Policy Forum Yet another call to action

September 17, 2010
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The West Michigan Policy Forum last week kicked off with vigorous pleas to continue the unification of the state’s economic strategies. Conference committee co-chairs Peter Secchia and Doug DeVos urged the estimated 600 attendees to keep pressure on Lansing politicians to wisely prioritize economic reform initiatives.

“We are united in the brotherhood of business,” Secchia said. “We have been successful in bringing a discussion of all the issues where there was no discussion before. The proof will be in the gubernatorial elections. What legislators are feeling now is the result of their unwillingness to listen. You could call this a Tea Party. We’re teed-off.”

Doug DeVos then turned the podium into a pulpit in issuing a plea for focused direction on Michigan’s economic matters.

DeVos said, “There have been legislators who have been in the way and weren’t listening. They thought that political correctness was more important than the severe issues facing this state. The electorate has shown we’ve had enough.

“You have a duty and responsibility to pay attention to the people of this state,” DeVos said in his pointed comments to legislators in attendance.

“We need to stay a strategic level and not focus on the one or two points people can’t agree on,” DeVos noted. “We need to focus on the 90 percent we all agree on. We need to stay united.”

Michigan’s two gubernatorial candidates were grilled at the West Michigan Policy Forum Friday morning, but it wasn’t a debate; they appeared on stage separately and apparently weren’t even in the DeVos Place ballroom at the same time.

In “the first official non-debate” – in one moderator’s words — Lansing Mayor Virg Bernero and former Gateway Inc. executive Rick Snyder were asked the same questions, revealing that neither will support legislation to make Michigan a right-to-work state, the second of the five directives set by the first policy forum two years ago.

The first directive, elimination of the Michigan Business Tax with corresponding spending cuts, would get a different approach from each of the candidates.

Bernero, a Democrat, said he would eliminate the MBT surcharge “immediately” and then work to reform the state’s tax on business, with input from business. Snyder, a Republican, said he would eliminate the MBT and implement a flat six percent tax on C corporations.

Snyder said it will take a “smaller, faster, cheaper” state government to grow Michigan’s economy and create new jobs. As governor, he will create of team of experts with successful experience in business and government to help get the state back on track.

Bernero said the “number one problem is there are not enough jobs” in Michigan, declaring that manufacturing “is the top of the food chain” in Michigan. He decried the movement of manufacturing jobs to foreign countries by American corporations looking to cut costs.

Americans who have lost their jobs are “suffering from free trade, rather than fair trade.”

“We are competing against a communist country — China,” on a playing field that is not level, said Bernero.

Both candidates spoke in favor of consolidation of duplicative government services across the state. Bernero said East Lansing and Lansing should be one city, for example, and Snyder said he believes there are many instances where Michigan’s colleges and universities can consolidate services they offer in the same areas.

Brian Wesbury, an Ann Arbor native and chief economist for First Trust, told a Thursday luncheon audience that the current recession isn’t any worse than the one the nation went through in 1982.

But Wesbury pointed out one major difference between the two. In 1982, the federal government didn’t overreact to the Savings and Loan crisis. In 2008, though, it did and that action turned many Americans into economic hypochondriacs.  “People are scared to death. It’s the kind of hypochondria that leads to (political) populism,” he said.

Wesbury said the subprime mortgage situation came about because the Federal Reserve held interest rates too low for too long and people borrowed too much, which is what he felt would happen when the cost of money is so cheap. But Wesbury said the situation only became a national crisis when the federal government overreacted and threw everyone into a tizzy.

In contrast, he pointed out the Reagan administration cut taxes, cut government spending and the Federal Reserve raised the interest rate in 1982. Wesbury said the reaction in 2008 from the Bush administration wasn’t Reagan-like and it had the exact opposite effect. “Credit default swaps didn’t take the country down,” he said, while adding the government did.

Wesbury said an economic recovery is underway and consumer consumption is at an all-time high, even as the hypochondria is continuing.

As for Michigan, Wesbury said the state began to fall apart economically in the mid-1990s when the personal income of state residents began to drop below the national average. In 1969, Wesbury noted that Michigan and Texas each had 4.9 percent of the nation’s economy. Today, he said Michigan’s share has plunged to 2.7 percent, while Texas’ portion has grown to 7.7 percent.

Wesbury said Michigan’s taxes and regulations are the reasons the state has fallen behind Texas. And the reason taxes and regulations are so much more cumbersome here than in Texas is because Lansing’s elected officials don’t trust business. “People don’t trust you, and when I say ‘people’ I mean government,” said Wesbury, who added that it was up to business people to change that attitude.

In another session, attendees were told the state of Michigan will spend $1.6 billion in “non-recurring resources” in fiscal 2011, largely federal stimulus funding. That means the state government will be forced to cut spending soon — and the Mackinac Center has a suggestion where to do it.

“Bring public sector (employee) benefits in line with the private sector,” said Joseph Lehman, president of the Mackinac Center.

Lehman said the gap between public and private employment benefits — insurance, pensions and vacation pay — in Michigan is $5.7 billion, which would more than cover future budget shortfalls, he said.

“Government wages are increasing much faster than private wages” in Michigan, he said, blaming what he called the “compound monopoly” of state government and unions.

Spending on K-12 education per pupil began to increase in 2002, said Lehman, and “the “school unions were there.” He also noted that student math scores have not gone up.

Lehman’s comments came during a panel discussion on “Michigan’s Budget and Spending Priorities.” Other panelists were Jeffrey Guilfoyle of Citizens Research Council and Lou Glazer of Michigan Future Inc.

Guilfoyle mainly stuck to numbers that illustrate that Michigan is now a “relatively poor” state, compared to most others. It was 20th in per capita income in 2001 but 37th in 2009. The state had 350,000 auto industry jobs in 2000; now it’s 124,000 and still decreasing. Compared to all states in terms of state government spending as a percentage of the state’s personal income, Michigan ranks 11th in teacher salaries, 14th in higher education, and 18th in corrections. Michigan is 30th in its tax collections.

Guilfoyle said tax cuts are “in the pipeline,” state revenue sources will not be growing and the budget problem “is not going to self-correct.”

Glazer said Michigan Future recommends “structural” spending cuts by state government, along with increased tax collections. He noted that those two measures are “the hardest things” for politicians to do.

Michigan needs to invest in higher education and encourage “quality of place” — “vibrant cities” — that will attract young professionals who will help grow the economy again.

As a state, “we need to get younger and better educated or we get poorer,” said Glazer.

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