A Tale Of Two Governors

February 28, 2005
Print
Text Size:
A A

The sharply differing backgrounds of Michigan's and California's governors seem to dictate their radically different approaches to the two states' mounting problems.

Jennifer Granholm has spent much of her adult life in government, dependent on the public treasury for her livelihood. Arnold Schwarzenegger, by contrast, entered government only after making millions in one of the most competitive businesses on earth.

And the difference in their approaches sticks out like a very sore thumb.

In a meeting late last month with California newspaper editors, the Governator put it succinctly. He wants taxes cut. He says — and he's right — that history shows tax increases not only stall business growth but also deepen government deficits. The reason? Government inherently strives to spend more than it exacts from the public.

"Ve got to starve this monster," he told an audience of astounded journalists. And he apparently intends to take that battle right to the people over the heads of the rest of the government.

By contrast, Granholm seems to believe tweaking existing taxation and deepening government debt will improve employment.

We can only ask, "How?"

It's not as if Lansing has ignored business. The state spends heavily on public works. It funds a scurrying Michigan Economic Development Corp. It has created Smart Zones, Renaissance Zones, and brownfield legislation — a panoply of incentives and spending targeted at what it guesses and hopes will be the economic waves of the future.

Yet since December 1995, Michigan has placed 50th out of the 50 states in percentage of employment growth. In its percentage of per-capita income growth over roughly the same period, Michigan placed 43rd. It was the only state to lose a large number of jobs in 2004, and it currently leads the nation in unemployment.

Obviously, something's defeating Lansing's economic programs. Michigan leads the nation in unemployment — not economic growth.

Perhaps the heart of the matter lies in an analysis by James R. Hines Jr., a professor of economics at the University of Michigan. His research disclosed that during the last quarter of the old century, Michigan's corporate taxes averaged 50 percent higher than those of other states as a percentage of gross state product.

How's that for a competitive disadvantage?

Apparently forgetting the maxim that if you want to destroy something, tax it, the Legislature created the Single Business Tax as a levy on jobs, not profits. The reason? To guarantee Lansing's revenue stream regardless of the ups and downs of the private sector. The thinking was that, in bad times, citizens and businesses might sacrifice. But not Lansing.

Lansing's top priority, transparently, is neither a healthy economy nor high employment.

To be sure, everybody in the state capitol favors a healthy economy.

But what Lansing really wants is minimal interruptions in the revenue stream that guarantees government officials' comfortable incomes, Rolls-Royce insurance, routine pay hikes and ultra-early pensions — not to mention stay-on positions at the trough for term-limited officials as lobbyists or political appointees.

That kind of collective public sector greed is Michigan's version of the California monster about which the Governator spoke.

Lansing is feeding the monster and scratching its ears and brushing its coat.

The economy? That comes second.    

Editor's Picks

Comments powered by Disqus