The New Economy B Y K E N R E I B E L
A Great Bargain on a Great Lake

When it comes to vacation spending, Milwaukee is the Costco of tourist des tinations.

Milwaukee’s tourism economy appears well positioned to weather rising fuel prices and a sagging economy with its unique attractions and low costs for shop ping, food and recreation.

“Milwaukee is a value destination,” said Dave Fantle, vice president of VISIT Milwaukee, a marketing agency charged with promoting the Greater Milwaukee area. “Compared to larger cities such as New York, Boston, Chicago and Los Angeles, and their costs of hotels, restau rants and attractions, Milwaukee offers more bang for the buck.” In 2007, tourism in the four-county Greater Milwaukee area (Milwaukee, Ozaukee, Washington and Waukesha coun ties) supported more than 64,000 full-time jobs, generated more than $2.5 billion in revenue and added $1.5 billion in wages, according to a report by travel-and-tourism research firm Davidson- Peterson Associates. Shopping, food and recreation account for 80% of dollars spent by visitors, netting $400 million in local and state taxes.

While travelers are being gouged else where, Milwaukee’s amenities and tourist attractions are easy on the wallet. According to the Travel Industry Association, the June 2008 Travel Price Index—the rate of inflation for the cost of travel within the United States—was 8.6% higher than in June 2007. Factored into that figure are higher gas prices—up 33.3% from a year ago—and higher airfares. Lodging, however, has declined slightly.

One solution for penny-pinching travel ers is to stay close to home. Rand McNally reported in May that two-thirds of Americans said they would either shorten their summer road trips or cancel them alto gether, resulting in a post-petroleum era phenomenon called a “staycation.” Some tourism industry analysts speculate that vacation destinations in urban corridors may be most insulated from rising fuel prices. Washington, D.C., for example, one of the most expensive tourist destinations, benefits from its proximity to cities within a day’s drive.

While it’s too early to tell if Milwaukee’s summer tourist season is a boom or a bust—Summerfest’s 2008 revenues are down 8%, but organizers cited bad weather as the cause—Milwaukee’s tourism busi ness may be insulated by its ongoing investment in tourist attractions.

“We’ve been investing in our product,” said Fantle, pointing to the Harley- Davidson Museum, the upcoming Iron Horse Hotel Potawatomi Bingo Casino, which is being expanded. Then there are the local landmarks such as the Calatrava-designed addition to the Milwaukee Art Museum, Pier Wisconsin, Miller Park and, of course, Lake Michigan, which always draw visitors.

Is It Open Season on the 401(k)?

In yet another troubling sign for the U.S. economy, more Americans are borrowing against their 401(k) retirement plans to make ends meet. What’s more, some banks are making it easier by offering people debit cards that tap into their retirement funds.

“The point is that 401(k) and similar contribution plans were creat ed to ensure that people would have adequate savings for retirement, not as a source of credit to use casually,” said Wisconsin Sen. Herb Kohl in a statement. “These debit cards allow a participant to use his or her retirement sav ings to make everyday purchases like buying a cup of coffee. Clearly that’s not what the 401(k) is for.” Kohl and New York Sen. Chuck Schumer recently introduced legislation that would bar banks from offering debit cards that raid customers’ retirement savings by borrow ing against their 401(k) accounts.

At a recent Senate committee hearing, Schumer pointed to estimates that for every $1,000 an American withdraws from his or her 401(k) plan, $10,000 of retirement income is lost. “It’s a really, really bad idea to borrow from your 401(k),” said Laura Retzer, 401(k) plan administrator for Briggs & Stratton in Milwaukee. “This is the time when you want to keep your money in the market, when the market is down. You need to think long-term.”

Retzer said 401(k) borrowers are taxed twice on their savings. “Most people don’t realize it, but you’re paying back the loan with after-tax income,” she said. “And when they withdraw at retirement, you’re taxed again.”

According to the Center for American Progress, the amount of money borrowed from defined-contribution retirement plans rose five-fold between 1989 and 2004, from $6 bil lion to $31 billion, in inflation-adjusted terms. Borrowers surveyed for the study cited unemployment, medical costs and home purchases as the most common reasons for tapping their retirement funds.
Definition of the Week What Is Forecasting? “Forecasting” is another word for economic experts’ best guesses about the future. Despite complex economic theories and cutting-edge econometrics, the forecasts economists make are often far off target. (Source: Economist.com)