Output is still below peak levels.
First, note that Wisconsin GDP has not reattained pre-pandemic levels.
Figure 1: Wisconsin GDP (blue), 2018-19 trend (gray line), and Economic Outlook forecast from November (red squares), all in mn.Ch.2012$ SAAR, against log scale). NBER defined recession dates peak-to-trough shaded gray. Source: BEA, WI Department of Revenue, NBER, and author’s calculations.
Wisconsin GDP as of Q3 was 0.9 percent below 2019Q4 (NBER peak), and 3.8 percent below the 2018-19 trend. In contrast, US GDP is 3.1 percent above 2019Q4 levels. Despite this, certain policymakers are arguing that the further government spending is not needed. Further, they argue the state’s budget surplus should motivate tax cuts, but in the next, not current, two year budget period (for some reason). As noted here:
“The surplus news reflects the unwillingness of the Legislature to invest the money as the federal government intended,” explains University of Wisconsin economist Laura Dresser, associate director of COWS. “It exists because we didn’t invest what we should have, especially for schools. It’s so overdue and desperately needed.”
By withholding money from local governments and especially local public school districts — which received an unprecedented zero increase in the current, two-year budget, the Republicans have let billions of dollars pile up in state coffers, unspent, while continuing to enforce completely unnecessary austerity measures.
Has government spending on goods and services been extravagant, given the challenges faced by Wisconsin residents? Real government spending is 3.8% below 2019Q4 levels.
Figure 2: Wisconsin state and local government spending on goods and services, mn Ch. 2012$ SAAR (blue, left log scale), and state and local government employment (red, right log scale). NBER defined recession dates peak-to-trough shaded gray . Source: BEA, BLS, and NBER.
State and local government employment in Q4 is down 4.2%.
