During the postwar decades there was a saying about this state's economy: “When the nation catches a cold, Michigan gets pneumonia.” This recognized that with its heavy reliance on cyclical manufacturing (autos), the Great Lakes state tended to do very well in good times, but worse than the rest in recessions.
Indeed, were one to superimpose charts of Michigan and U.S. economic activity over 50 years, the result would be trend lines that go in the same direction, except that the state’s trend has higher highs and lower lows.
Michigan’s political culture reflected this. Government spending grew steadily when the economy was growing, and during lean years the political establishment hunkered down, either seeking tax and fee hikes, or using accounting gimmicks to tide themselves over until inevitable recovery. They knew that if they could just hold on for a little while, the economy would save them.
However, beginning around 2000 the pattern changed. Both the state and the national economy slowed, the latter slipping into a brief and shallow recession in 2001. The national economy turned around in 2002, but growth was slow at first. It began to increase rapidly in 2003, when tax cuts removing disincentives for work and investment kicked in.
In previous economic cycles Michigan would have come roaring back. Not this time. Our unemployment rate stubbornly remains 1.5 percent to 2 percent above the national average. In 2004 and 2005 ours was the only state to experience a payroll employment decline, except for states slammed by hurricanes. One consequence is that the value of homes here has grown much more slowly than the rest of the country, and in early 2006 it actually appears that homes may be losing value in many parts of Michigan. A recent news report showed that the rate of mortgage foreclosures in metro-Detroit far exceeds the level anywhere else in the nation.
Worst of all, Michigan is in its sixth year as a below-average income state, and has been losing ground to other states on this and related measures for half a century.
To put all this in context, Michigan is on the verge of becoming a state characterized by declining incomes, homes that every year are worth less than they were the previous year, and lonely parents whose children and grandchildren had to go elsewhere to find careers. It’s not a pretty picture.
Michigan’s political establishment has for too long resisted calls for reform. However, with the bankruptcy of Delphi, the perilous state of GM and Ford, the hollowing out of the City of Detroit, and the disastrous out-migration of the best and brightest of our younger generation, there are signs that Lansing is beginning to wake from its drug-like stupor.
This feature has been created to assist those trying to advance the “wake-up” process.