On Wisconsin: The Dairy State’s Domination by Government Employment

Published February 18, 2011

Can one feel schadenfreude for the problems of an entire legislature?

Consider Wisconsin. Like most states in trouble today, the Cheese State has been a land of hefty taxes and regulations for years, causing it, over decades, to leak capital and labor. Many a talented and productive person has been forced to leave the state for regions more conducive to economic growth.

As a result, economic activity taking place there today is based largely on wealth redistribution rather than on wealth creation, as evidenced by the list below of the state’s top-ten employers. Note that six are public-sector entities, which means they are sustained by coerced capital flows diverted from wealth creators. Of the remaining four, two are in a healthcare industry largely protected from competition due to the cartelizing effect of government regulation of business.

Meanwhile, the largest employer is the much-maligned Walmart, which serves as a godsend in a labor market with so few alternatives for workers. The irony is that Walmart sells goods produced in areas characterized by less intervention in market forces than Wisconsin.

Largest Wisconsin Employers
    University of Wisconsin–Madison
    Milwaukee Public Schools
    US Postal Service
    Wisconsin Department of Corrections
    Marshfield Clinic
    Aurora Health Care
    City of Milwaukee
    Wisconsin Department of Veterans Affairs

This leaves Wisconsin’s legislature in a bind. The federal stimulus granted it an artificial lifeline, but that runs out this year. Meanwhile, its massive public-sector payroll cannot be met by income taxes on that same sector. (If only!)

Economists now predict a $2.25 billion shortfall in tax revenues for a $31 billion budget, which is now around 13 percent of state GDP. Wisconsin’s debt service now takes up 33 percent of its spending. Of all the state’s revenues, almost 30 percent comes from the federal government.

Propped Up By Feds
This is a state economy propped up by federal spending programs recently monetized by the Federal Reserve. But what else would you expect from a state that was birthplace of both the Progressive movement and better living through progressive taxation? The better living was short-lived, as many taxpayers eventually fled the state.

Those of us with an understanding of economic theory may take pleasure in the rumblings of those who benefited from these policies for decades, as it dawns on them that budget constraints are real-world phenomena that can now, finally, apply to them.

Politically-Connected Finally Feeling Pain
Economic schadenfreude is a condition not available to everyone who can experience schadenfreude. It is available only to those who understand economic theory. However, the now-increasing opportunities for this feeling suggest the economy is recovering, to the extent that politically well-connected groups that benefit at the expense of productive members of the economy are now suffering.

Christopher Westley ([email protected]) teaches in the College of Commerce and Business Administration at Jacksonville State University. A version of this commentary first appeared at Mises.org. Used with permission.