the Chicago Tribune. We made the case that employers in Illinois should escape to Wisconsin, not only because of Illinois' massive tax hike, but because of the two opposite directions our states are heading.

You see, businesses make decisions based on trends. Before locating a facility or adding jobs somewhere, they look to see what the future there looks like.

That's why the budget and budget repair bills we will introduce in the coming weeks will be even more important than our Special Session legislation.

It is in those budgets where rhetoric meets reality, where we will show that we will make the tough decisions now to lay the foundation for future economic growth.

During the present downturn, Wisconsin's proud tradition of responsible budgeting gave way to repeated raids on segregated funds, excessive borrowing for operations and an addiction to one-time federal dollars. These are no longer options, and their use has only delayed and worsened the difficult decisions we must now make.

These factors, along with the decline in the global economy that started several years ago, have combined to create a 3 billion dollar deficit for the state budget that starts on July 1. And they are contributing factors to why the state government faces more than a 200 million dollar shortfall for the rest of this fiscal year.

Like Wisconsin, states across the nation are facing major fiscal challenges. States face immediate budget shortfalls totaling 26 billion dollars this fiscal year, with an even larger shortfall over 120 billion looming next year.

Nationwide, states face an over trillion dollar funding shortfall in public-sector retirement benefits. 814 billion dollars of one-time federal stimulus funding is going away. States face a total mandated growth in Medicaid of 51 billion dollars. And state and local governments have a collective 2.4 trillion dollars in debts.

Now we have to face the challenges of the State budget shortfall and instead of padding it with Federal stimulus money, we're going to need to use the power of economic reform along with the tightening of the spending belt to reign in the budget deficit and stop spending more than we are taking in. The Legislative Fiscal Bureau and the Democrats are complaining that all of bills that the Governor has been signing up to this point simply add to the deficit and worsen the budget shortfall without creating any meaningful new jobs and State unions and Government workers are scared to death that it will all mean drastic cutting of every program. The Governor is talking about reforming and repairing problems with the State's obligations to Medicare. That will have to be addressed like it or not. What the Democrats do not seem understand and the LBF is not taking into account is that the bills Walker is passing today will set the stage for the revival of State revenues coming into the Department of Treasury coffers by the expansion of the tax base due to the stimulation of business growth. That in itself will raise the amount of money that will flow into availability for the State budget and add to budget reduction before the end of the year. The deficit will be partially reduced this way and be partially reduced by reductions in the growth of spending, working with true figures, and not plugging holes with stimulus money and raiding some funds to pay for others. Medicare reform will add the final piece to that reduction, along with State workers and others having to rework the way they pay into their benefits.

With the framework the Governor laid out last night and given the time frame to implement it, it is quite obvious that Scott Walker has a plan and last night he told Wisconsin how he will execute that plan. The details will come in the budget later this month. The principles have been laid out and the how those principles will be executed. If understood and looked at in the proper perspective, one can be confident that this plan for bringing back Wisconsin jobs and reforming the way Wisconsin government works will yield long-term great dividends despite some knee-jerk protests to the contrary.

Full text of Scott's speech here:

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