Faking the Business Creation Numbers

On October 9, 2013, The Business Journal reported that Governor Walker "continued ... to downplay his 250,000 jobs pledge from his gubernatorial campaign, instead focusing on two other numbers he says are key indicators of the state's economic success and potential: 11,590 and 1." Walker apparently blamed "employer concerns caused by protests in Madison, recall elections and the Affordable Care Act" for the state's failure to grow the way he had promised. So he is turning instead to two different measures of his "success": the growth of "new businesses" since he took office and a forecast for economic growth from the Federal Reserve Bank of Philadelphia.

The trouble is both measures are deeply flawed. Take the claim about "new businesses." The article in The Business Journal notes that the number Walker is using "include about 15 different types of business classifications." It does not note, however, that among those 15 types are such things as Little League Teams, Girl Scout Troops, Lions and Rotary Clubs, birdwatchers, a host of community organizations and other non-profits. The categories also include "out-of-state corporations that have to file papers in Wisconsin, but have no real physical presence in the state [plus] multiple filings for one business" (Uppity Wisconsin, November 13, 2013).

The actual number of economically significant new businesses created in Wisconsin since Scott Walker took office? 4,024 -- according to the Quarterly Census of Employment and Wages conducted by the Bureau of Labor Statistics. As Uppity Wisconsin points out, "the QCEW count is-- as Walker has pointed out almost daily-- an actual hard-count census of nearly all the businesses in the state with actual employees.  It is clearly the most precise measurement for keeping track of job and business creation under Walker" (Uppity Wisconsin, October 5, 2013).

As for the "WE'RE NUMBER ONE!" claim about Wisconsin's economic forecast,

it's a red herring! What the Federal Reserve Bank of Philadelphia measures is the GAP between actual GDP, or Gross Domestic Product, and potential GDP, defined as "the value of all the things that we had the ability and desire to produce in our economy, even if we didn’t produce all of it." The explanation of potential GDP goes on to say, "If GDP is different that potential GDP, then we have a problem. The economy isn’t employed at its full potential" (The Fed Explains Real Versus Potential GDP, nd).

So, "WE'RE NUMBER ONE!" (or number 2, but who's counting?) turns out to be a problem, not a plus. The Cap Times summarizes the true state of Wisconsin's economic picture:

The GDP growth for Wisconsin this year isn’t available, but data released Thursday by the federal Bureau of Labor Statistics shows that the state ranks 34th in job growth.

And on Wednesday, the Cap Times’ Mike Ivey reported that Wisconsin comes in at 41st in Forbes’ “Best State for Business” ranking. (Cap Times: New WMC ad makes misleading claim about Wisconsin economic growth, September 26, 2013).

In The Business Journal article referenced above, Walker is quoted as saying, “That’s potential, that’s not achieved yet." The key here is "not achieved." That's Walker's record in a nutshell.

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