That giant sucking sound

Back in 1992, independent candidate for President Ross Perot talked about the impact of the North American Free Trade Agreement as “that giant sucking sound” of American jobs leaving the country. A lot of things have happened besides NAFTA over the past couple of decades, but there is little doubt that plenty of jobs have been lost to foreign outsourcing. Discover Card even spoofs it with their ad featuring “Peggy,” a fictional character with a strong accent handling customer service calls for “USA Prime Credit.”

The ad is funny, but one of the reasons is that so many of us can relate to the experience. What’s not funny is that so many jobs have moved offshore because corporations can hire people for peanuts in comparison to labor costs in the U.S. Here in the Badger State, Mercury Marine, Harley Davidson, Kohler Company and others have pressed contracts in recent years that involved substantial concessions, pay freezes and often, new pay tiers for new hires that will offer even less to future workers. Those are the big deals that we know about because they involved labor unions. Unrepresented employees have been taking freezes, pay cuts, diminished benefits, furloughs and layoffs without the same fanfare.

It is against this backdrop that Governor Walker is exploiting the current labor market and fomenting envy between public and private employees. While most people agree that public employees shouldn’t be living in a parallel universe where none of the realities of today’s labor market exist, they should think about who will really be better off after another raft of hundreds of thousands of Wisconsin employees find themselves with diminished purchasing power. They should consider what it means to extend the lowering of standards that has been occurring in some portions of the private sector over to the public sector, as if that’s been some kind of grand accomplishment.

Walker is also going after medical benefits for the poor and cutting the earned income tax credit to wring a few hundred out of working poor families, now that his first priority of cutting corporate and capital gains taxes breezed through a compliant, lock-step GOP legislature with barely a discussion.  Together, they are insisting that the burden of resolving the state’s budget issues can only be placed on a relatively limited group of people without even a cursory look at the negative impact.  

So what happens when more people can’t afford much beyond their basic needs because they have been forced to accept a lower standard of living in the name of corporate profits, lower taxes (for a few fat cats) and preserving jobs? Who’s going to be better off? Here’s a hint: not you.

In Wausau, a small diner and a tire shop recently put signs in their windows to let people know that they support public employees. Many more around the state are doing the same or will share their views, if you ask them. They understand that when their customers lose discretionary income, they lose business. And for those shortsighted people — those who think that they will somehow be better off if some of their neighbors are a little worse off — the truth will become apparent soon enough.

“We expect more job growth with Wisconsin’s new, business friendly image under Governor Walker,” trumpeted Department of Workforce Development Secretary Manny Perez in a Wednesday press release that showed the statewide unadjusted unemployment rate was 8.2 percent in January compared to 7.1 percent in December. The very lowest unemployment rate in the state was Dane County — the seat of state government and the University of Wisconsin – (and a place where Walker captured less than 31 percent of the vote in November, well before anyone knew about his union-busting plans.) But Dane County will be a poorer place under Walker’s budget, along with just about every place else in Wisconsin.

The thing is, “business friendly” is entirely different for the businesses of Main Street, compared to the businesses of Wall Street or Koch Industries. It’s also entirely different for the business of being a middle class household and it doesn’t much matter what you do. There’s capitalism and then there’s corporatism. They’re very different.

Sucking money out of local economies all over the state is not an effective way to grow jobs. What it really does is diminish the capacity of those economies to create wealth for most of the players involved in them. It makes the pie smaller. The hundreds of millions of dollars in revenue cuts being absorbed by counties, municipalities, school districts and public employees across Wisconsin through smaller paychecks won’t be redirected to other purposes in those communities. They’re just going to be gone. Taking more out of employee paychecks isn’t going to make your taxes go down. The poor will be poorer, services will be diminished, college tuition will be higher and some of the money that used to recirculate around your community will have disappeared like a corporate bailout.

These are fiscally responsible priorities? It sounds more like morally bankrupt and a recipe for taking all Wisconsin workers a little closer to the 1930s.

JR

UPDATE: Study says Walker’s budget could cost nearly 22,000 jobs:

http://host.madison.com/wsj/news/local/govt-and-politics/article_8c50dc92-52f7-11e0-993d-001cc4c03286.html

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10 Responses to “That giant sucking sound”

  1. The revolution is coming my friends…

    I have decided to stockpile firearms and ammo on my hill-top bunker where during said revolution, I will declare myself Switzerland

  2. I always liked Swiss Army knives.

  3. Andrew Plath Says:

    I agree totally. Everyone seems to want smaller government with less regulations, and less cost to taxpayers. Yet people do not realize that less government may also mean less services. As in everything else, you get what you pay for. What Governor Walker referred to as “wants”, for some people are needs.

  4. John Rosenberg Says:

    Your comment on morally bankrupt priorities is spot on. One can only hope and pray that workers and voters (hopefully, the same people) will wake up to the fact that this is what “class warfare” looks like in the 21st century and right now, we’re losing. [full disclosure: I am Jim Rosenberg’s brother.]

  5. Thank you for your intelligent and thoughtful blog, which I have just discovered. I appreciate getting the perspective of someone who obviously knows local government concerns well, as well as someone outside of Milwaukee and Madison. The specter of the damage to small businesses, which were just starting to see the beginnings of economic recovery, as even more people get declining paychecks, concerns me very much. Giving that money to corporate interests outside Wisconsin won’t grow jobs or anything else here.

  6. daaaave Says:

    Puhleez!!! You speak as if their right to collective bargaining for their healthcare is the only thing keeping them out of sweatshops. Yes, many of them will take a hit but a lot, I mean A LOT, of people in the private sector took much worse in the last two years. And plus the public sectorites still have jobs for the most part…not all private sectorites are so lucky. Look, no one wants people who work for the government not to be successful, just know that when times demand a sacrifice for the good of us all (i.e. the ones who pay your salary) you might need to suck it up for a spell.

    So if their spending power is diminished for the short term it is far outweighed by the benefit of the state getting it’s fiscal house in order.
    Also, Wisconsin is one of the absolute least friendly states toward corporations to begin with, so throwing businesses a few tax breaks is no great sin. Jobs are created by companies (and the bigger the better), not by a few individuals who have yet to experience the full reality of this recession.

    What good is it if these people keep their sweetheart deal, and make a few extra bucks only to have the state chase away any corporate interest in setting up shop here. You really think small businesses are going to make up for that? Show me a community that was better off after a major employer left town.

    Remember too that if we were to leave the government workers’ compensation alone, that burden would just fall on the rest of us taxpayers who are already taking our own hit, how does that factor into your argument of less wealth in the local marketplace.

    And one more thing. Classifying an employer having a say in how it can and will compensate its workers as IMMORAL is about the stupidest comment I’ve ever heard. Actual immorality is everywhere. Look around and learn the difference.

  7. Sorry, no sale. In Marathon County, with a population of around 135,000, Walker’s bill will take around $22 million annually out of the local economy. That is not money that other taxpayers will have to spend; it’s just money that will be gone — and it will have an impact. Your underlying assumption is that this will create a more attractive business climate and that it will somehow be made up among others. That’s trickle down economics and we have ample proof that it doesn’t work very well for most people in the economy. There is no particular reason to believe that any given community (or most individuals) will enjoy benefits in proportion to what will be sacrificed.

    You can SAY that cutting the Earned Income Tax Credit, diminishing the quality of public education, damaging opportunities for local small businesses and negatively impacting the quality of life for many Wisconsinites in order to cut capital gains and corporate taxes for a relatively small group of significant beneficiaries is right and fair if you want to. In my view, we’ve been playing that game long enough to know that it simply doesn’t work for MOST people.

    As for employers having a say, I agree entirely — but Walker and the GOP are not the only people who have that role in a government that is of, by and for the people.

    • Daaaave Says:

      Your arguments are all short term. The state could be bankrupt in that time. What then? The Federal Gov can only bail out so many states at once and I’m guessing California is first in line. The priority here is that the state avoids bakruptcy and keeps a balanced ledger in the foreseeable future. First get back to a state of normalcy and then worry about how bus drivers will get by on 80

  8. Daaaave Says:

    Your arguments are all short term. First worry about the state going bankrupt, then worry about how the bus drivers in Madison will find a way to survive on 90K/year. 22 million to Marathon county sounds like not that much frankly…it is a whole county after all. The company I work for took 3-4 billion in losses since 2008. My department alone shrunk by 75%. I personally took an 11% hit in compensation in 2009 and was lucky enough to keep my job. My company is a major employer in my locality in Wisconsin and has global interests. What would happen if they decided that enough was enough and pulled out altogether. This town would be a mini Detroit.

    Long term, if you make the environment better for big businesses to stay or come in, then everyting else comes with it. More working middle class–>more opportunity for small business–>more tax base–>more gov services. The public sector just has a problem with being last in line in the flow chart.

  9. We’ll just have to agree to disagree on this one. I’m going to guess that your company’s problem wasn’t taxes, but market conditions. As for short-term thinking, I disagree with that, too. The GOP is working to make fundamental changes in the economy that result in less for workers and more for corporations and extremely wealthy folks. The outcomes impact on far more than just public employees.

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