As Michigan continues to bleed jobs and suffer one of the nation’s highest unemployment rates, most of the policy blame has been directed at our complex and burdensome business tax system. Another factor is that our state still relies more heavily than most on manufacturing, a sector where jobs are declining worldwide due to productivity gains.
However, too many analyses of the Michigan malaise pay too little attention to the proposals and pronouncements of public officials. That’s a mistake, because this is an instance where "mere" words can cause real harm.
State officials’ policy proposals send strong signals to potential employers to either "stay away" or "come on in, the water’s fine." Unfortunately, right now too many negative signals are being sent. Here are several examples:
Gov. Jennifer Granholm’s Single Business Tax restructuring proposal. This effort to address possibly the worst dead weight on Michigan’s economy may actually be adding to the problem. Being "revenue neutral," the governor’s proposal only cuts taxes for some industries — generally manufacturers — by raising them on profitable areas of the service sector. The plan also will raise insurance rates on all businesses. Ironically, the proposal’s prime beneficiaries — manufacturers — will probably still shed jobs, while its whipping boys tend to be in sectors that are creating jobs. The sectors will create fewer jobs, though, as long as the threat of higher taxes remains on the table.
Republicans rolling back energy competition. Unintentionally "talking down the economy" is a bipartisan activity. Republicans in the state Senate have promoted legislation that threatens to end the lower prices and improved service enjoyed by Michigan’s electrical consumers as a result of an electricity competition law passed in 2000. These proposals, together with recent interpretations of the 2000 law by the Michigan Public Service Commission, are causing potential job providers to wonder whether power will be available in this state at prices that allow them to compete.
Gov. Granholm’s “Water Legacy Act.” This groundwater legislation would put Michigan at a disadvantage with respect to most Great Lakes states by eventually imposing a full regulatory permitting regime on any residential, commercial, agricultural or industrial water user who withdraws as little as 100,000 gallons of water per day in any given 30-day period. This volume is not, in fact, particularly large: Thousands of Michigan businesses would be affected, including factories, farms, golf courses and ski facilities.
In a huge reversal of property rights, the state would take away citizens’ longstanding freedom to the “reasonable use” of groundwater beneath their land — i.e., withdrawals that do not impair the water supplies of others. Instead, state bureaucrats would be making decisions about water use that Michigan citizens and businesses currently make for themselves. The threat of burdensome and time-consuming permit requirements could already be causing potential employers to pass over the Great Lakes State.
Deregulation of Telecommunications. The Michigan Public Service Commission has been reluctant to stop micromanaging telecommunications services, notwithstanding directives to deregulate from the Federal Communications Commission. This behavior may change with an expected rewrite this legislative session of the Michigan Telecommunications Act, although the commissioners can be expected to seek even broader regulatory powers under a new telecom law. But telecom investors are understandably hesitant to upgrade networks or expand infrastructure as long as state regulators stubbornly advocate price controls, subsidies and service mandates. Nor are businesses likely to increase investment until the Legislature restores a semblance of regulatory certainty with a new telecom statute.
Ergonomics regulations. A "work group" convened by the Michigan Occupational Safety and Health Administration is busily crafting ergonomics rules for Michigan job providers. Federal ergonomics regulations overturned by Congress in 2001 would have imposed between $264 million and $496 million in new costs on Michigan’s private sector. California — itself hardly a model of how to attract job providers — is the only state currently to impose such regulations on employers. Once again, the mere threat of such regulation may already be turning away job providers.
These policy proposals must be considered by any prudent business before it invests a single dime or hires a single worker in Michigan. Elected and appointed officials need to show greater sensitivity to how their catering to particular special interests can have a chilling effect on investment and job creation, doing real harm to the citizens they represent.
Jack McHugh is a legislative analyst for 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 author and the Center are properly cited.