The only legislation allowed to be proposed, discussed, and enacted during the special session is that which relates to spending, taxes, job creation, and balancing the state budget.  The two greatest obstacles plaguing the Walker policy agenda in the upcoming legislative session are the $2.2 billion budget deficit and an unemployment rate of 7.6 percent.  Leaders from both major parties recognize the challenges facing the Badger state and are committed to putting their partisan differences aside in order to restore economic prosperity.

At the time of this writing, legislative leaders have worked together to draft a myriad of legislative initiatives that create jobs and restore economic prosperity.  Two of those initiatives include tax cuts for small businesses and individuals, as well as increased funding for local economic development.  With the state of Wisconsin mired in an economic recession and thousands of citizens out of work it is paramount that legislative leaders put their partisan differences aside and work to return the state to a sound fiscal footing.

Tax cuts for individuals and small businesses.  Governor Walker and state legislative leaders from both major parties reached an agreement this past week on a plan that would cut taxes for small businesses (those whose annual income is less than $500,000 in gross receipts) and every Wisconsin resident.  Scott Bauer of the Associated Press noted that Walker had to diverge from his initial plan of providing tax relief to businesses with fewer than 50 employees because, in Wisconsin, businesses are taxed based on annual income and gross receipts, not total employees.  Governor Walker’s initial proposal was estimated to cost $40 million annually; the annual cost of the new tax cut program, however, has yet to be released by the Wisconsin Department of Revenue.

Though short on specifics, the tax cut legislation was approved unanimously by the Senate Finance Committee.  Despite facing liberal opposition in the Assembly Jobs, Economy, and Small Business Committee, the legislation was sent to both houses of the legislature for final approval.  Liberals in the legislature were supportive of some of Governor Walker’s tax cut proposals but hesitant to support the small business tax credit until more information is made available.  Still, legislative leaders on both sides of the political aisle are in agreement that tax cuts for small businesses are the most viable solution for creating jobs and restoring economic prosperity.  The Walker administration has yet to release the specifics of its tax cut plan for individuals and families, but the plan is likely to “send a message of change, reducing the tax burden in Wisconsin, lessening regulation and reducing the costs from litigation.”

Increased funding for local economic development.  In addition to tax cuts for small businesses and individuals, legislative leaders from both parties supported a legislative initiative last week that would significantly increase funding for economic and rural development.  With the vast majority of Wisconsin municipalities and counties facing enormous budgetary shortfalls, and since the national economic climate has been challenging, business development has been moribund for the past two years.   Thus, the Walker administration has worked in conjunction with county and municipal officials to build an economic development package that assists local governments in luring major corporations into their communities.

Under this legislation, credits for local economic development will be increased by $25 million annually.  This legislation, much like the tax cuts for small businesses and individuals, was passed unanimously by several State Senate committees, including the Committee on Economic Development and Veterans and Military Affairs.  Conversely, several leading Democrats on the Assembly Jobs, Economy and Small Business and the Rural Development and Rural Affairs Committees opposed this legislation.

While state aid is important for economic development, county and municipal governments should reduce the property tax burden and design tax breaks and financial incentives for local businesses.  Several Wisconsin counties have already taken steps to increase business growth in their communities.  In Outagamie County, for example, former State Treasurer and County Executive candidate Jack Voight is working with business leaders, economics experts, and political analysts to create a Fox Cities Business Leading Authority, whose sole function will be to create jobs and attract business to Outagamie County.  This Authority, a public-private partnership, would provide local businesses with the capital necessary to create jobs and expand their base of operations.  Governor Walker has pledged to work with leaders from each of Wisconsin’s 72 counties on developing sound business development strategies in localities across the state.

Controversial elements of the Walker agenda.  Despite the unprecedented display of bipartisanship that has been embraced thus far in the capital during the special session, liberals are committed to opposing certain provisions.  Among the panoply of initiatives introduced in the legislative special session, two have drawn the fiercest criticism: the restructuring of the Department of Commerce and the elimination of income taxes on Health Savings Accounts.

According to Bauer, the plan for restructuring the Department of Commerce involves “[replacing] the state agency with a public-private hybrid composed not of unionized state employees but of private workers.  It would be run by a 12-member board appointed by the governor.”  Liberals hotly oppose this.  Representative Gary Hebl, (D-Sun Prairie) said of Governor Walker’s decision to appoint members to this new hybrid committee, “It is almost like a dictatorship, or total control by a king.  It’s way beyond what our democracy calls for.”

Governor Walker points out, however, that the Department of Commerce in its current form is unable to carry out its foremost objective: creating jobs and attracting businesses to Wisconsin.  Instead, the Department of Commerce has become wasteful and intrusive: for example, it has recently taken over the regulation of amusement park rides and elevators to petroleum tanks.  Fundamentally, though, the melee over this bill is purely ideological.  Conservatives want to lessen the size and influence of the state bureaucracy, whereas liberals want to increase government oversight and protect unionized employees.  Despite their opposition, liberals do not have the votes necessary to prevent the restructuring of the Wisconsin Department of Commerce. 

The second major issue that has drawn unanimous liberal opposition in the special legislative session is the elimination of income taxes on Health Savings Accounts.  Rather than eliminating taxes on Health Savings Accounts, liberals contend that BadgerCare should be extended to all Wisconsinites who are currently without health insurance.  In general, liberals in the legislature fervently oppose the implementation of any health care legislation that does not increase government oversight.

But this legislation not only reduces income taxes for those who currently possess Health Savings Accounts; it also provides citizens with monetary incentives if they agree to establish new ones.  These allow individual citizens to control their own personal well-being and livelihood.  Furthermore, they create a culture of ownership by keeping control of health insurance out of the hands of the government and in the hands of individuals and families.

Conclusion.  If the special session is a sign of things to come, the regular legislative session might be one of the least polarizing and most productive in state history.  In spite of disagreements over Health Savings Accounts and the restructuring of the Department of Commerce, conservatives and liberals are united behind the themes of job creation and economic revitalization.  Additionally, members on both sides of the aisle have pledged to make balancing the budget and job creation foremost priorities in the current legislative session.  Legislative leaders should make improving the quality of life for all Wisconsin citizens their priority.  By shrinking the size of government, reducing taxes for small businesses and individuals, and exercising fiscal restraint, legislators can ensure Wisconsin will once again become an engine of economic growth.

The Wisconsin section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

By filing suit against the federal government, the State of Wisconsin and Governor Walker have pledged to protect state sovereignty, prevent government intrusion into the lives of individual citizens, and uphold the core tenets of the Tenth Amendment.  ObamaCare, in its current form, also violates the “Commerce Clause” of the U.S. Constitution by requiring that every American purchase a government-approved health insurance policy by 2016.

Background.  State Attorneys General throughout the United States have filed suit against the Patient Protection Affordability Care Act of 2010 on the grounds that the legislation violates the Tenth Amendment of the U.S. Constitution.  The Tenth Amendment states, “The powers not delegated to the United States by the Constitution, nor prohibited to it by the States, are reserved to the States respectively, or to the people.”  The Constitutionality argument against ObamaCare proposes that the Tenth Amendment prohibits the federal government from enacting any legislation that coerces citizens or states into purchasing goods or services.

The most controversial element of ObamaCare, and the subject of the aforementioned lawsuits, is the individual mandate provision, which specifies that nearly every American will be required to purchase government-approved health insurance by the year 2016.  Failure to comply will result in a monetary penalty of $750 (the “tax,” as it is referred to by the Obama administration, is expected to reach this monetary value by 2016) or two percent of one’s income.

Attorneys General from both major parties are in agreement that the individual mandate provision of ObamaCare violates the Tenth Amendment.  Former Florida Attorney General Bill McCollum, a Republican, and Louisiana Attorney General Buddy Caldwell, a Democrat, are in agreement that the individual mandate provision is an unprecedented exercise of state power.  Never before in American history has Congress required individuals to purchase a product to qualify as a law-abiding citizen.

State Nullification of ObamaCare.  In addition to filing suit against the individual mandate provision of ObamaCare, several state Attorneys General have advocated the nullification of the entire ObamaCare program.  Nullification is a process by which individual states attempt to invalidate a federal law or legislation that it deems unconstitutional.  Even if the U.S. Congress fails to repeal the entire law (which would almost certainly require overriding a presidential veto), the states could effectively undermine its execution one piece at a time.

At the time of this writing, eight states—Arizona, Florida, Michigan, Missouri, Ohio, Pennsylvania, Virginia, and Texas—have already introduced legislation that nullifies ObamaCare.  On November 2, 2010, the voters of Arizona overwhelmingly approved Proposition 106, a state Constitutional amendment that effectively nullified ObamaCare.  Proposition 106 was approved by a resounding margin, 55% to 45%.  Arizona is the only state so far that has passed legislation and a Constitutional amendment to nullify ObamaCare.  In addition to filing suit against ObamaCare on Constitutional grounds, another option for the Wisconsin leadership would be to consider pursuing nullification measures.

Action in Wisconsin.  Scott Walker, throughout his gubernatorial campaign, pledged that if elected, he would challenge the legality and Constitutionality of ObamaCare, and his instructions to Van Hollen came only hours after his inauguration this week.  In his letter of instructions, Walker stated that the individual mandate provision was unprecedented and unconstitutional.  Bill Cosh, spokesman for Attorney General Van Hollen, told reporters on Monday that no decision has been made yet as to whether or not Wisconsin would join the lawsuit filed by twenty other states or even file its own suit.  But due to the difficulty and cost associated with filing an independent suit, it appears likely that Wisconsin will join the existing group action. 

Van Hollen is therefore poised to challenge the Constitutionality of ObamaCare on the grounds that it violates state sovereignty guaranteed under the Tenth Amendment, and it appears that the Republican-dominated Wisconsin government is also in a good position to initiate nullification procedures even if U.S. Congressional resistance fails.

Conclusion. Drastic changes should be expected in the political culture in Madison.  Among the foremost priorities of the new administration is filing suit against the federal government in regards to ObamaCare’s violation of state sovereignty.  Governor Walker and Attorney General Van Hollen are poised to challenge the federal government’s usurpation of power and fight for individual liberty and states’ rights.  In the upcoming legislative session, Governor Walker should consider urging legislators to prevent the federal government from interfering with state affairs and the individual freedoms of Wisconsin citizens.

The Wisconsin section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

Download PAI Summary & Analysis of WI Dept. of Workforce Development Report

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PAI

WI Dept. of Workforce Development Sends Mixed Signals on the Growth and Stability of the State’s Economy

The Wisconsin Department of Workforce Development released a report indicating that unemployment in Wisconsin decreased from 7.8 percent in October to 7.6 percent in November. Secretary of Workforce Development Robert Gassman noted that in November 2010 Wisconsin’s unemployment rate dropped to its lowest level since January 2009.[1] However, with thousands of Wisconsinites out of work, the state budget deficit at an all time high of $3.3 billion[2] and expectations for it to skyrocket to $5.4 billion in 2011[3], the Wisconsin economy remains in a precarious position.

Secretary Gassman, Governor Doyle and liberal Democrats in the state legislature contend that the .2 percent decline in the state’s unemployment rate indicates that Wisconsin is on the verge of economic recovery.  Gassner, Doyle and liberals in the state legislature fail to mention, however, that Wisconsin lost 5,200 nonfarm jobs in the month of November and remains 150,000 jobs shy of its pre-recession (2006) totals.[4] Of the 5,200 jobs lost in the month of November, 4,800 were in the private-sector,[5]and 400 were government jobs.[6]

What is more, in the last twelve months, Wisconsin managed to create just 24,400 new private-sector jobs.[7] This makes governor-elect Scott Walker’s task of creating 250,000 new jobs by November 2015 more herculean than initially anticipated.  Dr. Abdur Chowdhury, a professor of economics at Marquette University, stated that at the current rate of growth (24,400 new jobs in twelve months), governor-elect Walker and the Wisconsin economy would have to create nearly 60,000 new jobs per year if it intends to achieve the goal of 250,000 new jobs by November 2015.[8] The only encouraging news to come out of the report is that 2,600 new manufacturing jobs were created in November 2010.[9]

Obvious Question: How can the unemployment rate decrease but the total number of jobs increase?  John Schmid, a staff writer for the Milwaukee Journal Sentinel, in describing the methods used by the Office of Workforce Development to calculate the aforementioned statistics, wrote, “The government calculates job-creation data and the unemployment rate from two separate monthly surveys.  The two have contradicted each other frequently throughout the recovery, sending mixed signals and suggesting that the labor market is stagnating without clear direction.  Not until the numbers move in tandem will economists be able to discern a clear direction.”[10]

Thus the new job report released by the Wisconsin Office of Workforce Development ends up telling us very little about the vigor of the Wisconsin economy. With thousands of Wisconsinites out of work, the state budget deficit at an all time high of $3.3 billion[11] and expectations for it to skyrocket to $5.4 billion in 2011[12], the Wisconsin economy remains in a precarious position.

In order to restore the Wisconsin economy, lawmakers from both parties should make cutting taxes for small businesses, reducing the corporate/business tax rate, investing more money in business research and development at state universities, and creating a climate of business friendliness the foremost priorities in the upcoming legislative session.  Rather than getting bogged down in the specifics of the state’s economic recession, the remainder of this forecast intends to offer viable solutions for creating jobs, and restoring economic growth, in the Badger State.

Step 1: Cutting taxes for small businesses.

Economists and politicians from both sides of the political spectrum are in concurrence that small businesses are a vital part of the state economy.  In an attempt to create small business jobs and restore Wisconsin’s economic prosperity, governor-elect Scott Walker has pledged to make tax cuts for small businesses one of his chief priorities in the upcoming legislative session.

Late last month, governor-elect Walker announced that he will encourage the state legislature to enact a state income tax reduction of 1 percentage point for businesses with fifty or fewer employees. The Wisconsin Department of Revenue finds that there are 321,300 businesses in the state-owned by sole proprietors category and another 69,400 S corporations comprised of 100 or fewer shareholders.[13] These tax cuts will allow small businesses to expand their labor force, provide Wisconsin residents with greater goods and services, and most importantly, increase the state’s tax base.

Governor-elect Walker, in describing the intricacies of the tax cut, and its impact on the Wisconsin business climate, wrote, “I will call for a tax cut of as much as 20 percent off the small businesses that provide most of the jobs in Wisconsin.  That is money that can be used to hire more workers at small businesses here in Wisconsin.”[14]

Dr. Abdur Chowdhury, a professor of economics at Marquette University, is optimistic that a reduction in business taxes will lead to an increase in statewide employment.  In an interview with Jason Stein of the Wisconsin State Journal, Professor Chowdhury said, “Reducing the tax burden on small businesses would be a good way to encourage them to expand their business and hire more.”[15] The first step to restoring economic prosperity in Wisconsin is to provide job creators with tax relief. A one point reduction in income taxes for small businesses, proprietorships and S corporations, will create jobs, a climate of business friendliness and foster greater economic productivity.

Step 2: Reducing the state’s corporate and business tax rate.

An exorbitantly high corporate/business tax rate is partially to blame for Wisconsin’s struggling economy. If Wisconsin intends to once again become an engine of economic growth it should work assiduously to attract a greater number of Fortune 500 companies to the state.  Scott Cohn, a Senior Correspondent for CNBC News, found that Texas, the nation’s number one state for business in 2010, is home to 64 Fortune 500 companies—more than any other state in the union.[16]

Conversely, Fortune Magazine found that in 2010 Wisconsin was home to a paltry ten Fortune 500 companies.[17] Wisconsin’s exorbitantly high corporate/business tax rate has led several corporations to leave or threaten to leave the Badger State, in recent years.  The U.S. Federation of Tax Administrators found that as of January 2010, the Wisconsin corporate/business tax rate has stood at a markedly high 7.9 percent.[18]

In order to restore economic growth in Wisconsin, PAI contends that the Republican controlled state legislature should do away with the business/corporation tax and, instead, follow in the footsteps of Texas, the nation’s top ranked economy in 2010, and impose a franchise tax.  The United States Federation of Tax Administrators, in discussing the specifics of the Texas franchise tax, wrote, “Texas imposes a Franchise Tax, otherwise known as a margin tax, imposed on entities with more than $1 million total revenues at a rate of 1 percent, or 0.5 percent for entities primarily engaged in retail or wholesale trade, on lesser of 70 percent of total revenues or 100 percent of gross receipts after deductions for compensation or cost of goods sold.”[19]

A two-year freeze in the Wisconsin business/corporation, coupled with the implementation of a franchise or consumption tax has would generate copious amounts of revenue, entice more Fortune 500 companies to set up camp in the Badger State and provide businesses with the capital necessary to create hundreds of new jobs.  If Wisconsin intends to create jobs, attract businesses, and become an engine of economic growth, it should eradicate its corporate/business tax, and instead, install a franchise or consumption tax.  Doing so would drastically improve the state economy, and as aforementioned, exponentially increase state revenue.

Step 3: Greater investment in research and development at colleges and universities.

To spur economic growth and foster a climate of “business friendliness,” the Wisconsin State Legislature should markedly increase expenditures for research and development at colleges and universities. In addition, Wisconsin public schools should expand their business education curriculums by providing students with access to organizations such as Junior Achievement, Students in Free Enterprise, and the National Institute for Economic and Financial Literacy.

The Wisconsin Economic Summit, in its enthralling November 2010 report, entitled Be Bold: The Wisconsin Prosperity Strategy, found that research and development at Wisconsin universities has created new jobs and generated large amounts of new revenue.  In discussing the impact that university research and development has had on the state economy, the authors of the report wrote, “Led by the University of Wisconsin-Madison, academic R&D is a $1.2 billion economic activity in the state, translating into more than 38,000 new jobs.  UW-Madison is perennially in the top three universities in the nation for R&D at more than $900 million, while the M7 region, with the Medical College of Wisconsin, UW-Milwaukee, the Blood Center of Wisconsin and Marquette University, collectively pull in more than $250 million.”[20]

The authors of the report, who happen to be some of the most successful and highly respected business leaders in the state, outline a myriad of strategies for restoring economic prosperity and fostering a culture of business friendliness in the Badger State.  Some of the recommendations made by the authors of the report include: increased funding for research and development on UW campuses; the creation of a strong academic research and development base in Madison; an increase in entrepreneurial literacy in K-12 schools through programs such as Junior Achievement and the Wisconsin-based National Institute of Economic and Financial literacy; and, an increased emphasis on employment-based learning on all college, university, and technical college campuses.[21]

The implementation of the aforementioned recommendations would increase state revenue, boost enrollment at Wisconsin colleges and universities, and provide K-12 students with the information necessary to be informed consumers. Governor-elect Walker and Republicans in the state legislature should make the abovementioned recommendations a foremost priority in the next legislative session.

Step 4: Fostering a climate of “business friendliness in Wisconsin.

Wisconsin Republican leaders should work indefatigably in the upcoming legislative session to foster a climate of business friendliness in Wisconsin.  As aforestated, Wisconsin is home to just ten Fortune 500 companies, enforces an exorbitantly high business tax and is one of the nation’s least-friendly business states.  Forbes Magazine, in its annual ranking of the best states for business, found that Wisconsin ranks forty-third in the nation. Only Vermont, Hawaii, Maine, Michigan, Mississippi, Louisiana, and Rhode Island rank below Wisconsin in business friendliness.[22]

Conversely, Fortune Magazine in a chart entitled America’s Top States For Business 2010 found that in 2010 Wisconsin ranked twenty-seventh in the nation in business friendliness.[23] Among Midwestern states, only Illinois, Ohio, and Michigan were less business friendly.[24] What was more, Fortune found that Wisconsin’s economy is ranked thirty-first in the nation.[25] Wisconsin’s low rating is precipitated by three factors: an exorbitantly high corporate/business tax rate, combined reporting and a high property tax burden.

Combined reporting is demonstrably bad for Wisconsin corporations because it stifles economic productivity.  Rather than paying taxes on just their business, corporations are forced to pay taxes on subsidiary companies or divisions within their corporation. BizTimes, a Milwaukee-based business periodical, found that in the first quarter of 2009, Harley Davidson took a $22.5 million dollar charge as a result of new combined reporting laws.[26] Debra Sadow Koenig and James Phillips in their beguiling article entitled “Wisconsin Adopts Combined Reporting and Other Tax Changes”, wrote, “In general, combined reporting means that each member of an affiliated or ‘combined’ group of corporations engaged in a unitary business reports on a combined report the unitary business allocable income allocable to Wisconsin.”[27]

Governor-elect Walker and Republican legislative leaders have stated they would consider reforming or eliminating combined reporting in the upcoming legislative session.  In fact, State Senator-elect Leah Vukmir (R-Wauwatosa), called for a special session of the legislature to repeal combined reporting.[28] With Republicans firmly in control of both houses of the legislature and the governor’s mansion, it appears certain that combined reporting will be repealed in the 2011-2013 legislative session.

In addition to an exorbitant corporate tax rate and combined reporting, Wisconsin business growth has been stifled by an excessive property tax burden.  Nationally renowned economists Dr. Arthur Laffer, Stephen Moore, and Jonathan Moore, in their book Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, found that as of January 2010 Wisconsin ranked forty-first in the nation in property tax burden.[29] Wisconsinites are required to pay $41.33 in property for every $1,000 earned in income.[30]

The state’s high property tax value has been demonstrably bad for business development, and economic growth.  In order to create a more business friendly state, PAI encourages the state legislature to replace the business tax with a franchise/consumption tax, eradicate combined reporting for Wisconsin corporations, and most importantly, drastically diminish the property tax burden.

Conclusion:

The release of the November unemployment numbers by the Department of Workforce Development illustrates that the Wisconsin economy remains in a volatile position.  While unemployment dropped to its lowest levels since January 2009, 5,200 nonfarm jobs were shed last month.  Economists predict that the Wisconsin economic situation will continue to deteriorate in the months ahead, as several leading manufactures have stated that they intend to cut back their labor force.

John Schmid, of the Milwaukee Journal Sentinel, noted that the closing of Everbrite, LLC, and NewPage Paper Corporation later this year will cost 400 Wisconsinites their jobs (36 at Everbrite and 366 at NewPage).[31]

The implementation of the strategies outlined in this document will restore Wisconsin to a sound fiscal footing, create jobs, and foster a climate of business friendliness in the Badger State.  Wisconsin’s fate hinges on the enactment of these critical legislative initiatives.  If Wisconsin intends to restore economic prosperity it is paramount that the recommendations outlined in this forecast are enacted into law at the onset of the upcoming legislative session.

[2] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[3] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[4] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[5] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[6] WISN News, “State’s Unemployment Rate Drops, National  Numbers Worsen.” Press Release, December 16, 2010, http://www.wisn.com/money/26163395/detail.html?treets=mil&tml=mil_7am&ts=T&tmi=mil_7am_1_08000112172010

[7] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[8] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html. Note: see pages 1-2 for this information.

[9] WISN News, “State’s Unemployment Rate Drops, National  Numbers Worsen.” Press Release, December 16, 2010, http://www.wisn.com/money/26163395/detail.html?treets=mil&tml=mil_7am&ts=T&tmi=mil_7am_1_08000112172010

[10] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[11] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[12] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[13] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[14] Scott Walker, “Emergency Special Session on jobs.” Scott Walker for Wisconsin, November 1, 2010, http://www.scottwalker.org/node/1623

[15] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[16] Scott Cohn, “CNBC’s Top States For Business 2010—And the Winner is Texas.” CNBC News, July 13, 2010, http://www.cnbc.com/id/37642856/CNBC_s_Top_States_For_Business_2010_And_The_Winner_Is_Texas

[17] Fortune, “States, Wisconsin, 2010.” Fortune Magazine, May 3, 2010, http://money.cnn.com/magazines/fortune/fortune500/2010/states/WI.html

[18] United States Federation of Tax Administrators, Range of State Corporate Income Tax Rates, March 2010, http://www.taxadmin.org/fta/rate/corp_inc.pdf

[19] United States Federation of Tax Administrators, Range of State Corporate Income Tax Rates, March 2010, http://www.taxadmin.org/fta/rate/corp_inc.pdf.  Note: See page 2, footnote Z, for the exact quote.

[20] The Wisconsin Economic Summit, Be Bold: The Wisconsin Prosperity Strategy, November 2010, p.5.  The report can be found at: http://www.wiroundtable.org/summit/Resources/BE_BOLD_FINAL_Dec1_2010.pdf

[21] The Wisconsin Economic Summit, Be Bold: The Wisconsin Prosperity Strategy, November 2010, pp. 8-12. http://www.wiroundtable.org/summit/Resources/BE_BOLD_FINAL_Dec1_2010.pdf

[22] Kurt Bladenhausen, “Table: The Best States for Businesses and Career,” Forbes, November 13, 2010, http://www.forbes.com/2010/10/13/best-states-for-business-business-beltway-best-states-table.html

[23] Fortune, America’s Top States For Business 2010, Fortune Magazine, http://www.cnbc.com/id/37516043/

[24] Fortune, Business Friendliness 2010, Fortune Magazine, http://www.cnbc.com/id/37516038

[25] Fortune, America’s Top States For Business 2010, Fortune Magazine, http://www.cnbc.com/id/37516043/

[26] Andrew Weiland, ‘The Hog Tax: Should Combined Reporting be Repealed?” Biz Times, May 14, 2010,  http://www.biztimes.com/news/2010/5/14/the-hog-tax

[27] Debra Sadow Koenig, and James Phillips, “Wisconsin Adopts Combined Reporting and Other Tax Changes,” Godfrey &Kahn, Attorneys At Law, News, Publications & Events, February 25, 2009, http://www.gklaw.com/news.cfm?action=pub_detail&publication_id=809

[28] Andrew Weiland, ‘The Hog Tax: Should Combined Reporting be Repealed?” Biz Times, May 14, 2010,  http://www.biztimes.com/news/2010/5/14/the-hog-tax

[29] Dr. Arthur B. Laffer, Stephen Moore, and Jonathan Williams, Rich State, Poor State: ALEC-Laffer State Economic Competitiveness Index 3^rd ed. (Washington, D.C: The American Legislative Exchange Council, 2010), 120.

[30] Laffer, Moore, and Williams, 120.

[31] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

Walker’s legislative agenda has six major components.  First, he intends to establish a Waste, Fraud and Abuse Commission, which will be given the daunting task of eliminating waste in the state budget. Second, he has pledged to balance the state budget—possibly his most arduous task.  Third, he has pledged to assist the state legislature with the creation of a small-business tax cut, intended to stimulate economic growth, create jobs, and foster a business-friendly environment in Wisconsin.  Fourth, he intends to restructure the Department of Commerce so as to allow the Secretary of Commerce to spend a maximum amount of time on economic revitalization.  Fifth, he has pledged to provide tax breaks for those with health savings accounts.  Finally, he has pledged to curb malpractice lawsuits against medical professionals.  Walker’s ambitious legislative agenda will restore economic prosperity, make Wisconsin a business-friendly state, and restore integrity to Wisconsin’s government.

Waste, Fraud and Abuse.  Walker told the Wisconsin State Journal late last week that the declaration of an “economic emergency” will be his first act as Governor, declaring that he will call for a special session of the legislature intended to deal solely with issues pertaining to the economy, job creation and taxes.  The “economic emergency” declaration includes the creation of a Waste, Fraud and Abuse Commission which will be responsible for finding $300 million per year to trim from state spending, which body he can create without the deliberation of the legislature by issuing an executive order.  The chief priority of this committee will be cutting wasteful spending from the state budget, government agencies and appropriations bills, but Governor-elect Walker has yet to outline his plan for selecting the members of this important committee.  It is critical that the Commission be independent and composed of individuals dedicated to Wisconsin’s welfare ahead of their own political agendas, because the eradication of wasteful and out-of-control spending can ultimately lead to a balanced budget and the restoration of economic stability.  So long as this committee puts politics aside and focuses on the issue at hand, the budget can be balanced and economic prosperity will be restored.

Balancing the State Budget.  Walker’s most arduous task in the upcoming legislative session will be balancing the state budget.  The Wisconsin Department of Revenue finds that the Wisconsin budget deficit is the highest in state history, a colossal $3.3 billion.  In order to balance the state budget, Walker’s plan will probably aim to eradicate wasteful spending, freeze agency budgets or cut them to pre-2006 levels, drastically alter BadgerCare, and cut income and property taxes.  Walker’s promise of creating 250,000 new jobs during his tenure will not become a reality if he fails to make economic recovery his foremost priority in the 2011-2013 period.

Tax Cut for Small Businesses.  Small businesses are the engines that keep the Wisconsin economy running, and in order to improve the Wisconsin economy, cutting taxes for small businesses and entrepreneurs should be a chief priority.  Throughout his campaign, Walker pledged to make business expansion and job creation the focal points of his legislative agenda in the years to come.  Last week, he announced that he will encourage the state legislature to enact a state income tax reduction of one percentage point for businesses with 50 or fewer employees.  The Wisconsin Department of Revenue finds that there are 321,300 businesses in the state owned by sole proprietors and another 69,400 S corporations comprised of 100 or fewer shareholders.  A one-point reduction in income taxes for small businesses, proprietorships and S corporations will create a climate of business friendliness, add jobs, and foster greater economic productivity.

Restructuring the Department of Commerce.  Late last week, Walker outlined an ambitious plan for restructuring the Wisconsin Department of Commerce.  Currently, the Wisconsin Department of Commerce is responsible for regulating business and industry, fostering economic growth, and promoting business growth.  Under Walker’s reform proposal, the Secretary of Commerce would no longer be responsible for low-level regulation of such things as amusement rides and elevators to petroleum storage tanks, as he is today.  Walker’s restructuring would make economic and business development the chief priority of the Secretary of Commerce.  In addition, Walker’s plan includes combining the Wisconsin Department of Commerce with the Wisconsin Housing and Economic Development Authority.  In short, Walker’s proposal would reduce the size of government and transfer much control of the economy from the government to the private sector.

Income Tax Deduction for Health Savings Accounts.  The fifth prong of Walker’s reform agenda is a state income tax deduction for health savings accounts.  Health savings accounts, much like Social Security personal accounts, allow individual citizens to control their own personal well-being and livelihood and create a culture of ownership by transferring control of health insurance from the government to the individual.  Walker recognizes that individuals are better suited to control their health care needs than the government, and as a result, he has made the expansion of health savings accounts, and tax breaks for those currently in existence, priorities in the 2011-2013 legislative session.  It is expected that these tax breaks will encourage Wisconsinites to reject government-run health insurance, and in turn, embrace health savings accounts.

Curb Malpractice Suits against Doctors.  Throughout his campaign, Walker made it clear that he would work to curb frivolous malpractice lawsuits against Wisconsin’s medical professionals.  It is important to note that Walker did not go so far as to say that he supports the enactment of widespread tort reform, but he supports efforts to reduce the price of medical malpractice insurance for Wisconsin medical professionals.  The Business Journal notes that in Wisconsin, there is a cap of $750,000 for noneconomic damages but no cap on medical expenses or lost income.  In effect, malpractice lawsuits can have devastating effects on physicians and, importantly, the quality of care they offer.  The fear of being sued for negligence or malpractice has forced many physicians to perform fewer surgeries and potentially harmful medical procedures, but Walker supports significant reforms that would limit the effects of this problem. A reduction in the number of malpractice suits, coupled with the enactment of a groundbreaking tort reform bill, should be focal points of Walker’s legislative agenda.

The Wisconsin section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

For the first time in Wisconsin history, the State Senate Majority Leader and the Assembly Speaker were defeated in the same election cycle.  The Republican Party even gained the seat vacated by Assembly Majority Leader, Rep. Thomas Nelson (D-Kaukauna), the Democratic candidate for Lt. Governor.  The Republican Party narrowly gained control of the State Senate by winning five seats previously held by Democrats; the breakdown of the Senate flipped from 18-15 Democrat, to 18-13 Republican.  In the State Assembly, the Republican Party gained 13 seats previously occupied by the Democrats, including that of the longest-serving member in the history of the State Assembly, Marlin Schneider (D-Wisconsin Rapids).  The breakdown in the State Assembly flipped from 50-45-1 Democrat, to 60-38-1 Republican.  Republican control of both houses of the legislature and the governor’s mansion guarantees that the legislative agenda will change drastically in the next two years.

In the 28th Senate District, incumbent Russell Decker (D-Schofield) was defeated by political novice, Dr. Pam Galloway, an oncologist from Wausau.  Galloway was able to garner 54 percent of the vote in this Republican-leaning district.   Decker had been first elected to the Wisconsin State Senate in 1990 and has been reelected every four years until now.  In 2007, after the Democrats regained control of the Senate, Decker was elected to the position of Senate Majority Leader.  While Galloway ran a superb race, very few political analysts predicted that she would unseat the Senate Majority Leader Decker.

Mike Sheridan has represented the 44^th Assembly District, which mostly comprises the city of Janesville, since 2005.  Prior to his election to the State Assembly, Sheridan served as the President of United Auto Workers Local 95 and as an assembly worker at the General Motors plant in Janesville.  Those familiar with Wisconsin politics will know that Janesville has traditionally been a Democratic stronghold, and prior to Tuesday evening’s elections, all three of the Assembly seats in this area, and the Senate seat, were occupied by Democrats.  Beginning in January 2010, however, all of these seats will be occupied by Republicans.  Sheridan’s defeat to a little-known political novice and former assembly line worker at General Motors, Joe Knilans, shocked the political establishment.  In any other year, Speaker Sheridan might have been reelected easily.

Thomas Nelson, the Ivy League-educated Assembly Majority Leader, shocked the political establishment in 2004 by defeating incumbent Republican Becky Weber, in one of the most conservative assembly districts in the state.  Nelson’s meteoric rise to political stardom in the Democratic Party was the result of his status as a “policy wonk” and his ability to unseat an incumbent Republican in one of the state’s most conservative assembly districts.  Nelson vacated this seat in 2010 after announcing his candidacy for Lieutenant Governor, and as a result, Jim Steineke, Nelson’s 2008 challenger, overwhelmingly won in the 5th District, defeating his Democratic challenger, Mert Summers, 58 percent to 42 percent.

Perhaps the most astounding victory for the Republican Party on Tuesday evening came in the 72nd Assembly District.  The 72^nd District, which encompasses Wisconsin Rapids and a large portion of Wood County, southwestern Portage County, and the southern tip of Adams County, has been represented by Marlin Schneider since 1970.  In 2009, Schneider became the longest-serving member in the history of the Wisconsin State Assembly.  When his term ends on January 10, 2010, Schneider will have served for an unprecedented 40 years, and only Senator Fred Risser (D-Monona Grove) has been in the legislature longer.  Schneider was defeated by a political novice, Scott Krug, 47 percent to 41 percent, as Independent candidate Thad Kubisiak, a liberal activist and a journeyman iron worker, garnered 12 percent of the vote.  Scott Krug’s unforeseen victory over Marlin Schneider was one of the most important of the 2010 election cycle.

Big Issues on the Reform Agenda

Business friendliness and corporate tax rates.  The foremost priority in the 2010-2012 legislative session should be creating jobs, revitalizing the state economy, and making Wisconsin “business friendly.”   Wisconsin’s corporate and business tax rate is among the highest in the nation and, along with the practice of “combined reporting,” has forced many companies to leave or threaten to leave the state of Wisconsin.  In practice, “each member of an affiliated or “combined” group of corporations engaged in a unitary business reports on a combined report the unitary business allocable income allocable to Wisconsin.”  Combined reporting is demonstrably bad for Wisconsin corporations because it stifles economic productivity.  Rather than paying taxes on their business, corporations are also forced to pay taxes on subsidiary companies or divisions within their corporation.  Companies affected most by combined reporting have included Harley Davidson, Miller Brewing Company, Briggs and Stratton, and Oshkosh Corporation.

Combined reporting, coupled with an exorbitantly high corporate tax rate, has made Wisconsin one of the nation’s most unfriendly business climates. In its annual ranking of the best states for business, Forbes finds that Wisconsin ranks forty-third in the nation in business friendliness.  If Wisconsin wants to retain its competitive advantage and become an engine of economic prosperity, it is paramount that the newly elected legislature reduces the corporate tax rate and eliminates combined reporting.

High-speed railway.  Since the onset of his tenure as governor, Governor Jim Doyle placed a profound emphasis on transforming the state’s transportation infrastructure.  As a result, in 2009, Governor Doyle announced his plan for building a high-speed railway system that would connect Madison, Milwaukee, Chicago, and Minneapolis.  At the time, policy scholars on both sides of the aisle lauded the idea.  But once the details of the proposal were announced in early 2009, however, conservatives began branding the high-speed railway as fiscally irresponsible and detrimental to the state’s fiscal well-being.  Wisconsin intends to use federal stimulus money to pay for the construction and operation of the 3,000 mile railway system, but Wisconsin Governor-elect Scott Walker argues that this money would be better spent on infrastructure repair and interstate highway expansion, and Republican lawmakers have made it clear that they intend to terminate the high-speed railway system.

Concealed Carry. Wisconsin is one of just two states (Illinois being the other) that completely forbids the carrying of concealed weapons.  In the 2006 and 2008 legislative sessions, both houses of the state legislature passed legislation that would have allowed Wisconsinites to obtain licenses to carry concealed weapons.  In both instances, Governor Doyle vetoed the legislation and the legislature was unable to garner enough votes to override the governor’s veto.  Republican lawmakers have stated that concealed carry will be one of their top priorities in the 2010-2012 legislative session.

Concealed carry, its proponents contend, would drastically decrease the crime rate.  Dr. John Lott, Jr., a professor of economics at the University of Maryland, College Park, and author of the book More Guns, Less Crime: Understanding Crime and Gun-Control Law contends that due to concealed carry, the number of violent crimes and gun-related deaths in the nation’s largest cities has decreased in the last decade.  It appears likely that a concealed carry law will be passed by the Wisconsin legislature and signed into law by Governor Walker in the next legislative session. 

Last Tuesday’s Republican landslide will usher in a new era of government in Wisconsin.  The tax-and-spend policies of the Doyle administration will be replaced by policies that promote economic recovery, business growth, reduced taxes, and fiscal prudence.  Wisconsin cannot afford any more high taxes, out-of-control spending and fiscal mismanagement.  By shrinking the size of government, reducing taxes on individuals and corporations, and exercising fiscal restraint, legislators can ensure that Wisconsin will once again become an engine of economic growth.

The Wisconsin section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

By, Deputy Policy Director, PAI.

With less than two weeks left, before the highly anticipated midterm election, on November 2, 2010, Republican gubernatorial candidate Scott Walker holds a commanding lead over his Democratic challenger, Milwaukee Mayor, Tom Barrett.

The most recent Rasmussen Reports poll, conducted on October 13, 2010, finds that Walker has increased his lead over Barret from 8% on October 1 to 9% on October 13, 2010.  This one percent increase is significant because it shows that Walker’s support is increasing in the final days of the campaign.  In most races, the frontrunner’s lead often begins to dissipate in the days leading up to the general election, but the Wisconsin gubernatorial race has yet to mirror that trend.

Rasmussen Reports finds Scott Walker leading Tom Barrett, 51% to 42%, at the time of this writing.  On October 1, Walker led Barrett by smaller margin—50% to 44%.  Walker’s upsurge  is attributed to his willingness to refrain from visceral character attacks against Barrett and his penchant for highlighting his plan for economic recovery.

Conversely, while Walker has begun embracing “feel good” campaign advertisements, Tom Barrett has remained on the attack.  As a result of Walker’s willingness to remain positive and focus on his plan for economic recovery, his support among leaners and Independents has increased.

Additionally, Barrett’s combative demeanor and negative campaign advertisements have played a role in shaping the public’s perception of him.  Rasmussen finds that just 47% of the electorate has a favorable opinion of Barrett, while 48% view him unfavorably.  In contrast, 57% of Wisconsinites have a favorable opinion of Scott Walker, while 38% have an unfavorable opinion of him.

Rasmussen has moved this race into the “Leans Republican” category for just the second time in this lengthy and arduous election.  In late September, the race was categorized as “Leans Republican” but Barrett’s late surge in early October prompted Rasmussen to once again categorize this race as a “Toss-up.”  Now, with 11 days left until the general election, and Scott Walker’s margin of victory increasing, Rasmussen has once again categorized the Wisconsin gubernatorial race as Leans Republican.

Walker’s high personal approval rating, coupled with his willingness to shun negative campaign advertising in the waning days of the campaign, will propel him to victory on November 2, 2010.

The margin of error for this poll remains the same as the two previous polls, +/-4 percent.  Furthermore, Rasmussen once again resorted to surveying a paltry sample of the Wisconsin electorate; 750 likely voters.  For the sake of brevity the author will forgo discussing the inaccuracies of such a small sample size and the surveying of likely, rather than registered voters.  Despite the small sample size used by Rasmussen their results are nearly identical to the other polls that have been conducted.

For the first time since the inauguration of the Wisconsin Gubernatorial Showcase, PAI is going to provide the voters with a breakdown of the other polls that have been conducted recently on the Wisconsin gubernatorial race.

For more information on the Wisconsin gubernatorial election, visit the Rasmussen website:

http://www.rasmussenreports.com/public_content/politics/elections/election_2010/election_2010_governor_elections/wisconsin/election_2010_wisconsin_governor

Wisconsin Gubernatorial Polls

Rasmussen, October 13, 2010 (750 LV)

Scott Walker 51%

Tom Barrett 42%

Reuters/Ipsos, October 8-10, 2010 (451 LV)

Scott Walker 52%

Tom Barrett 42%

CNN/Time, October 8-12, 2010 (931 LV)

Scott Walker 52%

Tom Barret 44%

Wisconsin Policy Research/St. Norbert College, October 12-15, 2010 (402 LV)

Scott Walker 50%

Tom Barrett 41%

Walker’s average lead, as calculated by Real Clear Politics, is +9.0. In order to find the average, one must add the sum of all the numbers and then dividing that sum by the total numbers in a given set.  In so doing, the reader’s calculation will match that of Real Clear Politics, +9.0.

Source: http://www.realclearpolitics.com/epolls/2010/governor/wi/wisconsin_governor_walker_vs_barrett-1184.html

Key: LV=Likely voters.  The number of likely voters is determined by the number of residents surveyed by the various polling agencies.  A higher sample size equates to more reliable information.

The Shaanxi province has long been a hotbed of international commerce and has always relied heavily on its export economy.  The Shaanxi province was the capital of thirteen Chinese feudal dynasties, spanning 1,100 years (the Zhou-Tang dynasties).  Shaanxi’s principal city and capital, Xi’an, was one of the four great ancient capitals of China and the eastern terminus of the Silk Roads, an extensive network of interconnected trade routes than spanned the entire Asian continent and linked it to the Mediterranean, Africa and Europe.  Now, the province has partnered with the state of Wisconsin to enhance Sino-American relations and bolster each other’s agricultural and manufacturing sectors. 

Wisconsin Governor Jim Doyle concluded his Chinese goodwill tour last Friday by signing an international trade agreement with the Shaanxi province. Under the terms of the agreement, Wisconsin and Shaanxi will develop mechanisms for strengthening bilateral cooperation for promoting economic and social development.  In addition, Wisconsin and Shaanxi will identify areas of cooperation in the areas of agriculture, education, the environment, sustainable manufacturing, and clean energy.  Following the trade agreement, Governor Doyle stated, “In Shaanxi province, Wisconsin is well-positioned to partner with China in areas of high growth, especially in the areas of sustainable manufacturing, agriculture, and clean energy.”

The governor has been criticized by conservatives in the Wisconsin legislature for visiting China at taxpayer expense during the largest budget deficit in state history; for failing to actually negotiate any specific quotas or services that are to be exchanged with Shaanxi; and for the agreement’s emphasis on “sustainable manufacturing” and “clean energy,” which are thinly veiled code words for the American Left’s agenda of centralizing state control over all things economic.

Since the onset of his tenure, Governor Doyle has placed a profound emphasis on expanding Sino-American trade relations.  Laura Smith, spokesperson for the governor, noted that when Governor Doyle assumed office in 2006, China was Wisconsin’s sixth-largest trade partner, with exports totaling $417 million, but that today, China is the state’s third-largest partner behind only Canada and Mexico.  In the years ahead, however, it will be more important for Wisconsin’s governor to help balance the budget, cut spending, promote a friendlier business environment, enhance interstate commerce, develop rapport with other American states, and make Wisconsin a national leader in innovation and commerce.

The Wisconsin section of the Weekly Political Forecast was authored by PAI’s Deputy Policy Director.

In the first poll released since the primary election, Rasmussen finds that Republican gubernatorial candidate Scott Walker is defeating his Democratic counterpart, Tom Barrett, by eight points, 51% to 43%.  This is Walker’s largest lead in a head-to-head matchup since polling began last January.

Now, with Mark Neumann out of the race, Walker’s percentage of the vote is expected to steadily increase.  Despite the hostility between the two campaigns and their supporters, the vast majority of Neumann supporters are likely to support Scott Walker in the general election.  In fact, Mark Neumann, in his concession speech urged his supporters to support Scott Walker in his bid to win back the governorship.

The September 19, 2010, poll is the first Rasmussen poll to include “leaners.”  Leaners are people who initially indicated no preference for either Scott Walker or Tom Barrett.  Recently, however, many of those who were originally “leaners” have changed course and now support Scott Walker.  Rasmussen indicates that even with “leaners” excluded from the poll, Walker still leads Barrett by a comfortable margin, 50% to 43%.  In every poll conducted since February 2010, Walker has garnered 46-50% of the vote and defeated Tom Barrett in a head-to-head matchup.

In last month’s poll, Scott Walker was only defeating Tom Barrett by one point, 47% to 46%, with Mark Neumann leading the pack at 48%.  As aforementioned, Walker’s increased vote total is a direct result of the primary victory and the support of Mark Neumann supporters.  As a result of Scott Walker’s commanding lead, Rasmussen has categorized this race as leaning Republican.

Since the onset of the campaign, most political pundits and polling firms considered it to be a statistical dead heat, or a toss-up.  Now, with two months to go before the general election, it appears as though Scott Walker and Rebecca Kleefisch are poised to coast to an easy victory in the general election.

In addition to examining the head-to-head matchup, Rasmussen also examines the favorability and unfavorability ratings of the two candidates.  Rasmussen finds that fifty-two percent of voters view Barrett favorably, whereas, forty-three percent have an unfavorable view of him.

Conversely, fifty-eight percent of voters have a favorable opinion of Scott Walker, and just thirty-six percent have an unfavorable opinion of Scott Walker.  From a purely numbers standpoint, it appears as though the Walker-Kleefisch ticket will be victorious on November 2, 2010.  With that being said, the race is far from over, and in Wisconsin, the nation’s preeminent swing state, anything can happen.

Expect the general election to be one of, if not the most visceral gubernatorial election in state history.  Both campaigns are going to spend copious amounts of money on polemical advertisements solely intended to denigrate the record of the opposition.  If both candidates can refrain from negative attacks, their favorability ratings will increase, and voters may no longer loathe politics or political campaign advertisements.

The September 19, 2010, poll, much like those conducted on August 27, 2010, and July 30, 2010, had a paltry sample size; 750 likely-voters.  The September 19, 2010, poll, despite having a larger sample size than polls conducted in previous months, still lacks legitimacy.  If a poll is to be considered an accurate indicator of an electoral outcome the sample size must exceed 1,500.  None of the Wisconsin gubernatorial polls conducted by Rasmussen or the Wisconsin Policy Research Institute thus far, has had a sample size of over 750.  A small sample size allows pollsters to judge the mood of the electorate, and their feelings on specific candidates, but as aforementioned, it will not accurately predict the outcome of the November 2, 2010, general election.  Political Scientists use polls purely to gauge the mood of the electorate, and their views of particular candidates.   The electorates view of candidates often fluctuates, due mainly to specific statements made by candidates, the style of campaign they run, or their performance in debates.

It is hypercritical to reiterate that polls with sample sizes than 1,500 are purely speculative and lack standing and precision.  In addition, the September 19, 2010, Rasmussen poll, much like the panoply of polls conducted previously, relies on likely, not registered, voters.  Likely voters have a much lower participation rate than those who are actually registered to vote prior to Election Day.

PAI recognizes that some citizens register to vote simply because they consider it their ‘patriotic duty’ but never intend to vote.  This group, however, comprises a trivial percentage of the electorate and is often not large enough to influence the electoral outcome.

Lastly, the September 19, 2010, Rasmussen poll has a smaller margin of error than each of the previous polls.  The margin of error for this poll, while a still exorbitant four percent, is still inferior to previously conducted polls.  As aforesaid, an accurate poll has a margin of error of =/-3 percent.  A diminutive sample size, coupled with a high margin of error equates to an inaccurate an unreliable poll.

This poll is excellent for examining the mood of the electorate and the electorate’s views of the individual candidates but is not ideal for indicating the electoral outcome.  As new polls and information on the election become available, PAI will keep you abreast.

The latest Rasmussen Reports poll, released on September 17, 2010, shows Ron Johnson, an Oshkosh business executive and political outsider, defeating incumbent Democrat Russ Feingold, 51% to 44%.

In last month’s poll, Johnson held a miniscule one point lead, 47% to 46%, with a four percent margin of error. Now, one month later, after both candidates easily won their primaries, and the national parties are spending copious amounts of money to elect their candidates, Ron Johnson has pulled ahead in this ever-important Senate race.

Johnson’s lead in this poll is attributed to what Rasmussen dubs “leaners.” Leaners, for those unfamiliar with this political vernacular, are those who initially indicated no preference for either Feingold or Johnson but have recently decided to support a candidate. Rasmussen contends that many of those who were initially undecided in this race have indicated that they prefer Ron Johnson over Russ Feingold. Rasmussen Reports, in its analysis of the Wisconsin Senate race, writes, “When leaners are excluded from the totals, Johnson leads Feingold 50% to 43%. Even when leaners are excluded from the polls, Ron Johnson still holds a significant lead over Russ Feingold.” As these numbers indicate, it appears as though Ron Johnson is going to defeat Russ Feingold on November 2, 2010. If that is the case, Ron Johnson will become the first Republican Wisconsinite since Robert Kasten, 1986-1993, to occupy a seat in the United States Senate.

Aside from the support of leaners, Johnson’s recent success is attributed to his outsider status, his penchant for running positive television advertisements that highlight his record rather than denigrate that of his opponent, his enormous fundraising prowess and, lastly, the electorate’s disdain with the current political establishment.

In addition to polling voters on whom they prefer in the general election, Rasmussen also examines the favorability and unfavorability ratings of the two candidates. Rasmussen finds that sixty-one percent of Wisconsinites view Ron Johnson favorably, and just thirty-three have an unfavorable opinion of him. Conversely, fifty one percent of voters have a favorable opinion of Russ Feingold, and a whopping forty-six percent have an unfavorable opinion of him. For a three term incumbent these favorability/unfavorability ratings are abysmal.

Feingold, if he intends to win the general election, must reconsider his campaign strategy and focus more on his record than attacking Ron Johnson. Despite Ron Johnson’s seven point lead over Russ Feingold, Rasmussen still categorizes the Wisconsin Senate race as a “toss up.” This designation is due largely to the fact that Wisconsin is, and in recent times has been the epitome of a swing state. In both the 2000 and 2004 presidential elections, the margin of victory for the winning candidate was less than one percent. In fact, in 2004, John Kerry defeated George W. Bush by a meager 0.4% in the popular vote. As the reader can discern, even though Ron Johnson holds a seven point lead over Russ Feingold victory is far from assured. As the election nears, expect national pundits and media outlets to remain fixated on this hypercritical United States Senate race.

Much like the August 2010 poll, Rasmussen surveyed 750 likely, not registered voters, and relied heavily on telephone surveys. As noted in our analysis of the Wisconsin gubernatorial poll, surveys done by landline phones are not an accurate gauge of voter attitudes, due to the fact that senior citizens and females have a greater tendency to use landline phones than millennials and males. A paltry sample size, coupled with a relatively high margin of error, +/-4.5%, makes this poll relatively inaccurate.

In each analysis piece that PAI has penned thus far on the gubernatorial and United States Senate contests, an issue has been made of sample sizes and margins of error. We do this to educate non-political science majors about the intricacies of polling and how to gauge whether or not a poll is an accurate representation of the electorate. As noted in several prior documents, if a poll is to be deemed accurate the sample size must exceed 1,500 registered voters. Additionally, polling agencies should sample those from different backgrounds and socioeconomic classes. In order to accurately gauge the views of the electorate, it is of paramount importance that leading polling agencies, mainly Rasmussen and Gallup to increase their sample sizes. While this poll provides Wisconsinites with a general overview on the state of the United States Senate race, it is lacks accuracy and validity. As new polls and information about the Wisconsin United States Senate race become available, PAI will keep you abreast.

• In January 2010, Representative Paul Ryan (R-WI), the Ranking Member of the House Budget Committee, released version 2.0 of his seminal plan for American economic revitalization, A Roadmap For America’s Future.  This detailed document outlines an ambitious, conservative solution for improving America’s economic situation and plainly rebuts the Left’s accusation that conservatives have no positive policy prescriptions of their own.  The major components of the plan include: Health Care reform, Medicare reform, Medicaid reform, Social Security reform, and a restructuring of the outmoded and dilapidated federal tax structure.  As the American entitlement system verges on bankrupting America, it is paramount that the United States Congress adopt free-market, limited-government solutions like those outlined in A Roadmap for America’s Future.  
• With crucial midterm elections less than two months away, politicians from both parties are distancing themselves from this ambitious but controversial policy tome.  At the time of this writing, only fourteen members of the United States House of Representatives have denoted support for the roadmap.  They include: Reps. Roscoe Bartlett (R-MD), Marsha Blackburn (R-TN), Michael Burgess (R-TX), John Campbell (R-CA), Jeff Flake (R-AZ), Virginia Foxx (R-NC), Jeb Hensarling (R-TX), Bob Inglis (R-SC), Cynthia Lummins (R-WY), Jeff Miller (R-FL), Sue Myrick (R-NC), Devin Nunes (R-CA), Tom Price (R-GA), and Erik Paulsen (R-MN).  Due to its penchant for drastically altering Social Security, “the third rail of American politics,” many Republican candidates and politicians have avoided discussing A Roadmap for America’s Future. With a hypercritical election looming on the horizon, politicians and candidates from both parties have placed a greater emphasis on their own electoral prospects than on restoring economic prosperity.  If America wants to remain the most vibrant and robust economy in the free world, it is essential that statesmen work to implement common-sense, free-market solutions like those espoused by A Roadmap for America’s Future. 

The solutions proposed in this decisive document afford individual citizens greater control over the fiscal future, and the future of the American economy.   If the United States intends to remain the world’s most vibrant and robust economy, it is critical that serious reforms be made to our outmoded entitlement system, distended tax system, and costly health care system.  The only viable solution for reform of these programs is the reversal of the centralization of federal government power over recent years and the implementation of citizen-controlled, free-market solutions. 

Health Care Reform

Since the election of President Barack Obama in November 2008, health care reform has been a focal point of American domestic policy.  The passage of “ObamaCare,” as it is dubbed by policy analysts, in March 2010, incited sparked unprecedented controversy over the best solutions for reform.  The nonpartisan Congressional Budget Office, in a 2009 report on the state of America’s fiscal health, noted that in 2007 the United States spent an estimated $2.1 trillion to provide, administer, and finance health care.  This $2.1 trillion, adjusted for population, is nearly twice the amount spent by the world’s other industrial nations.[1]  The CBO remarked that the cost of health care is increasing by nearly seven percent every year.  As a result, 19 percent of the non-elderly population will lack access to health insurance in 2010 and beyond.[2]  In addition, the federal government devotes 21.7 percent of its annual budget to the two major health entitlement programs, Medicare and Medicaid.  The percentage of the budget spent on these two entitlement programs trumps even national defense, which is granted only 17.8 percent.[3]  What’s more, health care costs, at the time of this writing, consume 15.2 percent of the nation’s gross domestic product.  If the current trends continue, and health care costs continue to increase by seven percent on a yearly basis, health care will consume a whopping 20 percent of the Gross Domestic Product by 2016.[4]  In short, the current health care system is bankrupting the United States.  In order to ensure that all citizens have access to affordable health care, and to alleviate the federal debt burden, it is of paramount importance that the United States Congress adopt a health care plan similar to the one espoused in the Roadmap For America’s Future.

The Roadmap’s central concept is simple.  It states clearly, “The plan ensures universal access to affordable health insurance by restructuring the tax code, allowing all Americans to secure affordable health plans that best suit their needs, and shifting the ownership of health coverage away from the government and employers to individuals.”  It seeks to create an ownership society, in which citizens, not the federal government, are responsible for their own well-being and futures.  The focal point of the health care reform plan promoted by Representative Ryan is a refundable tax credit of $2,300 for individuals, and $5,700 for families, which is to be used to purchase health care in any of America’s fifty states.[5]  The plan stipulates that individuals and families are able to apply the tax credit to preexisting employer-sponsored health insurance plans or to an alternative plan that may better suit the needs of the individual.  In describing the intricacies of this tax credit, Ryan writes, “The payment will be made directly to the health plan designated by the individual, allowing those who use health care to choose the insurance that best suits their needs.  Any individual who obtains health coverage that costs less than the credit will receive any leftover as payment from the health plan, to be used for other health expenses.”  There are several advantages to this method of health insurance funding.

First, and most importantly, is universal access.  Prior to examining universal access, it is hypercritical to delineate the difference between universal access and universal coverage, as supported by President Obama and Congressional liberals.  Universal access allows all citizens access to a health insurance policy of their choosing.  If a citizen chooses not to purchase health insurance, he or she will not be forced to do so by the government.  Conversely, universal coverage, as the liberal Congress recently codified into federal law, stipulates that all citizens must purchase a specific health insurance plan, preferably a plan administered and funded by the federal government.  Universal access, as proposed by A Roadmap for America’s Future, allows all citizens, regardless of age, gender, income, or previous medical conditions to take advantage of the tax credit.  Moreover, the tax credit would enable citizens to purchase health insurance at the beginning of the year, rather than waiting for their tax returns.  Allowing citizens to cross state lines to purchase a health insurance policy that best suits their needs is an ingenious and fiscally responsible solution for reforming health care. 

Second, under this proposal, citizens would be able to keep the same health insurance plan if they switch occupations or state of residency.  Portability especially benefits those with preexisting conditions, because they will be able to change jobs without having to worry about losing their health insurance.  Further, this proposal affords employees greater freedom to choose the insurance plan that best suits their needs and which physicians they want to see.  Citizen choice, not government control, is the best solution for reforming our health care system.

Finally, small businesses benefit more from this proposal than the current health insurance structure.  Currently, unless a business can afford to offer a large-scale health insurance plan for its employees, its options are limited.  Conversely, under a tax credit system, employees, not the employer, are responsible for purchasing their health insurance.  In describing the benefits afforded to employers under this system, the Roadmap states, “The refundable tax credit model allows employees to take responsibility for purchasing their own health care with the credit, but also small businesses to make defined contributions to accounts—such as Health Savings Accounts—to help fund their employees’ health care expenses.”

Entitlement Reform: Medicare, Medicaid, and Social Security

The greatest threat to America’s fiscal health in the 21st century is the entitlement system.  Projections suggest that by the year 2028, these three programs will consume 100 percent of federal expenditures, leaving no money for national defense, infrastructure improvements, or education[6].  A Roadmap for America’s Future proposes ambitious but sensible solutions for reforming the American entitlement system.

Medicare/Medicaid:

Of the three entitlement programs, Medicare is the most difficult to reform.  Some suggest that Medicare reform is impossible due to the sheer size of the program and its complex structure.  Medicare came to exist as part of the Social Security Act of 1965, in which President Johnson pronounced that the federal government was going to begin funding a program to aid senior citizens with their medical expenses.  Medicare, much like Social Security, was designed as a single-payer system, in which the federal government pays for all expenses with tax dollars.  A major downside to such an approach is that it forces the federal government to administer and control every aspect of the program.  For example, the federal government selects which physicians, prescription drugs, and medical procedures Medicare recipients can receive.  A Roadmap For America’s Future seeks to end government control of Medicare, and grant citizens greater control over their medical decisions. 

First, the Roadmap intends to preserve the current Medicare structure for those currently over the age of 55.  Liberal polemicists and politicians have tried to convince the American people that conservatives want to dismantle Medicare and leave all current recipients without medical coverage.  This idea is erroneous and purely a political ploy.

Second, those who are currently under age 55 would be provided with Medicare payments to be used to purchase private health insurance.  The Roadmap stipulates that each Medicare beneficiary would become eligible for the payment by enrolling in a health insurance plan.  When phased in, and adjusted for inflation, the average yearly payment to Medicare beneficiaries will be $11,000.[7]  This money will continue to help alleviate medical expenses and allow citizens to purchase health insurance that best suits their needs.  The payment would also be pegged to income in order to particularly benefit those of a lower socioeconomic status.

Third, the Roadmap advocates the establishment of Health Savings Accounts for low-income beneficiaries to assist them in paying out-of-pocket expenses.  The Roadmap, describing eligibility for this, states, “The new Medicare program establishes and funds [Health Savings Accounts] for low-income beneficiaries.  It is designed specifically for those who are fully dual eligible (eligible under current policies for both Medicare and Medicaid), and beneficiaries with incomes that fall 100 percent below the poverty line.”

Social Security

President Franklin Roosevelt signed into law the Old Age Survivors Disability Insurance Act, or OASDI, and created what is today America’s largest entitlement program, Social Security.  At its inception in 1935, the mission of Social Security was to provide aid and compensation for low-income and retired workers.  Since that time, Social Security has witnessed several transformations, including the phasing in of a pay-as-you-go funding mechanism, a greater number of recipients than workers, and a colossal rise in the payroll tax.  Social Security, as it stands currently, is expected to begin running a deficit by the year 2017.  The current system is no longer viable and poses a serious threat to American economic hegemony.  A Roadmap for America’s Future contends that personal Social Security Accounts are the only viable solution for repairing this entitlement program.

Again, the Roadmap preserves the current Social Security system for those who are currently 55 and older; offers workers under the age of 55 the option to invest one-third of their payroll tax into personal accounts; and creates a permanently-solvent Social Security system by using a portion of the payroll tax to pay for the transfer costs and the unfunded liabilities.  It advocates an increase in the retirement age from 65 to 67, which merely reflects the increase in Americans’ life expectancy and changes in labor trends since the 1930s.

Americans would be able to invest a percentage of their current Social Security payroll tax in a personal account that they, not the government, are responsible for administering.  The personal account will allow citizens to invest their money into low-risk stocks, bonds, or both.  The preferred method of investment is a Life-Cycle Account, in which the citizen begins by investing 60 percent of their money into low-risk bonds and 40% percent into low-risk stocks.  Later, as the account begins to accumulate interest and the citizen has settled into his job, he has the option to alter their account by investing more money in stocks.  Furthermore, once a worker has accumulated over $25,000 in his personal account, he would have the option to invest in other investment packages.

Peter Ferrara, a leading expert on Social Security Personal Accounts, contends that under such a plan, a husband and wife each making $30,000 per year will accumulate well over a million dollars by the time they are ready to retire.[8]  Moreover, the Congressional Budget Office notes that under a personal account system, citizens would generally receive three times the amount of money they would receive under the current government administered pay-as-you-go system.  Personal accounts create an ownership society, alleviate many of Social Security’s financial burdens, and allow the program to become solvent.

The one major drawback to the personal accounts system is that the cost of transferring from a government-run program to one exercised by individuals is large. Michael Tanner, a senior policy analyst at the libertarian Cato Institute and author of the most sweeping Social Security reform proposal in American history, “The Tanner Plan,” told this author in a 2008 interview that transfer costs fluctuate based on the amount of payroll taxes invested.  The transfer costs, according to Tanner, could range from $5 trillion (The Bush Plan and A Roadmap For America’s Future) to $7 trillion (The Ryan-Sununu and Tanner Plans).[9]  But A Roadmap For America’s Future alleviates much of this cost by taking the portion of the payroll tax not invested into personal accounts and using it to pay both the transfer costs and the unfunded liabilities.  In order for Social Security to become solvent, it is hypercritical that a mechanism exists to pay for the high transfer costs and unfunded liabilities. 

The Federal Tax System

The Roadmap recognizes that the current federal tax structure is much too complicated and in a state of utter disrepair.  As a result, it recommends the following:

1)      Providing taxpayers with a choice of how to pay their income taxes.  Citizens will have the option to pay their income taxes through the current system or, instead, through a highly-simplified income tax system that has just two tax rates and no special tax deductions.

2)      A simplification of the tax rate.  The Roadmap simplifies the tax rate to 10 percent of income up to $100,000 for joint filers and $50,000 for individual filers.  For those joint filers making over $100,000 per year and single filers making over $50,000, the tax rate is 25%.  The creation of two tax rates simplifies the tax code and makes filing income taxes much easier.

3)      The elimination of the Alternative Minimum Tax, an extra tax some people have to pay on top of the regular income tax.

4)      The elimination of the Capital Gains Tax, the Estate Tax (also referred to as the “death tax”) and all taxes on interest payments.

5)      The Corporate Income Tax, which is currently the second highest in the world at 35%, is replaced with a consumption tax of 8.5%.  The astronomically high corporate tax rate has led many of the nation’s most prosperous corporations to relocate their corporate headquarters to other countries, mainly Japan, Singapore, China and South Korea.  The elimination of the corporate income tax will drastically increase American productivity and tax revenue.

Concluding Thoughts

Several leading conservative journalists, including Fred Barnes and William Kristol, both of the Weekly Standard, contend that conservatives, if they intend to win back both houses of Congress, must embrace the core tenets of the Roadmap, mainly Social Security Personal Accounts, Medical Savings Accounts, health care vouchers, and a restructuring of the federal tax code.  Barnes writes, “It’s not only the freshest, boldest, and most comprehensive Republican thinking, it is also the most relevant. If Republicans adopt the Roadmap as their basic ideological blueprint, it offers them the prospect of a landslide in the midterm election this year, followed by a victory in the presidential election in 2012.”[10]   Further, Barnes calls the Roadmap the most important proposal in domestic policy since Ronald Reagan embraced supply-side economics in the 1980 presidential election.[11]  Conservatives, if they intend to win back both houses of Congress and revitalize the American economy, should make these ideas the focal point of the 2010 midterm elections. 

The full text of the Roadmap can be accessed electronically at: http://www.roadmap.republicans.budget.house.gov/UploadedFiles/Roadmap2Final2.pdf

Bibliography

Barnes, Fred. “Think Big: Republicans Should Embrace Paul Ryan’s Roadmap.” The Weekly Standard 19 July 2010: 13-14. Print.

Ferrara, Peter J., and Michael Tanner. A New Deal for Social Security. Washington, D.C.: Cato Institute, 1998.

The Long Term Budget Outlook. Rep. Washington, D.C.: Congressional Budget Office, 2009.

McLaughlin, Seth, and Stephen Dinan. “GOP Flinching at Budget Spending Cuts Plan.” Washington Times. 27 Aug. 2010. 6 Sept. 2010. <http://www.washingtontimes.com/news/2010/aug/26/spending-cuts-plan-has-gop-flinching/>.

Ryan, Paul. A Roadmap For America’s Future: A Plan to Solve America’s Long-Term Economic and Fiscal Crisis. Publication. Vol. 2.0. Washington, D.C.: United States House of Representatives, 2010. <http://www.roadmap.republicans.budget.house.gov/UploadedFiles/Roadmap2Final2.pdf>

Social Security and Medicare Part A Cumulative Cash Surpluses and Deficits in Constant 2007 Dollars-2007 through 2080. Rep. Arlington,: Concord Coalition, 2008. http://www.concordcoalition.org/files/uploaded_for…/BixbyIOWACharts.ppt

Tanner, Michael. “Personal Social Security Accounts.” Personal interview. 20 Oct. 2008.

[2] Ibid., 25.

[3] Ibid., 25.

[4] Ibid., 25.

[5] Rep. Paul Ryan, A Roadmap For America’s Future: A Plan to Solve America’s Long-Term Economic and Fiscal Crisis, (Washington, D.C.: The United States House of Representatives, 2010), iv.

[6] Ibid., chart 19.

[7] Ryan, A Roadmap for America’s Future, 51.

[8] Peter Ferrara and Michael Tanner, A New Deal For Social Security (Washington, D.C: The Cato Institute, 1998), pp. 60-75.

[9] Michael Tanner, Interview with the author, The Cato Institute, Washington, D.C., October 20, 2008.

[10] Fred Barnes, “Think Big: Republicans Should Embrace Paul Ryan’s Roadmap,” The Weekly Standard, July 19, 2010, 14.

[11] Ibid., 14.