In his weekly column, LABI President Dan Juneau weighs in on the Wisconsin recall, exit polls, the stock market and the fiscal outlook for the state.
THE WISCONSIN RECALL ELECTION
Gov. Scott Walker became the first governor to survive a recall election. Walker campaigned against public sector union collective bargaining excesses when he ran for governor in 2010. He won. His legislative initiative to rein in those abuses was no surprise. Neither was the vengeance with which the unions went against his legislative agenda and, when it passed, him as well. Interestingly, as soon as the recall petitions were certified, the unions campaigned against Walker on everything but collective bargaining. It didn't matter. Many voters believed that the election was about sore losers trying to end a winner's term early. The fact that Walker's reforms were working at the state and local levels to help balance budgets without increasing taxes also played a major role in the outcome of the election. Walker won big on June 5, and public sector unions lost even bigger.
They should be abolished. The television networks and wire services that pay for exit polls should either demand that steps be taken to make sure they are accurate, or they should abandon them. My organization paid to have an accurate exit poll done on the day of the presidential election in 2000. We wanted to get an accurate read from the electorate on a certain fiscal issue and felt that the election would be a great opportunity to get the feedback we needed. We hired a competent firm to design the sample and questionnaire and to identify representative precincts to poll. We included the presidential race to validate the accuracy of the survey and came within one percent of the actual vote. Compare that to what happened in Wisconsin. The exit polls there predicted the race was a dead heat. Walker won by seven points. Either exit polls need to be totally reformed for accuracy or media outlets should not be allowed to present data from them while the polls are still open.
THE STOCK MARKET
The Federal Reserve has systematically pursued a policy of keeping interest rates artificially low in order to force more investment dollars into the stock market. Few investors are putting money into regular savings accounts or CDs since interest rates are next to zero. The result has been a forced marriage between investors and Wall Street. This week the depressed market rallied because "wise ones" determined that bad economic news would propel the markets forward because it would raise hopes of more government "stimulus." Not long ago, the markets were about value and judging the competency of the management of companies. Not any longer. Now it is about whether Germany will bail out the rest of Europe or whether Ben Bernanke will take off in his helicopter and drop more liquidity on a system that already has record-low interest rates and a huge surplus of cash that few seem to want to invest or borrow. Businesses want stability and predictability, not more rabbits out of the hat by Bernanke.
THE STATE FISCAL OUTLOOK
The Legislature has gone home after passing a $25+ billion state budget balanced with a considerable amount of one-time money. Projected revenues for the next fiscal year are suspect. Current revenue estimates peg oil at almost $100 per barrel while current prices are in the low $80s. Corporate and personal income tax collections are also erratic. There are so many patches on the inner tube of the next budget that significant shortfalls are almost inevitable. Some legislators want to look at tax "loopholes" next year, saying that removing tax exemptions isn't the same as raising taxes. That will be a hard sell to businesses and individuals who see little being done to reform indigent health care delivery, post-secondary education, and the state retirement systems.
Gov. Jindal has said he is staunchly opposed to raising taxes. It is quite likely that 36 votes will exist in the House to kill new taxes or the removal of tax exemptions. Our economy is stimulated by private sector growth, not more government. The Legislature would be better served trying to expand private sector growth instead of penalizing it with higher taxes.
Dan Juneau is president of the Louisiana Association of Business & Industry and an ABiz contributing columnist.