Center for Competitive Federalism
When Scott Walker was elected governor in 2010, Wisconsin
was one of the worst states in the country in which to do business.
Since then, we have seen bold and impactful reforms, and
Wisconsin has made great strides. It has clawed its way to 15th
place in the CNBC Global CFO Council ranking, from 29th in
Still, much work remains. Even in the CNBC ranking, Wisconsin
remains below the national average in friendliness to business
and cost of doing business. According to the Kaiser Family
Foundation, in 2014, Wisconsin’s state and local spending per
person ($7,797) was 43 percent higher than the national average
($5,457) despite an average income below the national average.
Even after $2 billion in tax cuts, Wisconsin’s working families
bear the highest state and local tax burden of any Midwestern
state, much higher than Minnesota, and higher than any state
except New York, New Jersey, Connecticut, and California—all
states with significantly higher levels of income. Even after several
years of outperforming the nation in economic growth, Wisconsin
still lags behind the national average in both per capita income
and family income, according to the U.S. Census Bureau.
Every year, the federal government provides hundreds of billions of dollars in assistance to state governments. Over many decades, the amount of federal assistance to states has hovered around 3.0 percent of GDP, nearly equal to the federal deficit. That level of funding gives the federal funding a powerful lever over the budgets and policies of states
governments, a lever that is rapidly turning into an instrument of control. In violation of the federal structure of our Constitution, which was designed to reflect the “vertical” separation of powers, the fiscal operations of federal and state governments are increasingly integrated – and the feds are increasingly in control.
State officials are all too familiar with this creeping federal takeover. Every day, these “assistance” programs confront them with a painful dilemma – either remain faithful to the preferences of the voters who elected them and risk the money that the federal government has already taxed away from them, or secure the money and trade away the voters’ preferences. Law professors call it “cooperative federalism,” but from the point of view of state officials, a more apt term might be “coercive federalism.”
Of all James Madison’s brilliant contributions to the Federalist Papers,
the least prescient must be Federalist No. 46, in which Madison
explains the reasons why the states would be richly protected
from undue federal encroachments.
Madison dismisses as “chimerical fears” the idea that federal power
would ever effect “a meditated and consequential annihilation of
the state governments.” As we now know, those fears proved all
Wisconsin is home to a diverse economy. Travel to northern Wisconsin, particularly in the middle of summer, and one can find a tourist destination like none other. Southeastern Wisconsin is home to
some of the most recognizable Fortune 500 companies, including Johnson Controls, Northwestern Mutual, ManpowerGroup, Kohl’s, and Harley-Davidson. Madison is the seat of state government and home to a world-class research institution, the University of Wisconsin.
Lesser known, but just as significant, are the industries north of Milwaukee along the shores of Lake Michigan up into the Fox Valley and into Green Bay. There, one will find some of the highest concentration of manufacturing companies in the country. From internationally known manufacturers like Oshkosh Truck to small businesses such as Plymouth Foam, Eastern Wisconsin still makes “stuff” and they do so as well as anybody in the world.
Unfortunately, far too often, the main impediment to continued growth and expansion, both in terms of manpower and physical footprint, is not lack of resources, skilled labor or technological advancement. Instead, manufacturers in Eastern Wisconsin face the daunting task of complying with onerous federal regulations, many of which key competitors, even within Wisconsin, are not required to comply with. Such a scenario puts those who choose to grow a business along the shores of Lake Michigan at a distinct competitive disadvantage.
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