The Next Governor's Big Task

By this time tomorrow, either Scott Walker or Tom Barrett will have been elected Wisconsin's next governor. No matter what is thrown at the Wisconsin business community from the federal government, the next chief executive of Wisconsin had better find a way to ignite more entrepreneurial activity between Lake Michigan and the Mississippi River.

According to an analysis by the Wisconsin Taxpayer Alliance, Wisconsin has created new businesses at a very low rate over the past 16 years. Since 1994, a period that includes the robust information technology revolution of the mid-to-late 1990s, an average of only 4.5% of all private firms in Wisconsin were brand-spanking new in any three-month period. That compares to the national average of 5.4%, and it's worse than all but eight states.

Care to guess what business sector typically leads the American economy out of recessions? You guessed it, small business growth and job creation. That does not bode well for Wisconsin's post-recession prospects, which is why the next governor has to focus like a laser beam on entrepreneurism.

The Taxpayer Alliance report, titled "Wisconsin Jobs and Wages: A Wake up Call?" cites the lack of investment capital, the state's mix of industries (we don't rank highly in high-pay areas) and aspects of its business climate. I'm not very good at deciphering code, but that last point appears to be a diplomatic way of saying that our state government isn't doing enough to help matters, and I could not agree more.

That's not to say the state has done nothing. The Act 255 tax credit program, for example, clearly has made a difference in early-stage funding, but later-stage venture financing still suffers.

But raising tax rates on individuals and businesses hasn't helped, and so a more business friendly approach to public policy would be welcome. It's not that large public traded companies face long odds because there is a fair amount of optimism about the 2011 stock market performance, especially for corporations that maintain some sort of competitive advantage. But not enough is done to incent risk-takers to start anew.

We're in a period in which Dane County CEOs, according to a survey conducted by CEO Consulting Services in Madison, believe the "new economy," meaning slow growth, is here to stay. Nationwide, chief financial officers, the folks who are the most intimately familiar with the books, are worried most about cash flow management, according to a survey conducted by TD Bank.

Clearly, some sort of intervention is warranted.

The next governor won't be able to do everything needed to spur business formation, especially with the federal government threatening to spend us into a debt-induced oblivion, but states like Texas and Florida have created environments where new businesses can sprout, even in this environment. Why can't we?
 

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