Michigan's chance for success after deep cuts? Look to Snyder's next years in office
At a recent daylong conference I attended on making Michigan more prosperous, not one speaker I heard mentioned cutting taxes.
That’s probably not surprising considering the summit, sponsored by Michigan State University’s Land Policy Institute, was attended mostly by local government officials, executives of nonprofit organizations and other community leaders.
Ideas developed in breakout sessions at the conference included improving public transportation, embracing cultural diversity and incorporating entrepreneurship education in the sixth through 12th grades.
The MSU confab drove home an important point that sometimes gets lost in the current high-decibel debate over taxes: We can’t just cut our way to prosperity.
I get what Gov. Rick Snyder is trying to do in “reinventing” Michigan, and I applaud him for taking bold steps to address chronic budget deficits, poor educational performance and fiscal problems in local governments.
Businessman Snyder is leading a classic corporate turnaround strategy: quickly and deeply cut costs, identify lurking liabilities buried in the bowels of the company’s financial statements and deal with as many of them as possible in the first year.
In the second year, when the financial picture likely brightens, the CEO declares his strategy is working.
But if the cuts are too deep, the future of the enterprise can be threatened.
Just ask the workers at Chrysler, who watched their former bosses at Daimler and Cerberus strip the company of money to develop new products, leaving the automaker severely weakened in a highly competitive business.
Snyder recently told me that once the state is financially stabilized, he wants to end the annual cuts to such areas as higher education and revenue sharing to local governments.
That makes sense, considering that Snyder has repeatedly said a better-educated citizenry and more attractive cities were among his top priorities.
But some of my friends in the world of public policy say they aren’t so sure Snyder and his Republican colleagues who control the Legislature will walk the talk.
They think the Republicans are intent on continuing to shrink the size of state government for years to come, regardless of any economic recovery.
You can bet, for instance, that if an improved Michigan economy results in a surplus of tax revenues, there will be intense pressure by Republicans to cut taxes again, rather than increase spending on higher education or cities.
That would be a mistake, say those who believe the state is losing economic competitiveness because of a poorly educated work force, bad roads and the loss of bright young people who are flocking to Chicago and other vibrant cities outside of Michigan.
“I understand that we need to have a moderate tax policy, but a poor quality of education leads to a poor standard of living,” said Doug Stites, CEO of Capital Area Michigan Works, a job-training agency in Lansing.
“States that have a high level of education in their work forces, without regard to their tax policies, have high standards of living,” said Stites, who headed Michigan’s work force development programs under former Gov. John Engler.
I think Snyder gets it. He supports the expansion of high-speed rail that young people want in Michigan. And his economic development strategy focuses heavily in retaining and attracting talent.
Ultimately, the decisions he makes in his second, third and fourth years in office will be as important to Michigan’s future as the difficult ones he’s making now.
Email Rick Haglund at haglund.rick@gmail.com.
Comments
BigMike
Fri, May 13, 2011 : 11:29 a.m.
Veracity says: "The changes that you are seeing from Rick Snyder's government is a reduction in the quality of life for the average citizen (but not the wealthy), disregard for 450,000 unemployed, disenfranchising the electorate, restriction of woman's rights and impeding education." This false antagonism between business and "the people" has got to stop. If more business is done in Michigan, there will be more jobs, and more taxes will be collected overall, both from the businesses and from the people they pay. More jobs means a higher quality of life for more people and lower unemployment. More taxes going into government coffers can mean more money available for education. Business is not the enemy - those "wealthy" people you are so concerned about largely earned their wealth by creating products, services, and jobs for the average citizen. Governor Snyder is pro-business. That doesn't mean he is against the average citizen, it means he understands how jobs are created.
Veracity
Thu, May 12, 2011 : 10:10 p.m.
Mojo: I believe that you will not view Texas so favorably after reading this article: <a href="http://theweek.com/article/index/210730/debt-crisis-is-texas-americas-ireland" rel='nofollow'>http://theweek.com/article/index/210730/debt-crisis-is-texas-americas-ireland</a> Mickey Mouse: The changes that you are seeing from Rick Snyder's government is a reduction in the quality of life for the average citizen (but not the wealthy), disregard for 450,000 unemployed, disenfranchising the electorate, restriction of woman's rights and impeding education.
Mike K
Thu, May 12, 2011 : 10:26 p.m.
Drive south on State street past the airport. Take a right onto Avis Drive. Go through that industrial park and tell me what you see. We are not talking ideas here. We are talking reality. Everyone of those "for sale", "for lease", "space available" signs is a drain on our tax base, and that's just one park. To see the worst one, go out M14 east and exit Sheldon Road North. Hang a left onto 5 mile then another left on Fogg. Drive around in that one. Tell me what you see. Why has this happened, and what could we do about it?
Micky Mouse
Thu, May 12, 2011 : 2:26 p.m.
Keep going Gov. Snyder you are doing a great job in turning around this decaying stagnant do like we always have done state. Change is what this state needs and has needed for to long. The same old same old has not been working for years. Gov. Snyder was elected with promises of change. Why is this a surprise to Michigan citizens. Given time this Governor will bring back this state. The recall groups are only hurting this state. What do they want to go back to what has not been working for years. Open your eyes look where this state has been headed. Do you want more of this continued downward slide. The Mea does not care about this state they just want there members to continue to get there fair share the heck with the rest of us. With change and advancement unfortunately there is going to be some pain.
mojo
Thu, May 12, 2011 : 1:25 p.m.
"We can't just cut our way to prosperity." . Funny . . . On a cost comparison basis, that is what Texas has done - and they simply added over 5 million residents in the last 10 years. Ate our lunch. . . People vote with their feet - they go where the jobs are; not where the taxes are high. Businesses do the same. Rick knows the game - who Michigan competes against to get "job-makers."
Mike K
Thu, May 12, 2011 : 1:58 p.m.
Forever - I'll call you on that one. This just happened to me. I got a nice little bonus in March and my wife wanted to replace some doors in the house. It would have run about 5 grand. I'm all in until the accountant comes back with the taxes and we owe that 5 grand. No doors. Fingerle missed again. A local contractor missed again. I'm sure there are others like me. Now to add insult to injury. I got a 3% raise. Congratulations right? Not. Guess where that went? Yeap, to avoid that 5 grand "surprise" I have to withhold more. Back to square one lol.
Forever27
Thu, May 12, 2011 : 1:47 p.m.
whatever body part people use to vote with, one thing for sure is that it isn't with their brain. People vote against their own economic interests on a regular basis. Tax cuts sound great, everyone wants more money in their pocket in the short term. Unfortunately, when it comes down to it, tax cuts do little to help the overall economy. Especially when the level of personal debt is where it is today. People don't use that money to purchase new items (which is what is necessary for any economic benefit, it can't be used to pay back-debt).
Bridget McGarry
Thu, May 12, 2011 : 12:59 p.m.
Maybe there won't be second, third, and fourth years for Snyder. There's a movement developing to recall him.
Mike K
Thu, May 12, 2011 : 1:13 p.m.
I hope not. I know many on the left are very angry and energized. Their solution is to "tax the rich" and tax rich corporations. That does nothing to increase commerce, and to some, it leads to further reduction. Just look for those yellow and black "Signature Associates" for sale signs. Once you catch on to it; you'll see what I'm talking about. Every one represents lost revenue. We don't need to tax the rich; we need to fill those buildings. Each one represents a drain. I would agree that tax codes could be improved such that loopholes for "the rich" are tightened, but "taxing the rich" is not the solution.
Mike K
Thu, May 12, 2011 : 12:57 p.m.
The first order of business is to reduce the cost of doing business in Michigan. This State was once a jobs destiny, and I am an example relocating here in 1992. Commerce has slowly left our state resulting in a decreased tax base. One can argue about why business's have left - unions, taxes, lousy weather, globalization...., but at the end of the day it really boils down to the cost of doing business. I can show you practically empty industrial parks - ever see those yellow and black "Signature Associate" for sale signs?? All of those locations once generated taxes for local, state and federal governments. The reduction in the tax base naturally leads to the reduction of goods and services provided by our government. The left complain that Snyder is screwing this, that and the other thing, and nothing could be further than the truth. The right calls for smaller government, and although generally, smaller seems better, that is not what is happening here. What we have is a simple adjustment of expenses to revenues while trying to rebuild robust commerce in our State. Snyder's approach makes good sense to me. As for the future, there isn't one until the plan does indeed increase commerce in Michigan. Candidly, I don't think 4 years is enough to rebuild Michigan. The people will grow uneasy and likely vote him out; the plan will be scrapped for a new one, and we will start over........... again.
Mike K
Fri, May 13, 2011 : 1:29 a.m.
You bring up some good points ANV99. It is indeed a matter of competitiveness. I've talked about Arizona landing a new Intel plant as well as a new First Solar plant in past posts. The bottom line is that Michigan does need to compete globally for jobs and business. There are no guarentees. I wish there were. On the other hand, simply drive through an industrial park to see what's happened. Every "for sale", "for lease", "space available sign" is a poster for LOST TAX RECEIPTS. Like I said, Michigan needs to return to a JOBS DESTINY, and the only way that will happen is to attract business to our State. The alternative is to "tax the rich", but guarenteed, that will run out eventually. Commerce is the key. GE is a corporate tax avoider, and a friend of the administration. Enough said. "Big Oil" pays more taxes in a day than GE a year (I'm embellishing).
alternativeview99
Fri, May 13, 2011 : 12:59 a.m.
"What we have is a simple adjustment of expenses to revenues while trying to rebuild robust commerce in our State." I don't think this is simple. What is simple is that if you continue to take spending power away from the middle class, there won't be people to buy the goods and services produced here. So, if you give money to business, maybe they will build plants and factories in other countries where there is no middle class, only poor, who are willing to work for minimum wages and live without health care and other necessities of life. And, maybe the goods and services produced will be sold to the rich over in those countries. Where does GE do business? Where does it create jobs? . How does that help an average Michigan citizen.
DonBee
Thu, May 12, 2011 : 12:27 p.m.
It seems folks are focused on taxes, not on the review of 90,000+ regulations that the state has today. Some out of date (e.g. rules on cars driving past livery stables). Some are redundant (e.g. rules on ergonomics that the Federal Government has similar rules on). Some conflict with each other (e.g. rules on clean up of former auto repair locations). Cleaning up the regulations, the tax code (this does not require cutting taxes), special incentives that pick winners and losers in the state, and other simplification can do more to help the state than lower taxes. Governor Snyder is quietly working on these issues, or at least it seems to be quietly, since all people seem to want to talk about is taxes.
Forever27
Thu, May 12, 2011 : 12:18 p.m.
The CBO constantly comes out with research showing that money spent on government services puts more back into the general economy for every dollar spent, whereas, tax cuts put back in about less. This link is to a CBO report on a possible simple 10% cut to income tax back in 2005 <a href="http://www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf" rel='nofollow'>http://www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf</a> .
Forever27
Thu, May 12, 2011 : 1:44 p.m.
Plubius (shouldn't it be Publius?), that is a slippery slope argument your making. This projection was simply a hypothetical of what would happen if a 10% was made across the board. It is far from suggesting that government spending should constitute the entire GDP.
Plubius
Thu, May 12, 2011 : 12:56 p.m.
Nonsense. Using reductio ad absurdum, this suggests that the entire GDP should be government spending, which is even more ridiculous. Government spending should be kept to the absolute minimum necessary amount.
Veracity
Thu, May 12, 2011 : 12:06 p.m.
Many look favorably upon Governor Snyder's efforts to create prosperity in Michiga'sn again. I guess it depends upon how "prosperity" is defined. If corporations keep more of their profits because of the $1.8 billion reduction in corporate taxes then the corporate executives and any stockholders will feel prosperous. But as has been observed over the last ten years, the average worker's salary has declined while executive pay has ballooned. The record profits experienced recently by many businesses has resulted from increased productivity provided by shifting to cheaper labor overseas and through technological advances. Meantime, the unemployment rate remains stubbornly elevated. The chance for our children to acquire necessary skills to become employable in the future is being hampered by reductions in spending on education. The lack of targeted retraining efforts for our unemployed restricts improvement in employment figures. Until Governor Snyder's programs significantly reduces the 450,000 unemployment figure and his draconian approach to education produces truly superior results in our schools I reserve my judgement about his ability to govern effectively for all citizens of Michigan.
grye
Thu, May 12, 2011 : 1:51 p.m.
Those disatisfied with the business cuts don't seem to have any understanding of how to grow a business and create the jobs needed in Michigan. Eliminating the current business tax program resolved a double taxation issue on small businesses. If taxes are kept the same or increased on businesses, they then have no extra money to invest in the company for research and development or to create additional jobs. Increase your personal taxes, you have less to spend. Same thing. You want to create an environment that provides the opportunity to grow. If businesses chose not to grow and only pocket the money, then maybe there should be some penalty. But without the extra funding available, there is no opportunity for growth. Of course if you have other opinions on how businesses can grow by increasing the amount of taxes they pay, please share.
Adam Jaskiewicz
Thu, May 12, 2011 : 12:04 p.m.
We'll see. I'm willing to judge him on results rather than jumping to conclusions prematurely, and I'll vote NO on a recall if it comes to that, but I'm skeptical.
RayA2
Thu, May 12, 2011 : 10:30 a.m.
Shrinking government sounds like the teapublican playbook and there'e no doubt that they will pursue that over any other objective. So with Slick and his teapublican yes men in Lansing, we can count on poorly funded schools, crumbling roads, contaminated air and water, increased taxes on poor and middle class working families, many more tax reductions for "business owners", and the giveaway of public assets like parks for years to come. Recall Slick and his gang of yes men now. We may never recover from the destruction they will bring down if we don't
grye
Thu, May 12, 2011 : 1:44 p.m.
I don't see Snyder as a Teapublican. He espouses values that cross party lines. He ran his campaign under the Republican party since his business background is more atuned to balancing the budget and minimizing waste in the government. However he also has expressed the desire for programs that are more aligned with the left. That is why he is ticked off many individuals on both sides. Truly more independent than anything else. If the legislature expects to continue shrinking govt should the tax revenues be greater than expenditures, I don't see Snyder bowing to their wishes. There would be opportunities to create a better Michigan, provide assistance for higher education, and find ways to keep graduates in the state with new and exciting businesses.
DDOT1962
Thu, May 12, 2011 : 11:06 a.m.
"Recall Slick and his gang of yes men now. We may never recover from the destruction they will bring down if we don't" Recall Rick Snyder?? After just 5 months in office and no major legislative initiative or budget proposal of his yet passed through two legislative houses?? You don't think you're a bit of a chicken little, do you?