The state's Department of Revenue released it's latest economic outlook report and though the findings are by no means surprising, they still are not good. According to the report Wisconsin will lose at least another 12,000 jobs before the recession is over and our unemployment rate will climb to 9.7% (it stands at 8.7% as of May). Obviously not very good news, but better than the national projection of 10.3% unemployment.
The problem I have with the projections - as I have with most economic and fiscal projections by government agencies - is on what information are these figures based?
This isn't to say that I am calling the report's accuracy or veracity into question. I really just want to know how this type of information is predicted. After all, this weekend Vice President Biden admitted that everyone - including the President - had "misread" the economy. There is also the March economic outlook report from the DOR that predicted the bottom to be 143,400 jobs lost in Wisconsin. Problem is that since the recession began we've already lost 143,300.
I think that it is fairly clear that predicting how the economy will be a year or two from now is extremely difficult. Very few people apparently saw the housing and financial sector collapse or even thought that making risky, bad-business loans wasn't a good idea for long-term financial stability.
It would seem to me that these numbers are based on no further bad news for the economy popping up and that state government doesn't make things worse by taking more money out of consumers' pockets or making it more expensive to create jobs. Unfortunately, that may be the only thing that state or federal government seems to be interested in right now.
We are increasing spending by 6% over the next two years in Wisconsin, increasing borrowing and increasing taxes by around $2.1 billion. This isn't exactly a recipe for economic success in a recession. I realize that the stimulus money is supposed to "create" jobs, but at most it's just going to buy us a little time by keeping people busy building infrastructure. We still need to create an environment in which the economy can recover and be stable.
Rather than sitting back and waiting for a second stimulus package, or hoping that the economy will recover on its own, state leaders need to take a much more active role than they are to create jobs and attract businesses. I know that I probably sound like a broken record, but we need to create a better business climate to make Wisconsin a competitor for the jobs that will inevitably be created in a recovery.
Unfortunately, instead of looking forward, we now have a budget that includes such job-killing measures as combined-reporting and a capital gains tax increase. I guess we'll have to wait and see what the next economic outlook predicts, but I'm betting it won't be pretty.