On Wisconsin?

On Tuesday, June 5, Republican Governor Scott Walker of Wisconsin survived a recall election challenge, beating Democrat Tom Barnett by a convincing 53% to 46% margin. In the wake of Walker’s victory, opinions were divided about the meaning of the result. National Republicans said that the election was, “a telling forecast of the November 6 presidential election and America’s return to greatness.” Liberal outlets commented that “special interest money from outside the state bought the election.”

So what does the Wisconsin result really mean? I’d like to try to put it in the context of some broader themes that I plan to explore in future posts. Here are some of the questions that will need to be answered in the coming years, both in the U S. and by the citizens of most Western democracies.

1) Will taxpayers continue to support “tax eaters” (public-sector employees) at a permanently higher standard of living than their own, with superior health care and retirement benefits, despite those workers having higher job security and being subject to lower expectations of productivity, performance and accountability?

2) Do voters really want fundamentally smaller government? Are voters willing to see their own benefits (present or promised) cut or constrained?

3) Can raising taxes on “the rich” really generate sufficient revenue to fund everyone’s existing and promised benefit levels? (I believe the answer is no, in Wisconsin and most other places.) Regardless, will voters try to preserve existing and promised entitlements by punitive taxation on the wealthy?

4) When other funding sources fail, will the middle class be willing to pay for its own benefits, through significantly higher taxes? (This is an especially important question in the U.S., where at least at the national level the effective tax rate for a median-income taxpayer is unusually low.)

5) Are we still in an era where fairness demands and prudence permits the continued expansion of the state and the benefits it provides?

My view is that Tuesday’s election results provide us with only a Wisconsin-specific answer, and to only the first of these five questions. In a state where private-sector workers outnumber public-sector workers, a majority of voters supported Walker in making the compensation packages of public sector workers slightly less generous, and therefore more similar to those of the private sector workers whose taxes pay their salaries.  In other words, we now know that most Wisconsin voters are willing to see the other guy’s benefits cut or constrained in order to limit the size and expense of government.

The message of Wisconsin was, “cut their benefits, which are too generous. Constrain their power, which imposes costs on my pocket.” By a comfortable though not dispositive majority, Wisconsin voters indicated that they do not like the idea of ‘civil servant’ equaling ‘civil master.’

I believe Wisconsin provides few answers to the global issue of the structural imbalances between entitlements and financial resources. The result in Wisconsin can’t tell us much about the potential for benefit cuts in locales where the public sector is already larger than the private sector, such as France (55% of GDP), Cuba (78% of GDP) or Zimbabwe (98% of GDP), or where the structural gap between revenue and expenditure is particularly unsustainable, such as Greece (7% of the national budget) or California (17%).

The worldwide conversation on this issue is just getting started, and different places may answer the five questions in very different ways, hence creating very different paths forward. The paths chosen will, to a great degree, determine the winners and losers in 21st century.

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