Don’t overrate Walker’s impact
A governor can only do so much to influence economy
IN MY OPINION
As the foothills of another campaign for governor break the horizon, Gov. Scott Walker is scaling ever higher rhetorical peaks to take credit for the Wisconsin economy.
“Our unemployment rate is down from 8.1% when we took office to 3.2% today,” he said in a statement when the April statistics were released. “Our reforms are working and our future is bright.”
Just more evidence of Walker’s brilliant policies as he prepares to run for re-election?
Then what about another report that shows, inconveniently, that job growth in Wisconsin fell off a cliff last year, with manufacturers cutting nearly 3,800 jobs despite getting new tax breaks from the Legislature? Or the one released Wednesday that shows Wisconsin ranked 33rd among the 50 states in job creation in 2016?
Just more evidence that Walker’s policies are a disaster? I wouldn’t make either claim. The decisions that a governor makes can have an impact on the state over the long run, but in the short run — notably those monthly unemployment statistics — it’s hard to give credit or assign blame, according to the experts I interviewed by email recently.
Edward Glaeser, an economist at Harvard University, summed it up:
“I tend to think that governors have relatively little impact — but probably some over a long enough time period,” he wrote.
“Can a governor radically change the course of a state’s economy?” asked Steven Deller, a professor at the University of Wisconsin-Madison Extension. “Not really, but they can influence on the margins, or around the corners. As you know, the larger macroeconomy (what is happening to the U.S. economy) is the 800pound gorilla in the room. But a governor can set the tone of how the state thinks about the business climate.”
Politicians encourage short-term thinking, seizing on any snippet of good news whether they had anything to do with it or not. And voters often oblige them, giving them more credit — and more blame — than they deserve for the performance of the economy.
A 2007 study by Justin Wolfers, then at the University of Pennsylvania’s Wharton School, found that voters in oil-producing states tended to re-elect incumbents when the price of oil was rising and to turn governors out of office when the price of oil headed south. “Similarly, voters in pro-cyclical states are consistently fooled into re-electing incumbents during national booms, only to dump them during national recessions,” he wrote.
“Which shows governors are rewarded by voters for luck,” said Glaeser, who
flagged Wolfers’ work for me.
Abdur Chowdhury, a Marquette University economics professor, said a governor’s tax policy or spending choices can have a long-term impact. Walker’s efforts to bring broadband to more parts of Wisconsin, for example, could pay dividends in the years ahead by giving e-commerce a boost and improving telemedicine and educational opportunities. But it might be years before that shows up in the monthly unemployment statistics.
“They can affect state economies in many ways, although the effects are hard to measure and may even take years to evidence themselves,” Chowdhury wrote.
Whether Walker’s policies are responsible for Wisconsin’s slow growth since the Great Recession remains a matter of considerable debate. Act 10, which took money out of the pockets of union members across the state, no doubt had some impact on consumer spending.
Marc Levine, a professor at the University of Wisconsin-Milwaukee and director of the Center for Economic Development, says he has found some “indirect evidence of such a dampening effect (as Keynesian analysis would predict),” which he’ll report in an upcoming paper.
“The interesting question — which is quite relevant in the case of Wisconsin since 2011 — is when outcomes on indicators such as job growth or unemployment deviate from either historical trends or from national trends, it seems to me, compelling cases can be made for the impact of a particular governor’s policies during a particular time period,” Levine wrote.
But he cautions that “assigning responsibility (or taking credit) for economic outcomes is tricky and quite complicated.”
Walker’s policies are fair game, but we’d be smarter to focus on how he has treated the institutions that affect economic growth over the long haul — the state’s educational system, its universities and technical colleges. Has he put enough money into roads and bridges and job training? Is he supporting innovation?
And we should be wary of claims and counterclaims of politicians about job growth — especially when they are citing the peaks and valleys of monthly unemployment statistics.
No matter how high the rhetoric soars.