The governor’s five-year plan does not include reducing the cost of producing goods and services in Michigan — something that would attract industries trying to compete globally. Instead, the plan is built around the 21st Century Jobs Fund and other state programs that substitute central planning for the market process.
I am old enough that when I listened to Gov. Jennifer
Granholm’s Jan. 25 State of the State message, I was reminded of the "Politburo" speeches of the old Soviet Union. The governor, rather than attacking Michigan’s severe economic problems by capitalizing on our market economy, emphasized her administration’s plan to create a "transformed" Michigan economy "in five years" — in other words, a five-year plan.
This five-year plan does not include reducing the cost of
producing goods and services in Michigan — something that would attract
industries trying to compete globally. Instead, the plan is built around the
21st Century Jobs Fund and other state programs that substitute central planning
for the market process.
The 21st Century Jobs Fund sets up a group of
government-appointed planners to invest our tax dollars in what the planners
decide are attractive businesses. One might ask why giving billions of dollars
in citizens’ taxes to a government bureaucracy to disburse to the politically
connected will turn out better than what citizens’ would have accomplished
risking their own money. Similarly, one might wonder why individuals are
unwilling to invest their money in Michigan businesses in the first place.
Another part of the governor’s plan is an acceleration of
planned road building. Some people involved in road construction will collect
paychecks from the state in 2006 rather than 2007, but how does this improve the
state’s economy in the long run? The rest of the plan involves massive
government intervention in the economy, including government-paid health care
for 550,000 people; "affordable" education at government colleges; higher
government standards for the government primary and secondary schools;
governmental setting of minimum wages; a government-run retirement savings plan
for workers; and a governmental fixing of prices for the insurance industry.
Michigan’s lethargic economy is not due to a lack of
government plans. Nor is it due to the national economy. Michigan’s nonfarm
payroll employment has fallen from 4.445 million in January 2003 to 4.362
million in December 2005. This decline occurred at the same time that the
national economy was adding nearly 4 million jobs. Michigan lost 2.8 percent of
its manufacturing jobs from December 2004 to December 2005, while the national
economy lost only 0.8 percent of its manufacturing jobs. National monthly
unemployment rates for 2005 ranged from 5.4 percent to 4.9 percent. Michigan’s
monthly unemployment rates, in contrast, ranged from 7.5 percent to 6.1 percent
(the current rate is 6.7 percent). Michigan ranked 47th in personal income
growth in the third quarter of 2005, the most recent year for which data are
available. Nearly every other measure tells the same story.
Reminiscent of the old Soviet leadership, Michigan’s
policymakers even denounce bad news that reveals policy failures. In July 2005,
the governor called a Wall Street Journal commentary by State Rep. Rick Baxter
and me "treasonous" because it detailed the dire state of Michigan’s economy and
identified high taxes as a root cause. The governor’s plan — presumably
"nontreasonous" — is to not
allow significant tax cuts. Although she signed a small $125 million per year
tax cut for manufacturers (in a state budget of $40 billion), she has also
vetoed a number of other bills that would have reduced taxes, most recently a
proposed $30 million tax decrease for small businesses.
Michigan’s economy will continue to decline if its leaders do
not move away from the idea that central planning can make us better off. Only
individuals operating freely in a system of voluntary exchange, with their
property protected in a legal framework that encourages individual
responsibility and true charity, are capable of creating wealth for the poorest
If we truly care about the poor in our urban centers and our
rural communities, we will provide them with opportunity. This means reducing
Single Business and income taxes on Michiganians’ efforts to work, innovate,
hire and produce. This means freeing the labor market so that business owners
and less-skilled workers can set wages independent of job-killing "prevailing
wages" and mandatory union bargaining laws. It means deregulating insurers and
health care providers so that they can grow, rather than cutting their services
or losing money.
Simply put, it means reducing the cost of working or owning a
business in Michigan. This does not call for a five-year plan; it only calls for
common sense and a willingness to face facts.
Gary L. Wolfram, Ph.D., is the George Munson Professor of Political Economy at Hillsdale College and an adjunct scholar for the Mackinac Center for Public Policy, a nonprofit 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.