Gov. Tony Everts appears to have figured out that a pro-growth posture will be good for his Democratic Party. There has been a death of pro-growth Democrats for a couple of decades, and it hasn’t helped the party or the state.
It doesn’t take a rocket economist realize that Evert’s ambitions for more spending/investment on education, health care and roads will require a thriving private economy, from whence all tax revenues flow. As he drafts his first budget, that reality must have come home to him.
So our new governor has changed the tune from his campaign. Post inauguration, he has promise to be business friendly, and we have to take him at this word until proven otherwise.
He has spoken up for the need to further stimulate the economy through entrepreneurship. The Wisconsin economy needs reinvention, and it’s people with the guts and imagination to launch new ventures that do just that.
Most noticeably, Gov. Everts has backed off his campaign promise to eliminate the Wisconsin Economic Development Corporation, a public-private entity that was created under former Gov. Walker to stimulate job creation.
WEDC got off to a rocky management start five years ago, but has been stabilized and has made some major bets, most dramatically the multi-billion Foxconn subsidies. It will be at least five years until we know if this bet is a winner or a loser — or something in between.
Less visible has been WEDC’s other work. It has done an efficient job of administering the state’s unique Act 255 tax credits of 25% for investments in new ventures. Act 255 has worked smoothly and effectively without a lot of bureaucratic friction. Venture capital investment has roughly doubled over the last five years, hitting a record $254 million in 2018. But we still rank at best in the middle of the states on levels of venture investment, and Madison is still the main beneficiary of startup subsidies. Milwaukee is slowly gaining.
The program has worked so well that proposals are floating in Madison to raise the credit to 40%. That would really put Wisconsin on the map as a place to start a high-growth company.
As an angel investor with 19 early stage investments under my belt, please believe me that these new ventures are highly risky. Each one is like having a teenager in your house.
When a new venture hits, the ones you hear about, the returns are high. And the economy is reconfigured. But a majority of them fail or provide minimal returns. De-risking the early investments by 40% would make a huge difference.
Further, it’s an area where the governor and Republican legislative leaders might find common ground.
WEDC has also led the way on identifying new economic clusters that show promise for diversifying the economy beyond its traditional economic strengths of manufacturing and agri-business. The agency provided seed funding, for instance, for the merging fresh water technologies cluster in the Milwaukee Region. It also helped formation of the Food and Beverage Cluster in the M7 Region.
The hallmark of the Walker years on the economic side was to double down on manufacturing. That includes signature moves on removing the corporate tax on manufacturing and agri-business companies and the Foxconn subsidy.
In the end, during the Walker eight years, Wisconsin rode the national boom to low unemployment, but produced only half as much job growth as then national average. Walker delivered 250,000 new jobs in eight years versus his goal of doing it in four years. Labor shortages curtailed some job growth.
Gov. Everts should learn from that concentrated strategy that the Wisconsin economy needs more diversification toward the service industries.
Think about what the late George Dalton started when he started FiServ in 1984. FiServ, a huge financial services company, just made a $22 billion acquisition. The combined company will hopefully be headquartered here, as is NML in its new $400 million headquarters in downtown Milwaukee.
From the governor’s bully pulpit, Everts could shine the light forward for a broader economic base, led by entrepreneurs. No governor has ever made such a speech.