CapCon broke story about RTW "intimidation" list
The Daily Caller is reporting on a story Michigan Capitol Confidential broke about a Michigan union that bullied members who exercised their worker freedom rights. The International Union of Operating Engineers Local 324 published the names of 19 former members who resigned under Michigan’s right-to-work law in its statewide winter 2013 newsletter, labeling the workers as “freeloaders.”
The union’s attempt to intimidate members has now drawn national attention, being highlighted by KFI AM640 in Burbank, Calif.; WRBT FM94.9 in Harrisburg, Pa.; WBHP AM800 in Huntsville, Ala.; KIX FM104 in Fayetteville, Ark.; KTKR AM760 in San Antonio, Texas; WNTM AM710 in Mobile, Ala.; KNST AM790 in Tucson, Ariz.; WXKS FM108 in Boston, Mass.; KFAB AM110 in Omaha, Neb.; WRNL AM910 in Richmond, Va.; KKSF AM910 in San Francisco, Calif.; KVET FM98.1 in Austin, Texas; KNIX FM102.5 in Phoenix, Ariz.; KLSD AM1360 in San Diego, Calif.; WTAG AM580 in Worcester, Mass.; and WLW AM700 in Cincinnati, Ohio.
And why that myth is so damaging
President Obama came to Michigan recently to sign the $1 trillion farm bill and in a press release touting the bill, Sen. Debbie Stabenow called agriculture the state's "second-largest industry after manufacturing."
That is false.
A quick look at the data shows there is no possible way to justify calling agriculture Michigan's second-largest industry. Yet the claim has been repeated for years. This is especially distressing because Sen. Stabenow, D-Lansing, is the chair of the Senate Agriculture Committee and should know the size and scale of the industry.
The myth also is repeated by the Michigan Farm Bureau and the Ag Leaders For Michigan and other groups. The Michigan government also makes the claim, saying recently that agriculture is a "rock star" industry that employes "about 22 percent of Michigan's workforce."
The media echo chamber has helped spread this falsehood. An Associated Press article after the bill signing put that statement at the beginning of its article, which ran in newspapers across the country. (The national desk of the AP should have talked to Dave Eggert of MLive, who busted this fable two years ago.)
How did this statistic enter the conversation? My colleague James Hohman explains:
The source for the oft-repeated "second-largest industry" seems to come from an MSU report that uses a very loose definition of agriculture and multiplies the economic impacts from that loose definition.
For instance, cereal factories are included, as are food wholesalers and retailers like grocery stores and restaurants, regardless of their sales of Michigan grown produce. These jobs are then multiplied for their ancillary effects, meaning that you could be working as a car salesman and still be "induced" by agriculture, even though you directly work in automotive retail.
But even in the MSU study, the authors did not say agriculture is the second-largest industry. That was extrapolated by others.
This may seem like making a mountain out of a molehill, but misrepresentations like these are damaging. When politicians elevate certain industries of the economy in the minds of people, they are usually doing so to push favors for that segment.
Not surprisingly, while agriculture makes up about 1 percent of the national workforce, farmers get a disproportionate amount of subsidies that no one else receives. It also feeds the belief that bureaucrats and elected officials are "doing something" to help the economy, even if they are just shifting money from more productive areas to flashier ones (see: "State Loses 200,000 Jobs, MEDC Finds 2,185").
Agriculture is an important industry in Michigan, but there are lots of important areas of the economy. The government should not elevate it above the others, especially based on myths about its size.
Big spending on small part of economy
There are two things to keep in mind regarding the $1 trillion farm bill that President Obama recently signed into law at Michigan State University.
First, agriculture is a small component of both the U.S. and Michigan economies. According to the U.S. Bureau of Economic Analysis, the U.S. economy produced $16.2 trillion worth of output in 2012. Farming comprised $167 billion of this total, or about 1 percent. Only 1.5 percent of workers are employed in agriculture and related industries.
In Michigan, total economic output was about $400 billion in 2012, with farming constituting $4 billion of the total, or about 1 percent. Note that these Michigan figures actually inflate farming’s size because, unlike the national economy, the numbers for Michigan also include forestry, fishing and hunting, activities not usually thought of as “farming.”
The recent signing of the Farm Bill means that the federal government just committed to spend $1 trillion over 10 years to subsidize a tiny component of the economy that employs relatively few Americans.
Contrast farming with manufacturing. Nationwide, manufacturing output was $1.1 trillion in 2012, making up 6.7 percent of the economy. In Michigan, manufacturing output was $66.2 billion in 2012, or 16.5 percent of the state’s economy. Moreover, 8.7 percent of American workers are employed in manufacturing and the same is true for 13.7 percent of Michigan workers. We still manufacture a lot of output in both the United States in Michigan. Yet, we are able to do it without a $1 trillion manufacturing bill!
Second, consider the direction of the subsidies in the farm bill. According to the New Republic, the bottom 80 percent of farmers, the so-called “mom-and-pop” farmers that are romanticized in popular culture, receive an average of $5,000 in subsidies a year. The subsidies largely take the form of government-subsidized crop insurance. In contrast, many large corporate farms collect upwards of $100,000 each and some get more than $1 million in subsidies, as there are no income limits to receiving the subsidies.
And how are these subsidies paid for? The Farm Bill reduces the Supplemental Nutrition Assistance Program (or “SNAP,” which is more widely known as “food stamps”) by approximately $8 billion over 10 years. This translates into a roughly $90 per month cut to those lower income households that are affected. The increase in the subsidized crop insurance program described above costs $7 billion over 10 years.
These two points give credence to the view that this farm bill is really bad public policy. But this should also give pause to those who believe that only government can mitigate income inequality, as many politicians claim to want to do. As the farm bill case illustrates, these same politicians at times work directly against this goal.
Mackinac Center commentary in Detroit Free Press
Michigan’s corporate welfare programs, which should be eliminated, at the very least need more transparency, according to an Op-Ed in Sunday’s Detroit Free Press co-authored by Assistant Director of Fiscal Policy James Hohman and Eric Mosher, a program associate at the Public Interest Research Group. The commentary originally was written as a Mackinac Center Viewpoint.
Lower rates, fewer exemptions
It’s an election year, which means many Michigan politicians want to be seen letting taxpayers keep more of their own money.
As they proceed, however, they should take a long view of measures that aren’t just politically popular, but will have positive effects on future employment and economic growth in this state.
Democrats and many Republicans want to expand exemptions on pension income that were restricted as part of a 2011 tax overhaul, and expand homestead property tax and child credits that also were scaled back. The main component of that 2011 tax reform was replacing the Michigan Business Tax with a much simpler and less burdensome tax on firms' earnings, in practice ending taxation for most small businesses and imposing a flat rate on larger corporations.
While it has potentially unfortunate side effects (like creating incentives for retirees to move to a state with no individual income tax), scaling back exemptions on pension income made the system more fair. There's no logical reason why 401(k) or IRA withdrawals should be taxed while income from conventional pensions is exempt. Not to mention forcing struggling young families to pay higher rates so older citizens can pay less. And while property tax credits and dependent child credits are politically popular, they do little or nothing to help increase employment and the state economy.
In contrast, broad-based cuts in income tax rates do help create jobs and expand Michigan's economy. That's the goal of a bill sponsored by Sen. Jack Brandenburg, R-Harrison Township, which is pending on the Senate floor.
Before those 2011 tax changes, the current income tax rate of 4.25 was on track to being reduced to 3.9 percent, the rate before a large tax increase imposed in 2007. Senate Bill 402 would gradually roll the rate back to 3.9 percent by 2017.
Related to all this, Michigan's constitution prohibits politicians from imposing a graduated income tax. In other words, only a flat tax is permitted. Nevertheless, this principle has been eroded by exemptions that have the effect of creating a graduated tax system.
Indeed, according to the Michigan Department of Treasury, the system has become quite progressive. Most individuals don't start paying income tax until their income is around $22,000, mostly because of property tax rebates, home heating credits and other exemptions. (See chart nearby, but note that it is only updated through 2011, before that year's tax changes.)
Setting aside the constitutional issue, graduated taxes are not an invalid political choice, whether one agrees with it.
But economists agree that the most efficient method of taxation with the least number of unintended consequences is to spread as low a rate across as wide a base as possible. This is the direction Michigan tax policy should flow.
Apparently not those who want to increase the minimum wage
Minimum wage laws are regarded by economists of all stripes as among the least efficient tools for boosting the welfare of those at the lower end of the earnings spectrum, inevitably harming many of those they are intended to help.
This leads some to conclude that politicians who champion increasing the minimum wage must be demagogues working for partisan advantage. In reality, most politicians simply don't understand economics. In fact, there is research to support this more generous view.
In 2011, scholars J. Brian O'Roark and William C. Wood published a study on the link between minimum wage votes by members of Congress and their formal educations. The study, "Determinants of Congressional Minimum Wage Support: The Role of Economic Education," concluded that "members who majored in economics as undergraduates were less likely to vote for the minimum wage increase than their colleagues. No other major had a consistent influence."
O'Roark and Wood call for "deference" to economists on this topic, writing that "the minimum wage debate is a particularly political one, but just as the opinions of doctors on medical issues are deserving of special consideration, we believe that the opinions of the most economically literate on the minimum wage should be carefully considered by policymakers and the public."
Another lens through which to examine this problem looks at what politicians do rather than what they say. Mackinac Center for Public Policy Research Associate Jarrett Skorup recently documented the apparent hypocrisy of some politicians who publicly call for increased minimum wages while also employing office interns at a wage of $0.
Politicians are not the only hypocritical actors in this play. It is reminiscent of a California lawsuit filed several years ago by ACORN, a political agitprop group with strong ties to the Service Employees International Union. ACORN promoted not just minimum wage hikes, but even more burdensome "living wage" mandates.
The lawsuit sought to exempt ACORN, however, from paying its own members the wages it wanted mandated on everyone else. The group defended itself by stating the obvious case that other businesses could make as well. As ACORN lawyers wrote in their brief, "[T]he more that ACORN must pay each individual outreach worker … the fewer outreach workers it will be able to hire."
That is exactly the type of insight we would expect from someone with knowledge of the economic science. Like the congressmen studied by O'Roark and Wood, perhaps these champions of higher wage mandates for "thee but not me" had also taken college economics courses.
Minimum wage laws have been shown to eliminate job opportunities and cost many of the least skilled workers their jobs. Politicians who support increasing wage mandates may be ignorant of the economics at work here, or may simply be willing to sacrifice low-wage workers to gain political advantage. The public should correct them by rejecting these policies outright.
Get back to the 2011 and 2012 reform agenda.
Here's how to get back on track:
-- Pass a broad based marginal rate income tax cut. This is an incentive changing reform that will lead to more jobs, higher incomes and a growing, more competitive state economy. In contrast, boutique tax cuts like vehicle "sales tax on the difference," and political tax changes like increasing homestead property tax exemptions have none of those virtuous effects.
-- Close the school defined benefit pension system to new employees.
-- Require local governments to close their own defined benefit pension systems to new employees.
-- Repeal the state prevailing wage law that prohibits granting government construction contracts to the lowest bidder if a contractor is not unionized.
-- Enact a "no more stringent that federal' law limiting rules promulgated by state environmental and workplace safety regulators.
-- Finish the job on personal property taxes by putting a stake in the heart of this absurd levy on business tools and equipment. Even after parts of it are phased out under the recent reform law, the tax will remain a burden on many commercial firms. (Phase outs are OK, but at the end the tax should be deader than the Dodo for all businesses, regardless of size or type.)
-- Add sunset provisions to all laws that give government bureaucrats the power to write rules, enforce those rules and adjudicate them. Gradually replace those laws with ones that do not grant unelected bureaucrats legislative and judicial powers that undermine the constitution's separation of powers.
-- Stop expanding, and start rolling back, Michigan's "shadow government" of borrow-tax-spend "authorities," "zones," "tax increment finance" schemes, "interlocal agreements," etc.
-- Stop inflating the higher education bubble, and by all means don't put the state in debt to inflate it even further. Rather than allocating appropriations directly to each university, start shifting to a system that gives those dollars to students, who can use them to pursue the post-secondary education opportunities that provide the most value for the money.
-- Stop pretending that spending more on conventional public schools leads to better educational outcomes for children. The evidence shows that it does not. Instead, fund innovative alternatives including online education and greater parental choice.
-- Reverse the accounting change that delivers state tax dollars directly to the school pension fund rather than passing them through school districts. This is harming innovative and successful charter public schools and generating mischievous political games related to how much the state is spending on public education.
-- Repeal Michigan's minimum wage law, don't increase it. As Mackinac Center for Public Policy's director of fiscal policy Michael LaFaive put it, the only true minimum wage is zero, which is what many more low-skill workers will get if the mandated minimum is increased.
-- End corporate welfare handouts. So-called economic development programs are in fact just political development programs that benefit politicians and a handful of lucky winner firms, while doing nothing to grow the state economy or increase the total number of jobs.
-- Eliminate statutory revenue sharing payments to local governments. When the only money local politicians can spend comes from taxes and fees they themselves must authorize, they spend and govern more wisely. (This constraint is the only real and durable "best practices incentive." Legislators will inevitably succumb to pressure and hollow out other forms.)
-- Repeal the Obamacare Medicaid expansion. Instead, join with other states to press for the federal government to "block grant" the program with no strings attached to the 50 state laboratories of democracy. Let states create sustainable low-income health care systems that actually work for the beneficiaries and their people of their states.
-- Privatize some prisons. Not only will the privatized institutions save money, their very existence will create incentives for the non-privatized prisons (and the prison guard unions) to sharpen their pencils and also find ways to run more efficiently and frugally. Prisons are a necessary evil, not a jobs program, and their right cost is the least cost.
-- Repeal the racket known as the three-tier alcohol distribution system, which redistributes tens of millions of dollars from the consumer tier to a tiny, rolling-in-dough special interest tier. Prohibition ended 80 years ago; it's past time to end Michigan's transition out of it.
-- Increase Gov. Rick Snyder's bid to cut $25 million out of wealth redistribution from Michigan taxpayers to film producers by making the total cut $50 million. In other words, zero-out this bizarre form of reverse-Robin Hoodism.
-- Replace the extremely costly Michigan State Police ($639 million proposed for next year) with a much smaller and less costly agency limited to statewide investigations and specialized functions (aviation, dive teams, canines, etc.)
Majority of Michigan GOP delegation voted for it
President Obama was in Michigan last week to sign a 10-year, $1 trillion farm bill. While much of the debate has centered around the spending on food stamps, buried in the 1,000-page plan are many other provisions that are indefensibly bad policy.
While some are praising, and others complaining, about slightly rolling back spending on food stamps and eliminating some of the direct payments to "farmers" (who did not actually farm), the bill goes far beyond that. This bill continues special subsidy deals to farmers in every area in the country — from corn and beans to rice and peanuts to sugar and catfish.
The farm bill also pays 62 percent of the premiums for crop insurance costing billions annually. The program is administered through 18 private companies.
According to The New York Times, "Crop insurers scored a major victory from a provision in the bill that bars the Agriculture Department from renegotiating lesser payments to those companies over the … life of the bill. In previous years, the Agriculture Department's renegotiations with insurance companies have resulted in billions of dollars in savings for the government."
While the Congressional Budget Office said the bill will reduce federal spending by $16.6 billion, the R Street Institute, a free market think tank with its headquarters in Washington, D.C., said only $8.6 billion of that comes from trimming farm subsidies. Comparably, the 2014 White House budget wanted $37.8 billion in net cuts to farm subsidies. So the GOP, which provided most of the votes on this bill, soon will be campaigning on fiscal prudence, but could not manage to cut less than the president.
"The Obama administration is not exactly known for austere budgets, so the fact that the White House would cut $29.2 billion more in wasteful agriculture spending than the farm bill Congress approved underscores just how terrible this legislation is," said R Street Senior Fellow Andrew Moylan, in a press release.
The Economist noted that the bill is a 50 percent increase in spending over the 2008 law, with 80 percent going to spending that has nothing to do with farming.
The median farm household income is 25 percent higher than the national average and 75 percent of the subsidies in the bill go to the largest 10 percent of farm businesses. In practical terms, this means the rest of society is subsidizing wealthy agriculture companies.
Among Michigan's Congressional delegation, the bill was supported by Sens. Debbie Stabenow, D-Lansing; and Carl Levin, D-Detroit.
In the House, it was supported by most representatives on both sides of the aisle: Reps. Dan Benishek, R-Iron River; Bill Huizenga, R-Zeeland; Dave Camp, R-Midland; Dan Kildee, D-Flint; Fred Upton, R-St. Joseph; Tim Walberg, R-Tipton; Mike Rogers, R-Howell; Candice Miller, R-Harrison Township; John Dingell, D-Dearborn; and Gary Peters, D-Bloomfield Hills.
The four representatives who voted against the bill were: Reps. Justin Amash, R-Cascade Township; Sander Levin, D-Royal Oak; John Conyers, D-Detroit; and Kerry Bentivolio, R-Milford.
Republicans who were opposed to the massive far bill said they were against it for spending reasons while the Democrats said they were opposed because of the cuts to food stamp cuts.
"This is not your father's farm bill," said Sen. Stabenow, chair of the Senate Agriculture Committee, who co-wrote the bill, in a press release.
It's certainly not, nor your grandfather's. While the American economy was once mostly families working in agriculture, today many of the people and businesses that farm are much larger and wealthier. And yet we continue to give them hundreds of billions of dollars in subsidies. And much of the spending goes to an increasing number of federal programs and bureaucracy rather than the family farm.
Today, the annual budget of the Department of Agriculture exceeds the net incomes of all U.S. farmers.
Agriculture still is an important part of our economy, and there are many people working land that has been in their families for generations. But few industries, if any, get the special subsidies and deals doled out to Big Agriculture.
These favors are given to a growing number of industries in more and more states, making the farm bill a "Christmas tree budget" filled with gifts to please the beneficiaries, bureaucrats and politicians involved. But taxpayers are much worse off.
Senate Bill 475, Establish trampoline court regulations & immunities: Passed 25 to 12 in the Senate
To establish standards and regulations for recreational trampoline court facilities and operators, and grant these businesses limited immunity from lawsuits if the proposed regulations are followed.
Senate Bill 146, Extend enterprise zone tax breaks to a particular development: Passed 93 to 17 in the House
To revise a law that authorizes tax breaks for developers whose projects are in an area deemed a “neighborhood enterprise zone,” in a way that would allow the tax break for a particular developer's project, notwithstanding this developer's failure to request the tax break before getting a building permit, which the current law requires.
Senate Bill 319, Repeal mandatory life sentences for minors: Passed 62 to 48 in the House
To revise Michigan's mandatory life sentence with no chance of parole for certain very serious crimes committed by minors. Life without parole would no longer be automatic in these cases but prosecutors could request it. Otherwise, the minimum sentence would be 25 to 40 years, and the maximum at least 60 years. The measure responds to the U.S. Supreme Court's Miller v Alabama decision, and would not apply the new standard retroactively to the approximately 350 current prisoners in this category. However, it does have a provision authorizing parole hearings for them if a future ruling requires this.
House Bill 4825, Require candidates to disclose felonies: Passed 105 to 3 in the House
To require a candidate for public office to disclose when filing for the race whether the individual has been convicted of a felony in the past 10 years, and to disclose the crimes.
SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.
Made full contribution just twice in last decade
Michigan's school employee pension system is underfunded by $23 billion and to return it to full funding, it is necessary to continue to pay the system's annual required contribution.
The annual required contribution is the amount necessary to pay for the pensions that employees earn and to catch up on unfunded liabilities under the state's assumptions. The state has not been paying the full amounts.
The annual required contribution last fiscal year was $1.9 billion, but the state put in only $1.4 billion.
This has been a long-term problem. The state only paid its full contribution in two of the past 10 years.
This is one reason why the state should convert to a defined contribution retirement system, where it becomes clear whether the state is fully funding the retirement benefits offered to employees.