Favor them or oppose, the changes of direction embodied in Gov. Rick Snyder’s budget and tax proposals represent a huge departure from the previous eight years of Michigan governance (some would say the previous 12 years). In particular, the main thrust of the Granholm administration’s policies was to first insulate the status quo political system from disruption, and serve the people second. That's less surprising than it sounds since this is the default stance of political careerists on both sides of the partisan divide.
Perhaps most starkly, Gov. Snyder’s recommendations highlight the new governor’s status as a non-politician coming from outside the political system.
For example, rather than seeking broad-based business tax cuts to grow the state economy, Gov. Granholm’s eight years were filled with special deals handing over billions of state taxpayer dollars to a succession of fad industries. Investors and entrepreneurs were forced to become hat-in-hand favor-seekers, empowering politicians and bureaucrats by making them the source of special privileges. A 22 percent business tax hike in 2007 announced to those job providers who lacked such political connections, “You will be milked to feed the political establishment’s favored ‘winners.’”
Not surprisingly, the state’s economic problems only grew worse and went far deeper than the implosion of Michigan’s dwindling share of an otherwise healthy American auto industry. Even as the rest of the country experienced economic growth, almost every sector in this state was in decline, including ones with only tangential connections to autos, such as furniture and chemical manufacturing.
In contrast, rather than continuing to grow a state corporate welfare empire, Gov. Snyder would mostly replace this with across-the-board business tax cuts. These are wrapped into a comprehensive tax system overhaul, including the repeal of a state income tax exemption for pension income.
The latter is a striking example of the governor not hesitating to challenge a politically powerful interest, senior citizens and the AARP. The governor's willingness to pursue this reform is nevertheless unfortunate, since it would be unnecessary if the state’s political elites had the will to cut-back excessive government employee benefits.
Nevertheless, the proposed business tax cuts are without question a prerequisite to putting Michigan’s beleaguered economy back on a growth track, which is the big picture this non-political careerist governor is focused on — even when it entails substantial political risks.
On the budget side, during Gov. Granholm’s years a state government “structural deficit” was never addressed. As revenues stagnated, spending on prisons, Medicaid, regulatory expansions and, most notoriously, government employee pay and benefits, all continued to grow. Gaps between desired spending and actual revenue were continuously patched-over with accounting gimmicks and tax hikes.
Again charting a very different course, Gov. Snyder has proposed significant cuts in the sacred cows of K-12 and higher education spending, and in state revenue sharing payments to local governments. He’s using a “carrot and stick” approach to encourage school districts and local governments to scale back those excessive employee benefits, and state employees also are on notice that the governor wants $180 million in concessions.
Snyder’s status as an outsider is apparent in all of this, and also in contrast to the inclinations of a Legislature composed largely of political careerists. Such politicians advance their careers by never seriously upsetting the applecarts of politically powerful interests, including the union-dominated public school establishment, corporate welfare beneficiaries, local governments, the higher education establishment and others.
Snyder’s proposals step on all those special interest toes, which explains the angst they have generated in some corners of the Legislature. Indeed, for all the apparent partisan conflict, Gov. Granholm’s system-serving policies could never have become law but for the bipartisan cooperation of a Republican Senate for all eight years of her tenure and a GOP House during the first four years.
Michigan’s new governor hasn’t rocked all the special interest boats, but he’s challenged enough of them to show that he’s a very different kind of leader. Time will tell whether these new policy directions are sufficient to turn Michigan around, but if they fail it won’t be because Gov. Snyder placed serving the political system ahead of all else.
James Hohman is a fiscal policy analyst and Jack McHugh is senior legislative analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the authors and the Center are properly cited.