Do Republicans Ideas Lead to Job Growth?
Democrats say that government can create jobs through borrowing, printing money and spending. They warn that trimming bureaucrats from payrolls will be an economic disaster. Republicans argue that the bigger the government is, the smaller the private sector. The Tea Party prescription: shrink government, lower taxes, decrease regulation, and the economy will rebound through private enterprise.
"Facts are hard to argue with," Governor Walker of Wisconsin declared in a Heritage interview earlier this month. In the three years before his election, the Democratic State legislature and Democratic governor presided over the loss of 150,000 jobs. In Walker's first six months in office, Wisconsin added a net of 39,000 jobs, including 14,000 in manufacturing. The remainder were in agriculture, tourism, biotech and medical technology.
In June, Walker earned boasting rights that half of the new jobs in the entire country -- a shocking and paltry 19,000 -- were created in his state. In the same month, Democrat Illinois next door lost 7,000 jobs. (For more on Illinois jobs, see this - ed.)
Not only did Wisconsin add private sector jobs, they trimmed government jobs by 3,000. Instead of leading to disaster, 12,500 private jobs were added, leading to the one month total of 9,500 net new jobs.
What changed for Wisconsin? Republican policies made the dramatic difference. In his first six months, Governor Walker and his Republican legislature passed tort reform and regulatory reform to create a legal system that fosters economic growth instead of suffocating it. They balanced the budget and cut taxes, including freezing property taxes. To encourage business expansion, they passed a manufacturing tax credit and capital gains tax credit.
The cuts were not at the expense of the health and senior services. The budget continues BadgerCare, Medical Assistance, and SeniorCare, and allocates an additional $1.2 billion into the state's Medicaid program. All new revenue in the next two years will go to the Department of Health Services.
The budget did cut $800 million in aid to local school districts. However, the Republicans freed school districts of onerous union requirements that expensive health insurance must be purchased through the union. School districts quickly turned to the competitive private insurance market and have saved as much as $700,000 a year.
Shrinking government is impossible without taking on the public sector unions. Walker gained national media coverage with his challenge to the public union scam: non-voluntary union dues from government workers are paid into Democrat coffers to elect officials that negotiate give-away contracts at a ruinous cost to the taxpayers. Government salaries and benefits are 60% of the taxpayer burden. Teacher benefit to salary ratio was running three times higher than the private sector. In Milwaukee, $100,000 teacher compensation packages were bankrupting the school system, leading to layoffs of hundreds of teachers, and explosion in class size to an estimated 34 students. Reforming collective bargaining was essential to protect taxpayers and Wisconsin's schoolchildren.
Wisconsin Republicans won a historic victory over this extortion racket of public sector unions. We all remember the famous February demonstrations and the flight of Democrat legislators. Despite the media circus, the Republicans passed a law that requires union members to contribute 12.6 percent toward health insurance premiums and 5.8 percent of their salaries toward their pensions. They had been paying nothing. Nationwide, in the private sector, the average contribution is 20% by employees for their health insurance and 8% towards their pension.
John McCormack, writing for The Weekly Standard, describes the beneficial effects of this single Republican reform. Case in point, the Brown Deer school district had been negotiating unsuccessfully with the local union to cope with a $1 million budget shortfall.
"We laid off 27 [teachers] as a precautionary measure," Koczela told Walker. "They were crying. Some of these people are my friends."
Republican reforms allowed the school district to save $600,000 by teachers paying 5.8% towards their pensions. Changes such as a $10 doctor's visit co-pay (up from nothing) saved $200,000. Increasing the workload from five classes to six saved another $200,000. The budget was balanced. None of the changes affected the children. 27 teachers' jobs were saved.
The Pittsfield school district made up their shortfall and reduced property taxes by 9 percent. The Kaukauna school district turned a $400,000 deficit into a $1.5 million surplus. They plan to decrease class size, offer Chinese and Arabic, and offer more Advanced Placement classes. Children and taxpayers were the winners, and no teachers were laid off. The limitation on public sector unions' collective bargaining was the key to fiscal responsibility.
While Walker was taking on the teacher's unions, in neighbouring Democrat Illinois, the top school administrators get to retire at age 56 with a lifetime pension worth almost $9,000,000 each. Neil C. Codell of the Niles High School District (a suburb of Chicago) gets a salary of $885,327 and his pension is valued at $26,661,604. While Republicans were balancing the Wisconsin budget, Illinois has run up a $13,000,000,000 (yes that's billions) deficit. While Republican Wisconsin added jobs, the Illinois unemployment rate has been rising for three months, and stands at 9.5%. 33% of blacks age 20-24 have no jobs.
Obama's prescription, the famous stimulus, was wasted in Democrat-run Wisconsin by using it to pay the bloated public sector benefits for a single year. 80% of the $701 million federal stimulus funds Wisconsin received in 2009 went to public union workers. The cost to the taxpayer was $82,000 per job. Wisconsin lost 118,000 jobs despite the Democrat spending. By July of 2011, the state had received another billion dollars, and the White House's stimulus tracking website was boasting less than 5,000 workers were employed as a result. That's costing taxpayers $2 million per job. How could it be this bad? Because government spending doesn't grow an economy. Ozaukee County's transit service used $600,000 dollars to buy nine new shared ride taxis, five minibuses and 22 mobile GPS systems. Jobs created: zero. The City of Racine got $800,000 in stimulus money and used it to put in energy efficient LED streetlights, hiring an unemployed electrician to install them. The $800,000 amounted to one temporary job. The University of Wisconsin received 2 million dollars and created 3.7 jobs, at more than half a million dollar per job. No wonder our country is going broke.
How did Illinois do with the Democratic prescription for government stimulus as the best and only way to create jobs? A mere $170 million was allocated to highway construction, the most in the country and double the next state, Iowa. Three quarters of the stimulus, $2.9 billion, was used to pay Medicare reimbursements that the state had not been able to pay for years, leading to no new jobs. The state claimed the creation of 15,000 jobs, the most in the nation. Yet in the two months of February- March 2009, Illinois lost 40,000 jobs. In the twelve months of the 2009 tax year, they lost 230,000 jobs, a loss of 11%. Despite the self-congratulation by Democrats on their stimulus policy, Illinois ranks 48th in the nation in job growth. The Democrats are hard put to point to any growth in the private sector. In Chicago, the list of funded projects reads like philanthropy, not economic growth:
- $270,000 for the study of 'intergalactic gas' at the University of Chicago. No jobs were created
- $462,000 to study sharks at the University of Chicago. No new jobs
- $85,000 study on how parents contribute to their children's obesity, Northwestern University. No jobs
- $500,000 to a private company for work on 'finger-tapping technology' for use on cell phones
- $611,000 to the University of Illinois to study if stress makes people drink more
Democrat Illinois has a $13 billion deficit and passed a 66% state income tax increase in January. People are suffering, education is suffering, the economic situation appears hopeless.
Wisconsin's nonpartisan Legislative Fiscal Bureau estimates Republican Wisconsin will finish the two-year budget with a $300 million surplus. They lowered classroom size and funded health care, created jobs and cut taxes. Their economy is on an upswing.