By LAWRENCE R. JACOBS
MINNESOTA and Wisconsin share much more than bone-chilling winters: German and Northern European roots; farming; and, until recently, a populist progressive tradition stretching back a century to Wisconsin’s Fighting Bob La Follette and the birth of Minnesota’s Democratic-Farmer-Labor Party.
But in 2010 these cousin states diverged. By doing so they began a natural experiment that compares the agendas of modern progressivism and the new right. Wisconsin elected Republicans to majorities in the Legislature and selected a bold and vigorous Republican governor, Scott Walker. Minnesotans elected one of the most progressive candidates for governor in the country, Mark Dayton of the Democratic-Farmer-Labor Party.
A month after Mr. Walker’s inauguration in January 2011, he catapulted himself to the front ranks of national conservative leaders with attacks on the collective bargaining rights of Civil Service unions and sharp reductions in taxes and spending. Once Mr. Dayton teamed up with a Democratic Legislature in 2012, Minnesota adopted some of the most progressive policies in the country.
Minnesota raised taxes by $2.1 billion, the largest increase in recent state history. Democrats introduced the fourth highest income tax bracket in the country and targeted the top 1 percent of earners to pay 62 percent of the new taxes, according to the Department of Revenue.
Which side of the experiment — the new right or modern progressivism — has been most effective in increasing jobs and improving business opportunities, not to mention living conditions?
Obviously, firm answers will require more time and more data, but the first round of evidence gives the edge to Minnesota’s model of increased services, higher costs (mostly for the affluent) and reduced payments to entrenched interests like the insurers who cover the Medicaid population.
Three years into Mr. Walker’s term, Wisconsin lags behind Minnesota in job creation and economic growth. As a candidate, Mr. Walker promised to produce 250,000 private-sector jobs in his first term, but a year before the next election that number is less than 90,000. Wisconsin ranks 34th for job growth. Mr. Walker’s defenders blame the higher spending and taxes of his Democratic predecessor for these disappointments, but according to Forbes’s annual list of best states for business, Wisconsin continues to rank in the bottom half.
Along with California, Minnesota is the fifth fastest growing state economy, with private-sector job growth exceeding pre-recession levels. Forbes rates Minnesota as the eighth best state for business. Republicans deserve some of the credit, particularly for their commitment to education reform. They also argue that Minnesota’s new growth stems from the low taxes and reduced spending under Mr. Dayton’s Republican predecessor, Tim Pawlenty. But Minnesota’s job growth was subpar during Mr. Pawlenty’s eight-year tenure and recovered only under Mr. Dayton.
Higher taxes and economic growth in Minnesota have attracted a surprisingly broad coalition. Businesses complain about taxes, but many cheered Mr. Dayton’s investments in the Mayo Clinic, the new Vikings stadium, the Mall of America and 3M headquarters.
The lion’s share of Minnesota’s new tax revenue was sunk into human capital. While the state’s Constitution required that half of the new revenue balance the budget in 2013, Mr. Dayton invested 71 percent of the remaining funds in K-12 schools and higher education as well as a pair of firsts: all-day kindergarten and wider access to early childhood education. Minnesota was one of the few states that raised education spending under the cloud of the Great Recession.
By contrast, Mr. Walker’s strategy limited Wisconsin’s ability to invest in infrastructure that would have catalyzed private-sector expansion, and he cut state funding of K-12 schools by more than 15 percent. Per student, this was the seventh sharpest decline in the country.
Health care presents another difference. When Mr. Walker refused to establish a state health insurance exchange or to expand Medicaid, even though the federal government covered all costs for three years and most costs after that, ideology trumped pragmatism. The uninsured and the ill bear the burden. Many of the 10 percent of uninsured Wisconsinites were denied new Medicaid benefits and were shunted off to the federal exchange’s stumbling website.
Mr. Dayton is on course to improve Minnesota’s already low uninsured rate. He expanded Medicaid to cover an additional 35,000 people and accepted Washington’s offer to pick up the cost — as half the states, including a growing number with Republican governors, have. Mr. Dayton also created a state insurance exchange, which enrolled more than 90 percent of its first month’s target. Meanwhile, Minnesota’s tradition of innovative medical care and nonprofit insurers produced premiums in its insurance exchange that are, on average, the lowest in the country, well below premiums in Wisconsin.
Mr. Dayton’s embrace of progressive fiscal policy is matched by a fierce crackdown on lenient payments to insiders. Cuts in payments to managed care organizations serving Medicaid saved $175 million and produced lower rates in 2013 than in 2010, despite higher costs over all.
Of course, liberal aspirations contend with stubborn realities. Minnesota is a health reform pioneer, but it is dogged by entrenched problems in rural areas, where medical costs and premiums remain relatively high and the capacity of medical care providers may be overstretched by new demand. As for fiscal policy, Mr. Dayton would have applied sales taxes more broadly, while lowering their rates, but faced intense protests from a broad section of businesses and Democratic legislators who blocked him.
Even after tempering their initial plans, Democrats face a backlash. According to a recent Minnesota Chamber of Commerce survey, a quarter of Minnesota companies — a 10-year high — describe the state’s business climate as worse than elsewhere. Mr. Dayton and his colleagues got the message and are likely to roll back new sales taxes on farm equipment and warehousing facilities that had threatened to leave.
Evidence and common sense should matter more in our overheated political debates. The lesson from the upper Midwest is that rigid anti-tax dogma fails to deliver a convincing optimistic vision that widens economic opportunity and security. The excesses of liberalism may lurk, but Minnesota is building a modern progressivism that plows a hopeful path.