When Scott Walker was sworn in as Wisconsin’s 45th governor in January 2011, the state’s economic performance during the previous eight years had been dismal, and the outlook was worse. Wisconsin was facing a more than $3 billion deficit, segregated funds were treated like piggy banks, the unemployment rate hovered around 8 percent, and the tax burden (in particular Wisconsin’s draconian property tax) was suffocating residents.
Today, Wisconsin boasts a balanced budget, reserves that haven’t been seen in nearly two decades, property tax obligations that are in many cases lower than in 2011, and unemployment and labor participation rates that are almost impossible to top. We were therefore confused when reading a critique arguing a proverbial Martian would not be able to identify Walker’s election on Wisconsin performance graphs measuring the last ten years. This sort of analysis perfectly illustrates the Left’s continued disdain for Walker and, more importantly, the conservative policies advocated by the American Legislative Exchange Council (ALEC).
Bruce Thompson, Urban Milwaukee’s self-described “policy wonk,” offered his analysis of ALEC’s “Rich States, Poor States” annual report. The useful report offers two broad rankings, one related to a respective state’s outlook and the other to its performance.
The performance ranking is based on the cumulative measure over the last ten years of state gross domestic product, absolute domestic migration, and non-farm payroll employment, while the performance ranking relies on 15 state policy variables, such as tax burden, number of public employees, existence of a state minimum wage, and whether right-to-work is in place. ALEC argues these 15 policies will, all else being equal, eventually improve economic performance.
Thompson attacks ALEC’s argument because the improvements in Wisconsin’s outlook score have not directly tracked improvements in the performance ranking. To emphasize his point, he even says a foreign being would not be able to determine when the change in policy direction actually took place (i.e. Walker’s election in 2010). A closer look at his analysis reveals several significant shortcomings and omissions.
Check Your Statistical Analysis, Bub
First, even those with only a rudimentary knowledge of statistics would understand that even correlations that exist in the great run of cases won’t exist in every case. ALEC’s outlook ratings might be strongly correlated with economic performance across the country but not, for whatever reason, in Wisconsin and Maine (the other state Thompson evaluates). By cherry-picking these examples, Thompson’s analysis tells us precisely nothing about the value of ALEC’s ranking. A more comprehensive analysis by Oregon economist Eric Fruits has found that the ALEC rankings strongly predict economic growth.
That’s not the only error in Thompson’s analysis. During the Walker years, we have seen significant improvement among the ALEC measures. Thompson ignores that and fails to appreciate that the ALEC economic performance measure is comparative and an average over a ten-year period. This means Wisconsin could be experiencing significant economic gains but not move up in the rankings because other states have shown more, or just as much, improvement.
More fundamentally, because the performance measure is based on ten-year data, it will tend to lag changes in the outlook measure. Here, the better performance of the Walker years is dragged down by the far worse performance of the preceding Gov. Jim Doyle years. The further behind you start, the longer it will take to catch up.
Business Leaders Are Optimistic, and That Matters
Business leaders see clear evidence that Wisconsin is “catching up” and that Walker’s polices are putting the state on a better path. An improved outlook should ultimately produce results but it is, by definition, a “lagging” indicator. The ALEC report does not and cannot track factors such as the confidence executives and investors express.
While some like Thompson may be quick to dismiss such measures, industry leaders’ confidence in a state’s direction can affect decisions to expand infrastructure, add to the labor force, or increase production or offering services. Such measures certainly portend things to come. This year’s Chief Executive Magazine ranked Wisconsin as the tenth best state for business, jumping into the top ten following last year’s eleventh place rank and from 41st when Walker took office. Among other things, it noted the number of graduates in STEM fields from the University of Wisconsin system has steadily grown since 2009.
The positive business environment Walker is fostering in Wisconsin is especially evident when one looks at our border counties. Four of Wisconsin’s top ten fastest-growing counties lie along the border with Minnesota, ranked 45th in the ALEC outlook rankings. Illinois businesses are relocating to Kenosha County at breakneck speed.
Recently, a principal at Transwestern in Kenosha commented that “[i]f you are a larger employer in the state of Illinois currently, you’re troubled by what’s happening in Springfield. Kenosha is really the only release valve for Cook, northern Cook and Lake County.” This sentiment was not reflected in the ALEC report or recognized by Thompson.
Don’t Forget Act 10
Something also not accounted for in the analysis is Walker’s signature policy proposal, Act 10. These reforms essentially mandated that government services be offered to residents more efficiently. Put another way, Walker and his legislative allies demanded that government do more with less. This reform, while not necessarily traceable as a purely economic factor, has resulted in savings above $5 billion, keeping property taxes frozen (or even lower than when Walker took office). The ALEC report cannot quantify the number of residents and businesses that have decided to remain in or relocate to Wisconsin because of the streamlined services and efficient government.
Thompson’s analysis further ignores key labor statistics. Several key Bureau of Labor Statistics factors show obvious improvements in Wisconsin beginning around January 2011, so obvious as to render them identifiable by even a Martian. Labor force participation begins a steady increase mid-2010, from a low of 3,080,000 to a high in January 2017 approaching 3,140,000. Unemployment has fallen by nearly two-thirds from its peak of almost 300,000 in January 2010. The unemployment rate has experienced a similarly precipitous drop to less than 4 percent. To build a more complete picture of a state’s economic performance, the ALEC report’s authors may consider including factors like these in future studies.
With respect to that devilish ALEC, the attacks are getting old. Anybody who has attended an ALEC conference (we have attended several) can attest that its attendees include local legislators, academics, think tank heads, and political commentators. Sure, businesses sponsor various events, as is the case with almost any conference, even those on the ideological left. But the overarching aim is policy analysis and discussion, resulting in model legislation, all of which is publicly available and simply a model.
Put another way, local legislators are free to push ALEC legislation with any amendment or revision they wish. And if it is true that imitation is the sincerest form of flattery, then the Left is indeed infatuated with ALEC. Look no further than its own version: the State Innovation Exchange, a merger of three other ALEC-wannabes.
No, the Thompson analysis is not “wonkish.” Instead, it serves as an all-too familiar example of the Left’s continued distortions of the Walker record and disdain for groups like ALEC. Whether the ALEC report comprehensively captures every economic factor that illustrates the improvements in Wisconsin, the record is clear: the “outlook” for Wisconsin’s economic climate is improving, businesses from places like Illinois are flocking across the border, and government is more efficient then when Walker took office and its finances are in order. It is a record any Martian could easily identify.