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Right-Wing ALEC Playbook Is Crippling Wisconsin’s Economy

Small-government proposals killing jobs, not creating them

Feb. 19, 2013
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It’s no secret that Gov. Scott Walker is not making good on his promise to create 250,000 new jobs in his first four-year term.

Thus far, Walker has only added 37,511 new jobs since taking office.

But Walker’s job-creation failure can be chalked up in large part to the policies pushed by the secretive American Legislative Exchange Council (ALEC), a right-wing, pro-corporate lobbying group.

ALEC’s economic “playbook” is drafted by right-wing economist Arthur Laffer, creator of the infamous “Laffer curve,” which pushes the discredited claim that lower taxes actually create higher tax revenues.

Although Laffer’s economic theories are not taken seriously by mainstream economists, ALEC and Laffer promote them as if they were gospel—gospel that is believed by Republican lawmakers around the country.

Unfortunately, the ALEC-Laffer agenda as implemented by Walker and his Republican allies is weakening Wisconsin’s economy.


ALEC-NRA Legislation Passed in Wisconsin

Although ALEC attempts to keep its activities secret, thanks to research by the Madison-based watchdog group, Center for Media and Democracy, we know that ALEC is a corporate-funded front group that develops model legislation that favors its Big Business funders—such as Koch Companies, telecoms, Big Oil and Big Pharma—as well as deep-pocketed special interests, such as the National Rifle Association (NRA). ALEC and its legislator members (overwhelmingly Republican) then push its model bills in statehouses across the country.

In Wisconsin, Walker is perhaps the most prominent former member, although former Gov. Tommy Thompson bragged about generating ideas at ALEC conferences.

Current ALEC state chairs in Wisconsin are state Rep. Robin Vos (R-Rochester), the powerful Assembly speaker, and Rep. Scott Suder (R-Abbotsford), although most if not all Republican legislators are ALEC members.

ALEC became notorious as the force behind controversial bills such as Florida’s shoot-first-and-ask-questions-later Stand Your Ground bill, which was passed as the Castle Doctrine in Wisconsin in 2011. The model for these pro-gun laws was drafted with the help of ALEC members Wal-Mart and the NRA. The bill has helped to provide defenses for the shooters of Trayvon Martin in Florida and, closer to home, Bo Morrison in Slinger.


The ALEC Economic Playbook

Although ALEC’s bills on social issues have gotten the most attention, economists and good-government groups are now scrutinizing ALEC’s anti-government bias and economic recommendations.

What they’re finding is that ALEC’s low-tax, small-government proposals actually harm—not help—economic growth and job creation.

“These policies would cut taxes deeply for wealthy individuals, investors and corporations; shift tax burdens substantially from well-to-do to middle- and low-income households; and impose strict constitutional or legal limits on revenues or spending that would severely limit states’ ability to provide adequate funds for education, health care and other priorities, and impair state economic growth,” wrote Erica Williams and Nicholas Johnson of the Center on Budget and Policy Priorities.

ALEC’s economic “playbook,” in many ways, is its Arthur Laffer-authored publication called Rich States, Poor States, in which ALEC and Laffer rank states according to 15 state policies they promote. Overall, ALEC and Laffer favor low or no taxes, regressive tax policies that help high-income earners and corporations, a small public sector and the elimination of private sector unions. States are then ranked accordingly.

In the latest edition of Rich States, Poor States, ALEC ranks Wisconsin 32. The state gets “high” marks for having a low minimum wage, lacking an estate tax and having a relatively small public employee sector. It gets low marks for not being a right-to-work state and having high property taxes.

Although Wisconsin is ranked 32nd according to ALEC’s measures, it’s ranked 42nd in actual job creation between June 2011 and June 2012, according to federal statistics.


ALEC’s Policies Slow Growth, Encourage Inequality

Mainstream economists say that the discrepancy between ALEC and Laffer’s theories and real-world performance seems to be common.

Peter Fisher, research director for the Iowa Policy Project, is the lead author of Selling Snake Oil to the States, an analysis of ALEC and Laffer’s rankings. Fisher looked at ALEC’s 2007 state rankings and then tracked states’ economic performance through 2011.

What he found shouldn’t be surprising to anyone who knows basic economics: the higher a state’s ALEC-Laffer ranking, the worse it performed on a variety of economic indicators.

“There is virtually no relation” between a state’s economic growth and employment and its ALEC-Laffer ranking, Fisher told reporters on a conference call last week.

On the other hand, Fisher said, the relationship between a state’s ALEC ranking and common prosperity measures “are pretty strong but in the opposite direction to what ALEC and Laffer claim,” Fisher said.

Fisher’s analysis found that the better or more competitive a state on the ALEC-Laffer ranking, the lower that state’s income, every year from to 2007 to 2011.

What’s more, Fisher reported that the ALEC-Laffer recommendations actually weakened a state’s economy.

“In actuality, Rich States, Poor States provides a recipe for economic inequality, wage suppression and stagnant incomes, and for depriving state and local governments of the revenue needed to maintain the public infrastructure and education systems that are the true foundations of long-term economic growth and shared prosperity,” Fisher wrote.

Among the best predictors of prosperity, Fisher found, are strong education systems and a social safety net, as well as a concentration in high-growth industries that provide good-paying jobs.


Wisconsin’s Forecast

Walker and the Republican-dominated Legislature have been following the ALEC-Laffer prescriptions since taking power in January 2011.

In fact, ALEC-backed bills were among the first bills Walker signed. The Supermajority Act requires a supermajority vote on raising income, sales or franchise taxes; Wisconsin Act 2 weakens consumer protections under the guise of “tort reform.”

And while ALEC hadn’t authored Walker’s controversial collective bargaining bill, its fiscal policy director, Jonathan Williams, applauded it, saying at the time, “Wisconsin has become ground zero.”

In its latest edition of Rich States, Poor States, Laffer, Williams and the Wall Street Journal’s Stephen Moore recapped a few of the bill’s “savings,” then wrote: “These results are truly remarkable, and we commend Gov. Walker for standing up for Wisconsin taxpayers and putting government on the track of fiscal sustainability.”

The tax policies implemented since Walker took office also work against the greater good. For example, the Republican-authored state budget reduced the Earned Income Tax Credit and the Homestead Credit, a change that penalizes low-income workers, and drastically reduced taxes paid by profitable manufacturers.

In his next budget, Walker will introduce an income tax cut. But this, too, will favor those with higher incomes. Although that may be popular with ALEC, its corporate backers and Arthur Laffer, Wisconsinites aren’t so sure about Walker’s tax cut.

According to the Wisconsin Economic Scorecard, a quarterly poll conducted by the UW-Milwaukee Center for Urban Initiatives and Research, only 16% of the 622 Wisconsin residents surveyed would prioritize income tax cuts when allocating the state’s projected budget surplus.

Yet 40% said they wanted that money to go to education and 33% would like to see that surplus go to Medicaid programs—policies that Walker and ALEC oppose but which would be in the long-term interest of the state’s economic health.


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