The Private Sector Depends on Public Investment

The Radical Right Contradicts Itself

Several recent articles in the Post-Crescent show how odd and contradictory the radical right’s attitude toward government is.  In general, radical rightists do not like government. Their attitude was expressed most famously by President Reagan, when he said, “Government is not the solution. Government is the problem." In this view, all good things are done by the private sector, and government’s interference with economic matters should be minimized.  But the radical right is not consistent in this view.

On February 8, 2010, the Post-Crescent reported that Governor Walker said that he wants to create “a $75 million development loan fund in his next budget.” That is, he wants the State of Wisconsin to compete with private funding sources in order to attract economic activity to our state. He wants to do this in order to create jobs in Wisconsin. In other words, Governor Walker doesn’t believe that the free market will do the job by itself. State government must be involved.

On February 11, the Post-Crescent reported that our Governor wants to spend $100 million on job training. I applaud this idea, but how does it fit with the Governor’s plans to lower taxes, and how does it square with the idea that government is the problem?

On February 9, the Post-Crescent reported that Skyward Inc., a software company in Stevens Point is protesting the fact that it lost a contract to provide software to Wisconsin’s schools. This is the case where WEDC messed up the bidding process by offering Skyward nearly $12 million in tax breaks while the bidding was going on.

Government Investment in Business Is Common in Wisconsin

These are not isolated instances.  Here are some other examples from the website of the Wisconsin Economic Development Corporation.

·         Glacier Transit and Storage recently announced an expansion of its warehouse facility in Plymouth, WI and that it would receive $70,000 in tax credits.

·         WEDC announced a grant of $100,000 to expand revolving loan fund of the Hispanic Chamber of Commerce of Wisconsin.

·         In January, Milwaukee Tool Corporation announced that it would be expanding its Research and Development Facility in Milwaukee, and WEDC announced tax credits of up to $2.05 million to support this effort.

·         In January, the City of Lake Mills was awarded a WEDC grant of $46,750 for environmental assessment of an old industrial site in the city in preparation for fixing it to make it available for use again.

·         In November, The Wisconsin Economic Development Corporation was recently awarded a $661,087 State Trade and Export Promotion (STEP) grant from the Small Business Administration (SBA).

I do not wish to dispute the value of any of these grants or tax breaks, but they point to the fact that the private sector is heavily dependent on government activity. No one – least of all Governor Walker – believes that the free market left to itself will provide the jobs that people in Wisconsin need.

The Governor Wants to Pick Winners and Losers in the Economy

We should note also that Governor Walker’s policies involve something else that the radical rightists usually say they don’t like, and that is picking winners and losers among businesses or among sectors of the economy. (See, for example, a recent blog post by Michael Sandoval.) Obviously, if our state is going to invest $100 million in new companies, decisions will have to be made about which companies and which sectors to invest in. Our state will have to pick winners and losers.

Our Economy Has Always Been a Partnership Between Business and Government

Governor Walker’s plans to use government resources to stimulate the economy do not represent something new in our history. Our economy has always been a partnership between government and private business. Here are some examples.

·         At our country’s beginning, Alexander Hamilton’s insistence that the new federal government assume the debts that the states had incurred during the Revolutionary War made it possible for our currency to be accepted worldwide and laid the basis for the US to become a great trading nation.

·         Abraham Lincoln’s establishment of the Land Grant colleges created the institutions that train most of our engineers and that do the research that underlies our extremely productive agriculture.

·         The transcontinental railroad was built with huge government subsidies in the form of land grants.

·         Dwight Eisenhower’s investment in the interstate highway system laid the groundwork for growth in our national economy. (If you buy blueberries in January, thank President Eisenhower.)

Then, there are the ordinary government programs that business needs.

·         Public schools provide an educated work force

·         Roads make it possible for a company to ship its products to market.

·         Business facilities are protected by police and fire departments

·         The rights of owners are defined in law and are protected by our system of courts.

What Governor Walker Really Believes

Without these investments by federal, state and local governments, our economy could not function as it does, and we would all be much poorer. Governor Walker seems to understand this but only when he is desperate to create the jobs that he promised us.  The rest of the time, he follows the standard radical rightist line and pushes for lower taxes and smaller government, but now we know that he doesn’t really believe it.  He really believes that government should be big when it helps business but small when it does other things like protecting the environment.