Economists continue to sift through Gov. Walker's budget repair bill, wondering what impact a pay cut for thousands of public workers might have on the local business community.
If workers have less disposable income in their pockets, the thinking goes, they'll have less to spend on furniture, eating out or a new car.
One analysis released Wednesday by a UW-Madison Extension economist suggests that laying off 1,500 state employees, as Walker has threatened, would actually have less negative impact on the economy than subjecting some 350,000 public employees in Wisconsin to a 7.7 percent cut in take-home pay. That pay cut figure is based on employees contributing to their pensions and more to their health insurance.
Steven Deller of the Extension's Department of Agricultural and Applied Economics ran a computer calculation based on the loss of $3,949 per public employee, figuring an average 2008 salary of $51,454, the most recent detailed figure available.
The across-the-board pay cut, Deller estimates, would remove $1.42 billion of take-home pay from the $18.5 billion in total labor compensation in Wisconsin.
Conversely, eliminating 1,500 state workers entirely would result in a loss of $104 million in take-home pay, according to Deller's analysis.
"In other words, the policy option with the lowest level of ‘economic pain' would be to lay-off 1,500 public workers," he says.
But the research director of the Wisconsin Taxpayers Alliance, Dale Knapp, says Deller's report fails to note the savings on the other end.
"The alternative is to raise taxes, so taxpayers then would have fewer dollars to spend," says Knapp.
In response, Deller says his report - which used a standard economic impact matrix - was meant to spark debate over Walker's proposal. He admits it is a basic analysis but says the issue is not getting enough attention.
"Ideally, all policy options would be examined for the level of economic pain, allowing for more informed decisions," he says.
Meanwhile, a new survey from WisBusiness.com shows that 58 percent of technology industry executives support Walker's proposals vs. 39 percent who don't, with only 2 percent expressing no opinion.
Results were more mixed over whether the governor's proposals would hurt or help Wisconsin's ability to attract, retain and create jobs. Forty-four percent said the controversy would positively affect job creation while 32 percent said it would hurt those efforts, with 23 percent expressing no opinion.
The survey was conducted Monday and Tuesday with 247 executives in information technology, biotechnology and medical device, advanced manufacturing, and clean technology and agricultural biotechnology industries.
Of course, even with pay cuts or layoffs of public workers, the state is still facing major budget issues. The changes Walker is proposing are projected to save $300 million -- less than 10 percent of the state's $3 billion deficit.
For policy makers, the short-term options are to cut spending or raise taxes.
The longer term solution is to grow the economy, which presumably brings in more tax revenues as business prosper and sell more goods or services.
Deller says academic research has uniformly concluded that taxes are a drain on the economy but says the benefits from those taxes - such as education, incentives for business or infrastructure upgrades - can help stimulate long-term economic growth.
On a final note, former UW Business School Dean Michael Knetter says the partisan bickering is not doing the state any favors and will stall economic recovery.
It seems about the only ones benefitting now are the pizza delivery guys feeding protestors at the Capitol.