Few states have such notoriety for a failed economy as Michigan. Articles describing the auto state’s problems are rife with ironic phrases like “once a thriving economy,” or “city of the future.”
It still is, actually. The question is whether Michiganders are willing to do away with the policies that led to their current plight (the American Legislative Exchange Council ranks the state dead last in the nation in economic performance) and embrace those that once made their state the industrial capital of the Midwest.
Placing blame on foreign competition is intellectually bankrupt: Alabama’s Toyota plant is substantially more successful than those in Detroit. In August, the Huntsville plant announced the creation of 240 new jobs in the manufacture of four-cylinder engines.
Alabama’s governor, Republican Bob Riley, boasted that this is what comes of a well-trained, flexible work force. That latter point is a sticky one for Michigan — flexibility is not a virtue offered by Detroit autoworkers. Desperation, on the other hand, is offered in droves.
Michigan’s able work force remains unable to find work. Unemployment is at 15.1 percent, the highest in the country. When estimating those who have just given up looking, economist David Littmann of the Mackinac Center (a Michigan-focused think tank) informs me the number surges to about 26 percent.
These are skilled laborers with a background in assembling cars, a difficult skill that requires a wealth of technical knowledge. Their indigence isn’t fueled by the collapse of the American automobile industry, but by union officials whose uncompromising self-interest paid no attention to reality.
When two of the Big Three automakers — General Motors and Chrysler — turned to Congress for a bailout in 2008, their hourly autoworkers were some of the highest paid employees in America — at a rate of about $70 an hour in salary and benefits.
When union officials protest this number as being an exaggeration, it’s more out of embarrassment than indignation. General Motors employee benefits were 50 percent over the average of the private sector when the non-auto private sector wage was at its best. These were benefits even the auto companies couldn’t afford.
Michigan’s government is remarkably insulated from these issues. State legislators receive the second-highest salary in the nation from taxpayers who have no income to pay for it. And state and local government employee union benefits are far nicer than those enjoyed by the people who provide the revenue — an average government employee enjoys benefits about 83 percent higher than an average private sector employee.
In other words, being in business in Michigan is being in the wrong business.
Rather than look to trim the cushy lifestyles of these nonproductive sectors, politicians’ solution to Michigan’s economy all have to do with seizing more money from taxpayers.
One proposal involves filling the chronic deficits with an estate tax, which would be, in effect, a double inheritance tax that would have prohibitive effects on family-owned businesses.
Only last year, business taxes were increased. Although the personal income tax is flat, legislators want to make it progressive, with the top rate at about 10 percent. This will severely hurt two-income households, which comprise a significant portion of Michigan couples.
Such solutions ignore the fairly simple answer to an (increasing) annual $3 billion deficit by discouraging productivity and forcing the state’s greatest resource, its people, to get out of dodge.
According to United Van Lines, two-thirds of all Michigan moves are people leaving the state. It has the worst outward migration of any state — more so than North Dakota. And a survey from the Renaissance Center shows that more than half of all the firms contemplating expansion won’t even consider Michigan because of its work rules and onerous tax and regulatory burdens.
“We’re not even on the map,” Littman notes. But the opportunity is there. “We have bargain basement prices on everything — from water properties, which are a hallmark of growth, to infrastructure. And this is tied together with a large and progressive highway system. We also have the largest underground gas reserves in the nation.”
But any socioeconomic or demographic variable is in the bottom five rankings of the nation. Meaning, to bring the state back involves confronting the reality that drastic action must be taken to stop insulating special interests and start incubating industry.
Littman suggests two solutions: Doing away with the income tax and passing a right-to-work law that would eliminate union dominance over state politics.
Both would have the effect of freeing Michiganders to take advantage of the state’s still-potentially abundant opportunities for economic growth and prosperity. But it’s no small coincidence that these proposals may never see the light of day. After all, the state is too hell-bent on taking advantage of its population.
J.P. Freire is associate editorial page editor of The Washington Examiner. He can be reached at [email protected].
