Wisconsin puts proactive policies back on the map.

Agenda-Setting Financial Insight.
June 6 2012 2:50 PM

Wisconsin Puts Proactive Policies Back on the Map

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Governor Scott Walker's victory in Wisconsin's recall election suggests that well-desgined controversial policies are far from doomed.



Photo by Scott Olson/Getty Images

Governor Scott Walker’s victory in Wisconsin’s recall election has put proactive policies back on the map. The victory affirms his 2011 union-curbing budget reforms, suggesting that well-designed controversial policies are far from doomed. That’s good news for politicians of all hues battling Washington’s gridlock.

The Badger State offers an intriguing microcosm of the rest of the nation. When he took office in 2011 Walker inherited one of the worst state deficits in the nation, running at 13 percent of 2011-2013 revenue. He proposed increasing state workers’ pension and healthcare contributions, reducing take-home pay by about 8 percent. He also eliminated most collective bargaining rights for government workers, except for wages - arguing that the process is flawed as taxpayers are not represented in collective bargaining negotiations.

The Walker administration estimates these changes will create a $154.5 million surplus through 2013. The Bureau of Labor Statistics reckons it helped the state famous for its cheese to add 35,000 jobs in Walker’s first 16 months in office, which his economists reckon understates the impact. But the BLS does have the unemployment rate falling from 7.8 percent to 6.7 percent.

Walker’s proposals were strongly opposed by local Democrats, who fled the state to rob its Senate of a quorum and avoid a vote on the changes. And labor unions launched the recall petition. But Walker survived the vote by a comfortable margin that was slightly larger, even, than his November 2010 victory.

Granted, Washington’s lawmakers tend not to take flight en masse to block legislation. They have used plenty of other means to create a stalemate in recent years. But Walker’s victory suggests there is hope of ending that, even if no single party has a complete lock on power. Any such efforts require careful design, good marketing and determination - something lacking in President George W. Bush’s 2005 social security reform attempt and President Obama’s healthcare overhaul, and missing in spades from recent attempts to solve the budget and deficit crises.

Politicians may have gotten too used to the idea that unpopular policies cost votes. Walker’s victory should give them heart that it’s not a lost cause. 

Read more at Reuters Breakingviews.

Martin Hutchinson covers emerging markets and economic policy, drawing on 25 years of experience as an international merchant banker. He ran derivatives platforms for two European banks.

Daniel Indiviglio is a Reuters Breakingviews columnist, based in Washington, where he covers the intersection of politics and business. He joined from The Atlantic, where he provided analysis on topics such as financial regulation, housing finance policy, the Treasury, and the Fed.

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