Commentary and Opinion

KENNEDY: Who moved Wisconsin's cheese?

March 5, 2011

KennedyIn 1998, Spencer Johnson wrote a best-selling book about dealing with change; he titled it, “Who Moved My Cheese?”

I can’t help thinking how ironic it is that Wisconsin—home of the “cheeseheads”—is the most prominent example of what happens when political leadership stubbornly refuses to deal with an economic landscape that has changed.

Upon assuming office, Gov. Scott Walker immediately made two incredibly poor policy decisions: He rejected federal dollars for high-speed rail, and (as anyone who hasn’t been in a coma this past month knows) he offered legislation that would revoke the bargaining rights of public-sector unions. He has attempted to justify both decisions by pleading state poverty.

It’s tempting to point out that Wisconsin’s fiscal straits didn’t keep the governor and Legislature from first enacting generous tax breaks for business, but that bit of political hypocrisy isn’t nearly as troubling as the governor’s evident inability to understand a simple fact of contemporary budgetary life: It is impossible to balance public budgets by cuts alone. As Robert Russell, a Wisconsin state economic analyst, has pointed out, state workers are also taxpayers and consumers.

According to Russell, if Wisconsin public employee salaries are cut through increased withholdings (as Walker is insisting) by an amount large enough to fill the $137 million budget gap, the resulting drop in consumer spending will lead to:

• a loss of over 1,200 nongovernment jobs,

• a loss of about $100 million in business sales statewide,

• a loss of nearly $35 million in personal income of non-government-employee households,

• a loss of nearly $10 million in state tax revenue.

In other words, lower wages and fewer workers translate to less tax revenue and consumer spending. Since even the most modest tax increases appear to be politically untenable these days, the only option likely to generate sufficient revenue is economic development and job creation.

Which brings us to high-speed rail.

The policy arguments for high-speed rail are familiar to most of us: Our highways are increasingly congested and enormously expensive to expand; we can’t abate environmental pollution or reduce dependence on foreign oil without offering viable alternatives to the automobile; long commutes translate into lost productivity, costing businesses billions each year.

Urban planners argue that rail is essential if we are to address the problems caused by urban sprawl and make our cities more livable. Groups trying to save America’s small towns argue that those towns will disappear without fast, convenient interurban transportation.

All true, and all reasons to support mass transit within—and high-speed rail between—cities.

What is less noted and equally important, however, is the job-creating potential of high-speed rail. Last fall, California voters approved $10 billion for a rail project linking San Francisco and Los Angeles. More recently, the San Francisco Business Times ran an article highlighting the California High-Speed Rail Authority’s projection that 450,000 permanent jobs would be created by the project in addition to the 160,000 jobs needed to plan, design and build the system.

The Christian Science Monitor estimated that the Obama administration’s $8 billion initial investment in high-speed rail will produce 320,000 jobs and generate roughly $13 billion in economic development benefits, “including construction and operations jobs, as well as manufacturing and supply-chain opportunities. By increasing mobility while decreasing congestion and sprawl, high-speed rail makes our country more competitive while simultaneously spurring economic development.”

Waging a war on public unions—however ideologically satisfying—will not help Wisconsin’s economy. The cheese is on the high-speed train, and thanks to the governor, that train has left Wisconsin’s station.•

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Kennedy is a professor of law and public policy at the School of Public and Environmental Affairs at IUPUI. Her column appears monthly.

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