Source: BEA, Census Bureau and Author's Calculations
Since my job as fiscal policy director of a think tank requires
me to watch the State of the State address every year, I have often wondered
what I might say if I were governor. After a decade of analyzing state budgets
and Michigan’s economy, I think my remarks would go something like this:
It is a pleasure to be here to deliver my very first State of
the State address to this full chamber. My remarks will be different from my
predecessors’ in two ways. First, I did not craft these remarks around pithy
quotes that could be easily extracted by the media. Too many speeches by too
many politicians are designed to solicit good press coverage rather than convey
Someone once said that politicians will do the right thing, but only after they have exhausted every other option. Michigan may have reached that point.
Second (and related), my speech is void of applause lines. It
has, in recent years, become customary to place invited guests of heroic stature
in our gallery and then dramatically recount the ways they have saved kids from
ignorance, created jobs or served honorably in a theater of war. This omission
will prevent legislators from leaping to their feet in raucous applause with the
predictability of Pavlov’s dogs at the sound of a bell.
In exchange for meaningless but clever turns of a phrase, I will offer the troubling but blunt truth:
Michigan is dying. The Great Lake State most of us remember from our youth is being replaced by a poorer, less competitive one. Consider just a few economic measures.
State GDP is simply the value of all goods and services produced
within the geographical borders of a state. This ranking is important to us
because Michigan has typically done better during national booms and worse
during recessions. But starting in 2002 something changed. With a growing
national economy we should have been climbing in the GDP rankings, yet we
continue to fall. This is not a simple, cyclical event.
Let me drive this point home. If present trends continue, the
people of Alabama will on average have higher incomes than the people of
Michigan in just three years.
Lastly, Michigan has the highest unemployment rate of any state in the nation at 7.6 percent. If the Great Lake State has another year of net job losses as is expected, it will represent the largest string of year-over-year job losses since the Great Depression.
Now, I ask you: Does anyone think any of these numbers will
improve as a result of last year’s $1.4 billion tax hike? The economic law of
demand is clear. If you raise the price of anything — wheat, jobs or work, for
instance — you get less of it. When the state hikes the cost of laboring and
living in Michigan they will get less of it. We must reverse these trends and do
so with dramatic reforms.
For starters, Michigan must become the 23rd right-to-work state, which is perhaps the greatest economic development tool in the state’s reach.
Between 2001 and 2006, states with voluntary unionism enjoyed
state GDP growth of 18.1 percent. Michigan grew by only 3.4 percent during the
same period. From July 2005 to July 2006, nine of the top 10 states in terms of
population growth were right-to-work states. The numbers suggest that this is no coincidence.
The good news is that Michigan is a great state with abundant
natural resources, such as water and human talent. Moreover, opportunity can
spring from crisis. Someone once said that politicians will do the right thing,
but only after they have exhausted every other option. Michigan may have reached
that point. Let us move forward.
Michael D. LaFaive is director of the Morey Fiscal Policy
Initiative 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
author and the Center are properly cited.
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