Gov. Walker’s trickle down policy ignores: Cutting public employee wages will result in cuts in spending by consumers, lost tax revenue, and kills jobs

So how would reducing state worker’s pay effect Wisconsin’s economic recovery?

Capital Times: A report by the liberal Institute for Wisconsin's Future (IWF) released Monday estimates the cuts in take-home pay will cost the state $1.1 billion in reduced economic activity annually. 

(This would be the) economic impact (that) communities across the state could face under Gov. Scott Walker's proposal to increase health insurance and pension payments for some 343,000 school teachers, state and local government employees. 

Those figures are based on an assumed 8 percent cut for those affected by the proposal … The Walker plan would also result in 9,000 private sector jobs being lost, the report says.
The IWF figures are based on data from the Wisconsin Department of Workforce Development. Using traditional economic calculations, the report estimates a loss of some $600 million a year in production in the private sector. 

The idea is that if people have less money to spend, then business will end up selling less and producing less … The Walker plan would also increase the state unemployment rate and reduce sales tax collections as cash-strapped consumers spend less, according to the IWF.

Basing policy on the lie that public employees are paid more than the private sector is one HUGE flaw:

Report author Jack Norman, IWF Research Director says the Walker budget repair plan is based on a flawed belief that public sector employment is "somehow different" from employment in the private sector. He notes that when any worker loses income they cannot afford to spend as much at the grocery store, furniture outlet or local car dealer. "Under Walker's view, cuts to public employees are painless to the rest of the state's residents," he says. "In fact, reducing compensation for state and local employees carries a large and hidden cost."

His findings are backed up by others:

Steve Deller, a professor at the UW-Madison Department of Agriculture and Applied Economics says it's difficult to estimate … But Deller says the across-the-board nature of the cuts make them especially regressive. He calculates a state worker making $30,000 might see a 12.9 percent cut in take-home pay while Wisconsin teachers who makes about $51,000 a year would see their paycheck shrink 7.7 percent. 

Deller did his own analysis using a 10 percent pay cut estimate for public workers resulting in about $490 million in lost income. He estimates 12,900 private sector job losses as a result … "What is perhaps being overlooked is that there is lost state and local government tax revenues associated with this economic impact," he says. "Again, based on this worse-case scenario, we are looking at a loss of about $111.8 million in state and local government revenues."