In April 2009, Scott Walker announced his run for governor, and referenced the loss of Thomas Industries in Sheboygan. Gov. Jim Doyle didn’t do enough to keep the company in the state, Walker argued.
This kind of accusation is easy to make and almost impossible for the incumbent to rebut because no matter what kind of handout Wisconsin offers, some other state may offer more. Yes, Wisconsin needs jobs, but at what cost? And is there a better way for government to boost the economy than bribe companies threatening to move?
In the case of Thomas Industries, the company was based in Louisiana and Wisconsin, and wanted to consolidate in one place. The Doyle administration offered $2.5 million in aid, which worked out to about $6,500 per employee. As Zach Brandon of the state’s Department of Commerce explained to me back then, the average Thomas Industries employee would earn $40,000 per year and would pay back 4 percent of that, or $1,600, in annual state income taxes. Within four years, the state would regain its handout to the company.
This kind of handout was standard practice, Brandon noted. States were typically willing to spend $4,000 to $8,000 in subsidies per job gained and expected to recoup the money in three to five years.
But Louisiana wildly outbid Wisconsin in this competition, offering Thomas Industries $15 million, or nearly $39,000 per job. These employees, moreover, would earn $3 to $4 less per hour in Louisiana, and thus return a lower windfall in income taxes each year, Brandon estimated. Result: It will take Louisiana 39 years to recoup the subsidy through taxes paid by employees.
Think that’s insane? When the 2,000 General Motors jobs in Janesville were at stake, Wisconsin offered a $200 million package but was outbid by Michigan with a package worth $779 million or $390,000 per job. The idea of offering this kind of money for any company, much less in a shrinking industry like autos, is difficult to fathom. But given enough criticism from an opposing politician looking to score points, and the value of these handouts can quickly skyrocket.
In his Sunday column for the Milwaukee Journal Sentinel, John Torinus essentially argued on both sides of this issue. On the one hand, he defended Doyle for offering a $50 million subsidy to Marinette Marine to help it win a Navy contract that could employ 1,000 new employees (meaning the cost to the state is $50,000 per job). After all, Torinus wrote, “we can’t just sit on our hands and lose the contract to an Alabama shipyard.” Of course, that sort of argument leads to endlessly elastic subsidies. What if Alabama offers $200 million? Should we bid $250 million?
Meanwhile, Torinus made a contradictory argument: that the best investment for Wisconsin is in start-up companies. I’m inclined to agree with this half of his column. As has often been documented, most job growth comes from small and emerging companies. Mature companies often tend to be flat or even going backward, consolidating jobs. Torinus pointed to the Alterra Coffee and Tushaus Computer Service companies, which each needed about $100,000 in start-up dollars – all of which came from the private sector. They have grown to employ 200 and 130 people, respectively.
As it happens, Doyle and the state legislature have just passed a package that expands funding – by $15.7 million – for early-stage technology companies and “angel investors.” The story on this was more or less buried in the Milwaukee Journal Sentinel, whereas the periodic controversies over handouts to companies threatening to leave the state always get prominent coverage. Controversy drives the news. But as Torinus notes, those much quieter, early-stage investments will ultimately have far more impact on Wisconsin’s economy.
Confessions of Steve Hannah
These are good days for Steve Hannah, CEO of the satirical weekly, The Onion. Hannah was featured in a Q and A in the Sunday New York Times, dispensing his worldly wisdom.
It’s a far cry from the dark days of 1993, when Hannah, managing editor of the old Milwaukee Journal, and Sig Gissler, the editor, were both sacked in response to the ever-shrinking circulation of the afternoon paper. A story on that shakeup in Milwaukee Magazine by Jim Romenesko portrayed Hannah as a once-promising and energetic supervisor who seemed to grow bored with the job and turned nearly every reporter against him by bad-mouthing them behind their back. Hannah and Gissler “considered everyone who worked for them to be idiots, and they were the sole repositories of wisdom,” then-reporter Michael Zahn observed. (Ah, these reporters can be waspish about their editors.)
Hannah fell far, to a position handling media relations and writing a newsletter for the Strong Fund, a Milwaukee mutual fund company that eventually went out of business. But about four years ago, he got the job running The Onion.
As Joe Coscarelli observed in a column for the Village Voice, Hannah is weirdly obsessed with military matters in the Times interview: He learned toughness from his World War II veteran dad, went to work at the Journal everyday thinking life was a battle, and in his late 40s met – and was indelibly influenced by – a general who served in Vietnam and had a philosophy of being the last person off the battlefield and never leaving a body behind. Actually, the whole thing is ripe for an Onion parody.
Hannah confesses to being a rather overbearing capital bureau boss for the Journal (“So I went in on Monday and said: ‘I’m the boss. Anybody who doesn’t like it, step right up and let me know.’”) And he confesses that, on advice from an unnamed friend – who sounds like a female reporter (Lois Blinkhorn, is that you?) – Hannah decided to become more kind to his staff. But not kind enough, apparently, for those scurrilous scribes who complained to Romenesko.
But that was then. This is now. Hannah and Gissler (who runs the Pulitzer Prizes for Columbia University) have certainly landed on their feet. Who knows? They may turn out to be the last of their old Journal colleagues to leave the media battlefield.
The Buzz
-In reaction to the scandal at the Milwaukee County Mental Health Center, state Rep. Tamara Grigsby (D-Milwaukee) called Scott Walker “one of the worst county executives in Milwaukee history.” That would seem to leave wiggle room: In case she’s challenged about Walker’s disgraced predecessor Tom Ament, she can proclaim Walker second-worst.
-In reaction to my column of last week suggesting the Medical College of Wisconsin has neglected health care in the city, its longtime president, T. Michael Bolger, offered a detailed comment defending the college, noting charity care done by its physicians and several programs it has created to serve the city. All well and good, but his successor seems to think there’s an opportunity for the college to do more. I’m inclined to agree.
-A front-page, top-of-the-fold story by the Journal Sentinel last Thursday gave prominence to suburban officials complaining about an increase in prices the Milwaukee Water Works charge. Certainly newsworthy but rather incomplete. As a NewsBuzz story documented the next day, Milwaukee’s customers will still pay two-fifths of what the average American pays for water and far less than what most cities charge.
-Is JS religion reporter Annysa Johnson more aggressive than her predecessor? Pressroom Buzz considers.
-And should the Brewers fire manager Ken Macha? The Sports Nut is thinking rather negative thoughts.
