/Scott Walker, crony capitalist

Scott Walker, crony capitalist


In The Arena

The Wisconsin governor has a long record of doling out corporate welfare to political allies.

August 25, 2015

Peter Suderman is a senior editor at Reason magazine

Wisconsin Governor Scott Walker tends to be tightfisted with taxpayer money, unless that cash is lining the pockets of one of his political donors.

Over and over during his presidential campaign, Walker has declared that, as president, he’d stand up to “special interests.” But by signing legislation a few weeks ago committing $250 million in public funds—which, once interest is included, balloons to more than $400 million—to the construction of a new stadium for the Milwaukee Bucks, Walker has made it clear, once again, that he’s willing to use taxpayer money in ways that help his political allies, like Bucks co-owner and longtime Walker donor Jon Hammes.

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This is classic crony capitalism—a hefty dose of corporate welfare doled out to the benefit of a deep-pocketed political ally—and Walker has a long history of it in his home state. Indeed, one of Walker’s first acts as governor was to overhaul Wisconsin’s Department of Commerce, transforming it into the Wisconsin Economic Development Corporation (WEDC), a poorly run crony capitalist boondoggle that has benefited his political allies at taxpayer expense.

“We think this is a good solid move as a good steward of the taxpayers’ money here in Wisconsin,” Walker said of the stadium project, according to the Milwaukee Journal Sentinel. It’s a familiar sentiment. Walker has stumped for the stadium deal for months, and the idea that taxpayers ultimately stand to benefit from it has always been at the core of his argument. The Bucks have threatened to leave Milwaukee without a new arena; Walker’s position is that it’s “cheaper to keep them” because games held at the new stadium will bring in local spending (and thus taxes) while encouraging outside investment.

His pitch, long favored by politicians committing public funds to sports facilities, is contradicted by virtually all the economic evidence: multiple studies from organizations across the ideological spectrum have found that stadium subsidies don’t encourage nearly the level of economic gain that backers promise. And with or without the stadium, locals would spend their money inside the state.

While research indicates that taxpayers don’t win from deals like this, wealthy sports team owners clearly do. And in this case, that means people like Hammes, a billionaire financier whose son’s financial firm gave $150,000 to a pro-Walker Super PAC the day before the stadium deal was first announced. Not long after the donation went through, Hammes became co-finance chair of Walker’s presidential campaign.

This is hardly the first time that one of Walker’s financial supporters has benefited from taxpayer largess. A July report by One Wisconsin Now, a liberal activist group that has been consistently critical of Walker, found that since 2009 the governor’s campaign organization, Friends of Scott Walker, had received more than $2.1 million from individuals linked to WEDC awards.

According to the report, the majority of the money doled out by the WEDC since its inception has gone to Walker donors—including, once again, Hammes, whose $100 million hotel project received a $55.9 million taxpayer backed loan approved by the agency.


Walker’s embrace of crony capitalism in Wisconsin goes back to one of the key promises he made during his first run for governor. Running in 2010, as the recession was taking its toll, Walker said he would boost job growth in Wisconsin—specifically, that he would create 250,000 jobs. In pursuit of this goal, Walker moved quickly to sign bipartisan legislation early in 2011 to create the WEDC, a quasi-private agency purportedly devoted to promoting job growth and economic development in the state. 

The design of the new agency followed recommendations from a 2010 consultants’ report, sponsored by state business groups, which concluded that the existing Department of Commerce was too unfocused and too burdened by various rules and regulations to successfully foster a stronger business environment in the state. Walker’s new agency would still spend public money, but its quasi-private status would, at least in theory, free it from many of the old bureaucratic strictures.

Some political oversight would remain in place in the form of a board nominated by the state’s executive and legislature. Walker would watch over all of it: As governor, Walker, who pushed for the agency’s creation, would sit at the top of the board; he would also be responsible for picking the new agency’s CEO. Ultimately, it was his show.

The board was given wide latitude with regard to the sorts of activities it could conduct. They could pursue essentially any activity that might boost job growth or economic activity in the state. But the law also explicitly required that the board establish clear objectives and quantifiable benchmarks for every program created, and it required recipients of any public funds to send in a report on the results. The board was also tasked with verifying the information submitted by companies receiving public backing and with taking action against recipients who sent in false or misleading reports.  

In other words, the board, under the leadership of Governor Walker, was to be the both the idea generator and public watchdog for the new jobs agency—ensuring that its actions, funded at taxpayer expense, produced results.

But instead of results and oversight, the WEDC turned out to be a dysfunctional mess, wracked by incompetence and compliance problems, along with troubling connections to Governor Walker’s state political career and presidential ambitions. Signs of trouble were already apparent by November of 2012, little over a year after the agency went online, when the Journal Sentinel reported that the agency was suffering from serious financial control problems, including losing track of more than $12 million worth of loans.

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