By Kirsten Adshead | Wisconsin Reporter
EDITOR’S NOTE: With unemployment approaching 8 percent and an economy struggling to regain its footing, Gov. Scott Walker has called a special legislative session on job creation. But it will take more than laws and lawmakers to get business and employees back to work. In a periodic series, “Back to Work Wisconsin,” Wisconsin Reporter looks at the economic problems facing the Badger State, the fixes proposed and life after recovery.
MADISON — You don’t have to be a genius to understand why people are worried.
As Bill Clinton’s first presidential campaign was fond of saying to then-President George H.W. Bush, “It’s the economy, stupid.”
And so it goes, two decades later.
It’s the country’s financial ignorance, though, from the average consumer to the veteran senator, that significantly contributed to the Great Recession and its hangover, experts said Tuesday at an informational hearing of the Assembly Committee on Jobs, Economy and Small Business
Getting the economy up and running could take some serious smarts.
“I have little confidence (in lawmakers’ basic understanding of economics),” said M. Scott Niederjohn, an associate professor of economics and business at Lakeland College in Sheboygan and director of the Center for Economic Education.
As Wisconsin lawmakers grapple with how to strengthen the state’s economy, Wisconsin Reporter will be examining their efforts, part of a periodic series titled “Back to Work Wisconsin.” The first installment examines a key root cause of the current economic situation.
Niederjohn and Mark Schug, a national consultant on economics and financial education, met with Wisconsin legislators to discuss the real impact of economic illiteracy.
Bank of America just announced that it will start charging its debit card users a $5 monthly fee. Other banks are expected to follow suit.
Schug said the fee is the direct result of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, which capped the fee banks could charge each other for credit card transactions. Banks reacted, as businesses often do, by creating a new fee for consumers.
That’s a “very, very practical example of economic ignorance on the part of highly ranked members of Congress, and it’s going to (cause) a lot of damage to poor and moderate-income people,” Schug said.
“And now it turns out they’re going to start having fees to use a simple debit card,”said Schug, a member of the board of directors for EconomicsWisconsin: Wisconsin Council on Education, a nonpartisan education organization. Members addressed the committee Tuesday afternoon.
Ignorance isn’t solely to blame, said Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association, state’s largest financial industry trade association.
“I think what’s true is that lawmakers at either the state or federal level are not afforded enough time to be able to make sound decisions on some pieces of legislation,” she said.
The 2,200-page Dodd-Frank measure “was passed very quickly,” she said.
“I really question who all really read that before they voted on it,” Poels said.
Consumers are in the same boat when it comes to piles of contracts with fine print — on everything from mortgages to cell phone bills.
But the average consumer’s grasp, or lack thereof, of economic principles, the stagnating stock market or the collapse of the housing market speak volumes to the ignorance of borrowing, spending and investing, Niederjohn said.
“If even part of that was due to, sort of, financial illiteracy, which I think almost everybody agrees played a contributing part, then it’s almost incalculable how much that cost the country, pushing it back a decade in terms of economic growth,” he said.
Schug and Niederjohn teach a two-day course, “Economics for Opinion Leaders,” that teaches economic basics lawmakers, journalists, teachers and members of the clergy.
But they highlighted what could be a fundamental flaw — simple ignorance — at a time when economic struggles are the driving force behind much of public policy today, from President Barack Obama’s proposed American Jobs Act to Gov. Scott Walker’s special session on job creation.
Understanding economics in a global market isn’t for the faint of heart.
Speaking to Congress’ Joint Economic Committee on Tuesday, Federal Reserve Chairman Ben Bernanke rattled off a series of factors influencing the economy, from China’s undervalued currency to murky, erratic fiscal policies.
Schug said Bernanke is proposing some far-reaching fixes, and it behooves the public to know and understand the proposals. The Fed is on a buying binge, bolstering its securities portfolio with increased mortgage bonds and short-term debt, aimed at maintaining cheap credit.
Bernanke took a shot at Congress, criticizing the gamesmanship of this past summer’s debt ceiling battle between Democrats and Republicans.
He said people are “quite unhappy” with the economy.
“On some level, I can’t blame them,” he said. “Like everyone else, I’m dissatisfied with what the economy is doing right now.”