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Questioning Wisconsin’s “Multiplier Effect”
As I suggested on this blog before, Scott Walker and his fellow conservatives’ economic development plan all along must have been to stir up Wisconsin so much that out-of-state recall election dollars would flow into local businesses.
From there, the “multiplier effect” would work to lift Wisconsin’s economy.
In fact, Madison-based watchdog group Wisconsin Democracy Campaign estimates that between $125 million and $130 million was spent in 2011’s legislative recall elections and Walker’s recent recall.
Any day now those millions will trickle down into average worker’s pockets, bolstering Wisconsin’s middle-class. I mean, in theory, the buck should be passed around, picking up steam as it moves from one set of hands to another, right?
A Google refresher course on the multiplier effect reminds us that the theory includes a number of complex factors, one of them being “leakage,” when money isn’t spent in the state.
When it comes to campaign economics, very little of that $125-$130 million helped Wisconsin. Most of the money likely went to out-of-state pollsters, mail houses, media groups, and recent college grads parachuted in from D.C. And unless the TV, radio stations, or newspapers that saw heavy advertising were locally owned, a large chunk of the ad revenue likely went back to out-of-state corporate owners.
Tracking the economic multiplier effect from such a campaign is difficult to do with any accuracy, according to University of Minnesota economist Ford Runge.
Out-of-work electricians, plumbers, carpenters, retailers, factory workers, public servants, teachers, and other middle class workers saw little, if any, boost from campaign spending. What little outside investment remained in Wisconsin's economy is dwarfed by the damage of Walkers budget cuts and anti-union policies.
In retrospect, this much does seem clear: most of those out-of-state investors in Wisconsin politics weren’t interested in stimulating the state’s economy. Their benefit is derived from maintaining a dysfunctional, anti-worker, anti-tax state government. Wisconsin's recent example should serve as a model for how not to implement a progressive, nationally respected economic development policy.
Photo: Megan McCormick, wikidmedia commons
Posted in Economic Development | Related Topics: Economic Growth Midwestern States 2012 Election
1 Comment
Gary Lee says:
June 15, 2012 at 12:58 pm
Multiplier effect is always a hopelessly optimistic crystal ball forecast method, with the numbers most often picked based upon the answer desired, not on any rational analysis of historical trends or validated predictive models. And of course it is just variant of Trickle Down, aka Voodoo Economics.