Op-ed on top reforms in The Detroit News
Michigan’s economy has been on the upswing since it passed right-to-work legislation in 2012, with employment climbing 7 percent, private-sector wages increasing 4.9 percent, an unemployment falling from 9 percent to 4.5 percent – below even the national average.
Right to work has even helped unions, which have seen numbers climb now that they must earn the business of members. Mackinac Center’s Director of Labor Policy F. Vincent Vernuccio and adjunct scholar Jeremy Lott argue in an op-ed published by The Detroit News that Michigan’s labor reforms should continue.
They suggest four reforms that could help Michigan and its unions see continued growth: Enact Worker’s Choice, require re-certification, demand transparency and reform release time, each of which is detailed in the op-ed.
The more we can root out many of the entrenched problems associated with compulsory unionism, the better. While much has been done in private sector unions, it’s important to move serious union reforms further in the public sector.
Just in time for Labor Day, the Mackinac Center for Public Policy has released Top Labor Reforms for Michigan. The guide, authored by Vernuccio, includes 13 reforms lawmakers could make to further improve the workplace and support workers. A copy of the guide has been sent to every state lawmaker in Michigan.
Read the full op-ed in The Detroit News here.
Ding overspending schools, limit corporate subsidies, legislative subpeonas and a boost for the disabled
While the Legislature is on a summer break with no voting, the Roll Call Report continues its review of key votes from the 2015-2016 session.
House Bill 4329, Authorize emergency manager for chronically overspending school district: Passed 59 to 50 in the House on April 23, 2015
To authorize appointment of an Emergency Manager for a public school district that fails to comply with an “enhanced deficit elimination plan” required by House Bill 4327 for a district whose regular deficit elimination plan failed to fix the problem.
House Bill 4329, Authorize emergency manager for chronically overspending school district: Passed 25 to 12 in the Senate on June 18, 2015
The Senate vote on the bill described above.
House Bill 4467, Allow more dangerous prisoners at Baldwin private prison: Passed 57 to 53 in the House on May 7, 2015
To allow more dangerous adult prisoners to be held at a privately owned and managed prison whose previous contract with the state to house juvenile prisoners was revoked by Gov. Jennifer Granholm in 2005. Since then the prison has contracted with other states to house their prisoners, although it is closed now.
House Bill 4467, Allow more dangerous prisoners at Baldwin private prison: Passed 23 to 14 in the Senate on May 27, 2015
The Senate vote on the bill described above.
House Bill 4333, Prohibit MEGA corporate subsidy deal modifications: Passed 105 to 5 in the House on May 7, 2015
To prohibit state economic development officials from amending or modifying a corporate tax break and subsidy deal granted to certain businesses and developers under a Michigan Economic Growth Authority law repealed in 2011. The bill was introduced after it was revealed that these agreements have generated an unfunded liability of nearly $10 billion for the state, and that officials continue to amend the deals in ways that may increase this.
The Senate has not voted on this bill.
House Bill 4182, Ban local government “phone-in” voting: Passed 91 to 19 in the House on May 26, 2015
To establish that if a member of an elected public body is allowed to cast a vote on a decision by the body without being physically present, it is a violation of the state Open Meetings Act.
House Bill 4182, Ban local government “phone-in” voting: Passed 30 to 7 in the Senate on October 22, 2015
The Senate vote on the bill described above.
House Bill 4542, Create college saving plan for disabled students: Passed 108 to 1 in the House on May 27, 2015
To authorize a new type of tax advantaged education savings plan called an “ABLE account," which mirrors a recently enacted federal law, and can be used to pay for a disabled individual’s living expenses in addition to education expenses. Related bills make contributions to a beneficiary's account tax deductible, and increase the maximum balance allowed in these and other "529” college savings plans to $500,000.
House Bill 4542, Create college saving plan for disabled students: Passed 35 to 0 in the Senate on September 29, 2015
The Senate vote on the bill described above.
House Bill 4522, Expand legislative subpoena power: Passed 69 to 39 in the House on June 2, 2015
To give certain committees of the legislature the explicit authority to subpoena and investigate records of local governments, authorities, school districts and community colleges. At least one member of the minority party would have to agree. Under current law committees can subpoena state agency personnel and private citizens.
The Senate has not voted on this bill.
House Bill 4458, Repeal complete streets advisory council: Passed 90 to 18 in the House on June 2, 2015
To eliminate a government “complete streets” advisory council comprised of representatives of various pro-sidewalk interest groups that was created by a 2010 law mandating local governments adopt policies that promote more sidewalks and bike paths.
House Bill 4458, Repeal complete streets advisory council: Passed 28 to 10 in the Senate on March 1, 2016
The Senate vote on the bill described above.
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.
Common ways to rationalize use of taxpayer dollars
A recent article from Crain’s Detroit covers a study that says the state’s taxpayer-funded venture capital partnerships provided a 21-times multiplier on investments. That is, there were $21 of economic activity for every dollar taxpayers spent. The report, which argues for more taxpayer spending on venture capital, is yet another attempt to draw faulty conclusions by misapplying an economic multiplier analysis.
Publishing a multiplier analysis is a frequent tactic to gain support for taxpayer spending. On its face, it makes the case that putting money in your preferred place will provide substantial economic returns. A little bit of public investment will yield great returns, goes the argument. Here are some examples of different multipliers that have been used to justify government spending.
No single author or publisher created these reports. They drew on different sources of data, had different models of economic activity and used different methods to analyze the data. But they were similar in one important way: They were used to call for more government spending in Michigan.
One problem with all of them is that they are being used in ways they were not designed for. If they used the same methods and models, they might be used to show which kind of government spending would have the greatest economic impact. Instead, they are used to call for taking more money from taxpayers — a judgment call that is a different question entirely.
As economist Dan Smith remarked, “The increasingly sophisticated reiterations of old Keynesian models still fail to pass the inspection of basic economics, and still fail to address the most basic question, ‘where is the money coming from?’”
When the state publishes a study on the economic multiplier of state-paid tourism advertising, it never uses the study as part of a broader effort to set priorities for economic development spending. The economic development agencies could, for example, compare the effects of using tax money to promote tourism with the effects of that same money to seed new companies with venture capital funding. But they don’t. That kind of comparison could let them conclude that spending on tourism is better than spending on venture capital. Instead, both areas of spending (and many others) is rationalized by the argument that they have an economic impact.
There are a number of different tools available to determine the economic impact of a government initiative. Multiplier analyses are one, but their findings are often misinterpreted. Until they are used to compare the economic activity that results from different areas of public spending — something impossible, given the important ways in which they differ one from another — they should simply be disregarded.
Legislature considers bill to stop new Washtenaw County tax
In June, Washtenaw County became the first local government to approve a tax on disposable carry-out bags at the grocery store. If you forget to bring your own bags, grocers are forced to charge a 10 cent tax on every new bag you receive, paper or plastic. If you double-bag, it will cost you 20 cents.
Counties claim that they have the authority to manage solid waste collection but this is a policy that stinks on many levels. Let’s start with the environment. There is little evidence that targeting a particular type of packaging with a tax will have significant impact on reducing solid waste at municipal landfills. At last count, less than 13 percent of the 254 million tons of waste was comprised of plastic. Of this 13 percent or 32,520 million tons, 3,780 million are plastic bags. Additionally, paper bag use has been declining over the years due to increasing cost and recycling.
Many consumers reuse disposable bags before putting them in the trash and when these bags become unavailable or too costly, they’ll find alternatives, very likely plastic, and possibly, heavier plastic, which eventually end up in landfills.
A bag tax is bad for low-income consumers. Fixed taxes of this sort are regressive, meaning consumers with lower incomes will feel the pinch for non-compliance more than their affluent neighbors.
“I don’t tax poor people,” County Commissioner Ronnie Peterson was quoted as saying when he voted against the tax.
A bag tax also hurts businesses, who will have to find ways to absorb will the extra cost. Profit margins at grocers are getting slimmer in part to recent trends in declining food prices. Grocers will still have to stock disposable bags but now they will have to manage extra accounting associated with the tax. Stores can be subject to fines for non-compliance and this will require added documentation.
Probably the biggest threat a local bag tax imposes is the precedent it sets for the rest of the state. What’s to stop any local government from taxing things like plastic boxes, food containers to bring home leftovers from a restaurant, plastic cups at sporting events. The possibilities are endless. Can you imagine consumers having to steer through the patchwork of local taxes?
States are starting to realize this potential for havoc by passing “uniformity” laws. Five states, including Michigan neighbors, Wisconsin and Indiana, approved a uniformity law within the last 18 months. Eleven states now have uniformity laws in place.
Michigan’s “uniformity” bill has cleared the State Senate and is now before the House. SB 853 prohibits local government from creating an ordinance that would regulate, restrict, tax or prohibit the use of “auxillary containers,” which would cover most forms of packaging. It would not ban curbside recycling programs or recycling collection centers. Littering ordinances would be unaffected.
Washtenaw County’s bag tax is scheduled to go into effect on Earth Day in April 2017 unless Michigan legislators can stop it. Taking care of the planet is a responsibility most people assume and is best done voluntarily and through public education. Forcing people to act through a tax, a tax that could vary from city to city, could jeopardize any goodwill towards the environment.
Mid-level providers could help fill the gaps
Michigan appears to be about average in access to dental care. There are about 7,700 dentists in the state and over 10,000 dental hygienists. In 2011, there were 6.2 dentists per 10,000 people, exactly the national average. But there is a concerning trend: Michigan’s dentist population skews older than average and the state may be facing a dentist shortage in the near future.
Results from a 2011 survey of Michigan dentists reveals the problem. At that time, 37 percent of dentists were between 55 and 64 and another 15 percent were over 65. This means that over half the dentists in Michigan are over 55 and within striking distance of retirement. For comparison’s sake, nationally only 26 percent of dentists were between 55 and 64 in 2011 and 16 percent were over 65.
Not surprisingly, according to the same 2011 survey, half of Michigan dentists said that they only planned to continue practicing for 10 years or less. Over 70 percent of dentists planned to retire within 15 years. Put another way, over the next 10-15 years, to maintain current populations of dentists, Michigan would need somewhere between 3,850 and 5,400 new dentists.
Michigan does have two fine dental schools (my younger brother just graduated from one) and perhaps these schools will produce all the new dentists the state needs. Maybe, but history suggests otherwise. From 2000-2011, there were 240 new dental license applications filed per year in Michigan, on average. If that pace continues, dental schools would only produce about 3,600 new dentists in Michigan over the next 15 years — not enough to replace those who plan to retire soon.
What can be done to help deal with this potential shortage? One idea is to create a midlevel dental provider, much like a nurse practitioner in medical care. Alaska, Minnesota, Maine and Vermont allow these service providers in their dental markets. And Sen. Mike Shirkey, R-Clarklake, introduced Senate Bill 1013 in June, which would create a new license for a midlevel provider called a dental therapist. These professionals would work under the supervision of a dentist but could provide preventive and routine care on their own (filling cavities, simple extractions, crowns, etc.).
Hiring dental therapists might make it easier and less costly for dentists to expand their practices and fill shortages. Given that Michigan may soon face a shortage of dentists, policymakers should seriously consider this proposal.
Mackinac Center op-ed published in Wall Street Journal
Detroit is living up to its motto and rising from the ashes by embracing business, but it would see greater job growth and faster recovery if it removed the arbitrary occupational licensing laws that are preventing it from reaching its full potential.
Mackinac Center for Public Policy’s Jarrett Skorup, a policy analyst, and Jacob Weaver, a research intern, wrote in an op-ed published by The Wall Street Journal that Detroit puts a heavy burden on people looking to find work and provide a service to the city. For at least 60 occupations, workers must pay fees, take classes, pass exams, and/or undergo additional training prior to being allowed to work.
Research shows that these barriers restrict job growth and provide no measurable health or safety benefits to the public. Morris Kleiner of the University of Minnesota concludes in a 2015 Brookings Institution paper that licensing requirements cost consumers more than $200 billion and result in up to 2.85 million fewer jobs. As the economic damage becomes more clear, Mr. Kleiner has found allies in groups as ideologically distinct as the Cato Institute and President Obama’s Council of Economic Advisers.
Such unfair licensing requirements also disproportionally hurt low-income workers.
A bipartisan group of Michigan lawmakers have reformed licensing requirements at the state level and Detroit leaders should follow suit to ensure the city fully rebounds from bankruptcy.
Read the full op-ed in The Wall Street Journal.
Op-ed on Mackinac pipeline published in MLive
Michigan’s regulatory system aimed at protecting the Straits of Mackinac are working, but that hasn’t stopped media, environmental groups and public officials from criticizing a private company that’s following the rules.
As explained in an MLive op-ed by Mackinac Center’s Director of Environmental Policy Jason Hayes, Enbridge Energy has come under fire in recent months after it reported erosion around lakebed supports of its Line 5 pipeline in the Straits and requested permits from the state to fix the unsupported sections. The company followed the regulations in conducting a survey of the pipeline and is now trying to repair the eroded areas.
Enbridge did exactly what it was supposed to and the regulatory system worked exactly as it should have. In a perfect world, the company would be able to accurately predict lakebed erosion, many years in advance, and pre-emptively install supports before they were needed. But should it be blamed for failing to foresee the future?
Hayes said negative consequences may result if companies like Enbridge are criticized for doing the right thing; in the future, they may be less forthcoming with findings that reveal potential problems.
Most Detroit residents want more options
MLive reports this week that the share of Michigan students enrolling across school district lines or in public charter schools has reached 23 percent. Still others choose private schools (7 percent) or homeschooling (3 percent). The growing trend of families to access different school options is reinforced by the broader popularity of choice found in a new Mackinac Center public opinion survey.
The new scientific statewide poll, conducted by Marketing Research Group, shows 55 percent of Michigan voters support public charter schools as an option for families, more than twice as many as are opposed.
The result is consistent with answers given to an identical question two years ago, despite heightened attacks in 2014 from major media outlets and organized interest groups. More recently, a political full-court press nearly resulted in the creation of a new commission to restrict the growth of charters in Detroit. Anti-charter attacks persist nationally and locally.
Currently, Michigan charter schools enroll about 150,000 students, about one-tenth of the state’s public school population, with larger shares served in Detroit and other urban centers. Charters’ more disadvantaged student bodies gain on average an extra two to three months of learning each year compared with their peers in traditional public schools, according to the best available research.
Support for the increasingly popular opportunity to enroll across school district lines is comparably strong: 62 percent versus 34 percent in opposition. Through the Schools of Choice program, most Michigan districts have embraced the option to accept out-of-district enrollments, with more than 180,000 students participating last year.
Most respondents to the Mackinac survey are content with the current range of opportunities to select schools beyond the traditional assignment approach. Statewide, 59 percent of respondents said Michigan has about the right amount of choice, while a quarter said more is needed. In the Motor City, though, where educational struggles are deep and well documented, 51 percent believe there isn’t enough choice. Only 35 percent of Detroiters are satisfied with available options.
One option not currently available in Michigan registered as the most appealing of all in the poll: tax credit scholarships, which served 225,000 students from 15 different states in 2015-16. Under these programs, an individual or business receives a tax bill write-off for donating funds to a nonprofit scholarship organization. Families then apply for needed tuition aid from one of these organizations to enroll in a private school of their choice.
Respondents backed tax credit scholarships by a 2-to-1 margin (57 percent to 29 percent). Follow-up questions revealed Michiganders recognize that certain students have challenges that might be addressed by increased educational choice. Three out of four respondents (77 percent) liked the idea of making tax-credit scholarships available to families with special needs students. Almost as many (70 percent) favored offering the scholarships to low-income families.
Unfortunately, an imposing barrier currently blocks the way to promising private school choice plans. Michigan’s exceptionally restrictive state Constitution denies even the neediest, most vulnerable families the opportunity to access such a program.
By a margin of 55 to 36 percent, Michiganders do not believe that educational choice harms traditional public schools. The wisdom of the crowd aligns with a compelling body of research. Thirty-one out of 33 gold standard studies find that competition from private school choice actually helps improve public school performance. The record is less overwhelming, but still strong, for the broad positive effects of public charter schools.
The broad support for some choice programs demonstrates not only a compassion for families who need new effective options, but also an ability to see through one of the opponents’ primary arguments.
Support for all kinds of educational choice within the Great Lakes State meets or exceeds national sentiment. A recently released poll from Education Next, a pro-school reform journal, shows similar results on nearly all questions.
When it comes to changing the playing field of K-12 education, most voters embrace the concept of choice. The challenge that lies ahead is translating that support and demand into new learning opportunities that help raise the bar for all Michigan students.
The benefits of trade in Michigan
If the government prevented people from shopping outside of their own town or state, they would be outraged and recognize it as limiting their freedom. If Michigan businesses were prevented from buying or selling their products to people from other states, most people would understand that to be economically destructive.
Yet when it comes to the issue of foreign trade a lot of people from both sides of the political spectrum are opposed to allowing a similar free flow of products and services between countries. That’s why the two main presidential candidates are able to run their campaigns with antitrade sentiments as key planks.
But international free trade is a good thing. It allows people to sell their products to a much larger group. It gives consumers more choices in what they are buying, making goods and services better and less costly because of the increased competition.
Antitrade sentiment often plays well politically in Michigan. Many people blame foreign trade for the loss of some jobs, though that was occurring before trade agreements were made and is more related to technological advances and labor laws. Even leftist economists at the Economic Policy Institute only blame NAFTA – the trade agreement most frequently cited as economically destructive – for the net loss of 43,600 jobs in Michigan, a state with 4.8 million jobs. This, of course, doesn’t make it any easier for the people who lost these jobs, but it nevertheless shows that even the highest estimates of the negative impact of NAFTA on Michigan workers can find only a minuscule effect.
But it is likely that trade leads to more jobs overall. A new report from The Heritage Foundation looks at trade as it relates to Michigan. In particular, it looks at the benefits from trade – the number of jobs supported by exports, foreign investment in the state, and jobs gained from trade agreements. Here are some facts from the report about trade in Michigan:
- There are more than 14,500 Michigan businesses that export goods around the world, supporting almost 271,000 jobs.
- Service exports have more than doubled in the last decade to $13.4 billion while total exports have increased to $53.2 billion. Transportation companies export $26 billion worth of equipment to 165 countries.
- Since NAFTA was signed in 1994, the state has gained 281,700 jobs overall and has a lower unemployment rate.
- Michigan is home to 1,733 automobile and auto parts companies, 26 percent of which are foreign owned.
- The state imports $124 billion worth of goods, mostly from Canada and Mexico. This competition lowers the costs of goods for consumers and provides products for Michigan workers to sell.
- Michigan has significantly increased its exports to Mexico (16 percent) and China (27 percent) in just the past three years.
- The 30 percent steel tariffs imposed under the Bush administration harmed Michigan companies – the increase in cost made Michigan lose more jobs than all but three states.
Lowering trade barriers can provide new competition to businesses competing with foreign producers. But it also provides new opportunities for other local businesses, which might benefit from selling goods to new buyers in new markets. The historical evidence is overwhelming: Free trade always accompanies economic growth and prosperity, and countries that allow their people to take part are, on balance, much better off.
When international cooperation is not helpful but destructive
At an event held in northern Michigan on Aug. 4, Gov. Rick Snyder announced that he and Ontario Premier Kathleen Wynne would sign a memorandum of understanding to cooperate in promoting the automotive industries of Michigan and Ontario. This type of selective government meddling in the economy is a bad idea and should be avoided.
It effectively amounts to crony capitalism, which Oxford Dictionaries defines as an “economic system characterized by close, mutually advantageous relationships between business leaders and government officials.” Crony capitalism has been justifiably denounced by a diverse array of scholars, associations and politicians. These cozy relationships are typically unfair, expensive, and ineffective.
The plan the two politicians announced comes with no cost estimates. But it is easy to see how the memorandum’s vaguely worded vision of “jointly developing new programs to address emerging technology needs” could lead to new spending on business subsidies (otherwise known as “corporate welfare”) on both sides of the border.
It is fundamentally unfair that any dollars from our public treasuries are used to support such initiatives, which confiscate money from millions of people and businesses, diverting it to a privileged few with special government relationships. The “promotion” of one industry almost invariably results in the “demotion” of other industries, as businesses and people without political clout are forced to pay full freight.
And pay they do. For example, the state of Michigan approved $3 billion in incentives to just the Big 3 automakers in 2009 and 2010 alone through its (now defunct) Michigan Economic Growth Authority program. Four out of five scholarly analyses of the MEGA program concluded that it had, at best, no impact on the economy. The fifth analysis said the program had a positive but tiny benefit. There are numerous other examples of failed corporate welfare initiatives in Michigan alone.
And then there’s Ontario, where the provincial government provided General Motors and Chrysler with a $4.6 billion bailout in 2009. A report from Ontario’s Auditor General identified several problems with handouts from the provincial government to businesses. It also determined that the government recovered only $3.6 billion and had to write-off $1 billion of taxpayer money from the bailout. If you add in the money given to the auto companies from Canada’s federal government, the total cost to Canadian taxpayers was estimated at $3.7 billion. (All numbers are expressed in Canadian dollars.)
There is, of course, a litany of other examples. But the point is that the money to fuel the programs behind corporate giveaways and other “partnerships” doesn’t come in token amounts from bake sales. Instead, it comes from money that governments take from businesses and individuals through the tax system. The funds pay bureaucrats big dollars to oversee government programs, but they would be more effectively invested by market entrepreneurs who actually have the information and expertise to make informed investment decisions. Cronyism has another cost as well: It forces talented business officials to spend time and money making political calculations instead of purely economic ones.
Scholars from across North America have looked at government “promotion” efforts from every conceivable angle. The academic literature on official economic development programs is not flattering. Much of it was summarized in 2004 by economists Peter Fisher and Alan Peters in their peer-reviewed journal article “The Failure of Economic Development Incentives.” In their conclusion, they write: “Since these programs probably cost state and local governments about $40-$50 billion a year, one would expect some clear and undisputed evidence of their success. This is not the case.”
Instead of selectively meddling in the private economy and promoting one industry at the expense of others, Snyder and Wynne should focus on advancing broad-based policies that will encourage investment and entrepreneurship. That is the true path to prosperity, not more subsidies for the auto industry.