People in Wisconsin heard a familiar note in Paul Ryan’s acceptance speech for the vice presidential nomination. He talked up a goal of 12 million additional jobs for the first four years of a Romney-Ryan Administration.
The vice presidential nominee echoed a goal set by Republican Gov. Walker of Wisconsin, who promised 250,000 new jobs when he ran in 2010. That pledge helped Walker win, since job creation remains the number one issue in the country.
Wisconsin has roughly 2% of the country’s population, so the Ryan’s national goal and Walker’s Wisconsin target are right in line. In both cases, they are worthy goals. The problem is that no one really knows how to get there, including our political leaders and the Federal Reserve board. If they did, we’d be a lot further down the road to economic recovery at the national and state levels.
By example, Walker has made a number of moves to make Wisconsin a more business friendly state, but the state has added only about 30,000 jobs in his first 20 months in office. That’s way off the pace needed to hit 250,000.
At the national level, President Obama appears to have run out of ideas for job creation. The unemployment rate has been stuck at north of 8% for his whole time in office, despite $5 trillion in deficit spending that was meant to be a stimulus. He has stressed education and green infrastructure as long-term solutions.
Gov. Walker might argue that he has been held back by the economic sluggishness at the national level. He made the 250,000 pledge with the expectation that there would be a more robust national recovery. He thought he’d have recovery winds at his back.
Nonetheless, with the best of intentions, he made the promise. Shortly after taking office, he rushed to the Illinois border to entice businesses to move north. That foray proved once again that recruiting is a failed strategy for Wisconsin. Did we recruit any major firms from Illinois?
The governor and the Republican legislature bit the bullet on fixing the state’s staggering deficit by passing Act 10. That pushback on unsustainable public employee benefits triggered mass protests and a nasty recall election, but restored the state to fiscal solvency. That, alone, though, is not moving the state’s economy.
The same can be said for the other actions taken by Walker and company to improve the state’s business climate, such as reforming the tort system, such as giving a future break to the state’s manufacturers in the form of income tax credits, such as making the DNR more pragmatic.
The jobs debate in Wisconsin then moved to the mining legislation, even though the 800 or so jobs directly involved in the proposed Penokee iron mine were years in the future. Getting mining permitting right is important, but it is not by itself going to reinvent the Wisconsin economy. Proponents perhaps saw it as a symbolic issue.
The latest solution getting high profile attention as policy makers try to come up with answers to job creation is fixing the jobs mismatch. Some 40,000 jobs are allegedly open in Wisconsin because employers can’t find the skilled people. A concerted effort is underway on several fronts to fix that obvious defect in our state’s training policies. That could help a lot, especially if the job training strategy addresses the needs of the driver sectors of the economy, like advanced manufacturing, information technology and health care.
But, remember, there are some 500,000 people out of work or under-employed in Wisconsin, a far bigger number than the job openings. So job creation remains issue one.
Is there a better answer? One stands out. And it’s people like Sue Marks, Jalem Getz and Randy Spaulding. They are entrepreneurs who know what the politicians don’t know – how to create jobs. Marks is on her third startup, called Pinstripe. It already employs 450 highly paid workers and is headed to 1500. Getz started BuySeasons, and it employs more than 1000 year-round and double or triple that in its high season. He is currently starting another company. Spaulding created Spaulding Clinical Research in a vacated hospital in West Bend. He employs 150 and is just getting started.
Those numbers are just the direct employees of these firms. There are many others created in their supply chains.
President Obama, the Romney-Ryan team and Gov. Walker all have a ready strategy just waiting for them to reinvent the American economy, one that has been proven to work. Get behind the entrepreneurs in a big way. They have both touched that theme, but only in a minor way. They must know that all net job growth comes from young companies.
Romney highlights his small venture investment by Bain Capital in the Staples start-up before that fund moved to the easier path of buy-out investing. Buy-out funds, in contrast to venture funds, often reduce jobs as they streamline their acquisitions and load them with debt.
An example of enlightened policy is Act 255 in Wisconsin. It gives 25% tax credits to investors who take the high risk of putting money into startups. Since its inception in 2005, the state has given credits to 138 companies. They have created 1112 new jobs, and that jobs number keeps growing as the companies mature and new companies are added to the launch list.
The state and nation could easily double the pace of startups if we put dollars and support behind the innovators.
In Wisconsin, for example, the state could create what’s called a fund of funds to put matching dollars into venture funds in the state. It could be a limited partner in those funds, which means the taxpayers should get their money back and then some.
It could encourage the foundations associated with the state’s universities to put a small slice of their portfolios into the early stage space. They already make alternative investments into hedge funds. The Wisconsin Alumni Research Foundation (WARF), which has a $2.3 billion portfolio, is having trouble sustaining its revenues from licensing, so venture investing in the intellectual property from university campuses presents a viable alternative. Why not invest in our own brainpower? WARF has invested in several startups, so the precedent is there.
A few universities around the country are adopting that strategy even though each deal by itself presents high risks. The answer is to spread the risk over a whole bunch of companies, not just dabble in a few.
Instead of coming off as well-intended but clueless about job creation, the Obama and Romney teams could show they understand that high-growth entrepreneurs produce a triple bottom line for the nation: they create all the country’s new jobs; they create wealth by exporting global products and services and by cashing out their investors; and they bring the innovations themselves to the world.