For those who follow money matters, how better to ring in a new year than a positive spin on the U.S. and Wisconsin economies?
And attendees at the Wisconsin Economic Forecast at Monona Terrace Thursday got upbeat presentations from both Gov. Scott Walker and St. Louis Federal Reserve President James Bullard.
“It was nice to hear such a rosy forecast,” said Doug Fearing, who runs a security business in Madison and was one of 550 lunch guests at the event sponsored by the Wisconsin Bankers Association.
Walker brushed off a recent dismal report on job creation in Wisconsin — saying the Capitol protests and recall election had frightened employers from hiring — and talked instead about reducing income taxes in the next state budget. He said putting more money in the pockets of business people and consumers is the best path to future growth.
“Since most businesses don’t pay corporate taxes but rather pay through the individual income tax, the biggest bang is dropping the state income tax rate,” he said, adding that details would be released during Tuesday’s State of the State address.
Walker hit on a familiar theme of improving the state workforce, noting that Wisconsin lags in ready hires in information technology, health care and finance. He called for directing more resources to the state’s technical colleges.
But Walker specifically did not mention the University of Wisconsin System, which he suggested during a speech in California last year should have its funding tied to whether it is meeting job-training goals.
On the jobs situation, Walker said the recent report from the U.S. Census Bureau showing Wisconsin 42nd in job creation from June 2011 to June 2012 was due to business uncertainty amid the recall election of this past summer.
“Employers were waiting until after June 5 and were not willing to go out on a limb until they knew the next step,” he explained.
Walker went on to predict that final job numbers from the second half of 2012 will show vast improvement. He didn’t shy away from his famous “250,000 new jobs” pledge, although most estimates show the state is well behind the pace needed to hit that goal.
“This is not about some bumper sticker target, it’s about the future of this state,” he told the business crowd. “I believe the decisive actions we’ve taken here over the past two years, from tax reform to regulatory relief, have put us in a better position going forward.”
Walker also hinted that something needs to be done to address the shortfall in transportation funding in Wisconsin, noting the gas tax has failed to produce needed revenues because vehicles have become more fuel-efficient. But he stopped short of specifics, such as adding toll lanes to Wisconsin highways or raising the gas tax.
Bullard, a Minnesota native, followed Walker with a less political talk that nonetheless offered up several reasons for brighter days ahead. They included improvements in the housing market, stronger growth in emerging markets and less uncertainty following a deal to avoid the so-called “fiscal cliff.”
“I think we are through a lot of the pessimism,” he said.
Looking forward, Bullard predicts a 3 percent growth in the U.S. gross domestic product in 2013 and 2014. That is better than some other economists have predicted but still not enough to bring down a stubborn 8 percent national unemployment rate.
“It’s not going to get people who have been out of work to say ‘the labor market looks so great I think I will come off the sidelines and start looking for a job,’” he said.
The big wild card remains Europe, Bullard said, noting that the combined economy of those developed countries is larger than the U.S. economy. While the European debt crisis seems to have eased from the panic mode of 2011, he says there is a lesson to be learned.
“There is such a thing as borrowing too much,” said Bullard, who has supported the Fed’s policy of “quantitative easing” or buying U.S. bonds as a way to avoid falling into a long-term Japanese deflationary trap. In 2010, he published a well-regarded paper on that topic.