David Michael Miller
Their bologna has a first name. It’s S-U-P-P-L-Y. Their bologna has a second name. It’s S-I-D-E.
Accusations are flying over who is responsible for losing Oscar Mayer. Gov. Scott Walker has set himself up for most of the blame because he’s the guy who put “open for business” on our state welcoming signs at our borders; he’s the guy whose signature photo op has him in shirtsleeves, hardhat and plastic glasses touring a manufacturing plant; and he’s the guy who has cut taxes and services and gutted regulation in the name of creating jobs.
It hasn’t worked. Wisconsin ranks last in the Midwest and is in the bottom half of all states in creating new private-sector jobs. After five years, the governor can’t blame the previous administration any more. If lower taxes, less regulation and a pro-business attitude were all it took to keep and grow businesses here, it should be working by now.
Instead, the last 1,000 jobs at Oscar Mayer will either vanish or be moved to New York, Iowa or Illinois. None of these are especially low-tax, low-regulation states. In fact, New York has the highest taxes in the nation.
The truth seems to be that the old Madison plant was doomed, not by any of the things that supply-siders like to point to, but by the simple configuration of the building. The multi-story plant was inefficient compared to sleek, sprawling facilities in other places.
It is true that Wisconsin seemed to do little compared to other states to keep Oscar Mayer here, but it doesn’t appear that anything state or local officials could have offered would have made a difference.
There are two lessons that might come from all this.
The first is that public financial incentives are dangerous and ill-conceived. The state of Iowa and local governments are giving Kraft Heinz almost $15 million for the privilege of cutting their workforce in Davenport from 1,400 to 475 jobs. That’s right. They’re giving the company public money to reduce their workforce there by two-thirds.
In Columbia, Mo., Kraft Heinz is modernizing a plant in a way that will increase production but reduce employment from 500 to 350 workers — with the help of a 75% property tax reduction over 10 years.
And while Chicago Mayor Rahm Emanuel is crowing about landing some front-office jobs in his city, Kraft Heinz is just consolidating operations in Chicago, at a net loss of jobs for that metro region as a whole.
The goal of merging operations is not simply to eliminate duplication. Kraft Heinz’s market is shrinking as consumers move away from processed foods like hot dogs and lunchmeats. Sales of packaged cereals and soda are down 25% since 2000, while sales of fresh prepared foods are up 30% just since 2009.
So for governments to invest heavily in a declining industry is politically tempting but probably a really bad bet. Sure, Wisconsin and local economic development leaders could have been more on the ball, but to what end?
Which brings me to my second point, which is that “economic development” is mostly just snake oil anyway. To listen to Gov. Walker, Wisconsin Manufacturers & Commerce and the Wisconsin Economic Development Corp. tell the story, it’s all about tax rates, regulation, public subsidies and that most amorphous of concepts, “the business climate.”
But economic development isn’t about any of these things. Businesses make location decisions, just as Kraft Heinz did for Oscar Mayer, based on their own internal logic. They go to places where the facilities are the most efficient, where workers have the needed skills and where the logistics of moving people and goods is easiest and least expensive. Taxes, regulation, handouts and cheerleading play little part.
Wisconsin needs to go back to what it’s good at. Why are Silicon Valley and Boston hubs of the high-tech economy? California and Massachusetts are not known for their low taxes and light regulation. But they have Stanford and MIT. In that light, how smart was it to cut the venerable UW by $250 million? Is that balanced out by all those “open for business signs”? I don’t think so.
The answer going forward is to get enough revenue through taxes to rebuild an excellent preschool to postgraduate educational system with a technical college system that can properly retrain line workers at places like Oscar Mayer; to invest in transportation and other infrastructure; and to protect our signature resources — the state’s land, water and air.
In short, we have to become once again a state that believes fervently in making investments in public resources and in people.
The current state administration, abetted by its big-business lobby, is moving in just precisely the wrong direction on every front. They didn’t lose Oscar Mayer, but they sure do have a way with bologna.
Dave Cieslewicz is the former mayor of Madison. He blogs as Citizen Dave at Isthmus.com.
