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AIP Column: Michigan's Central Planning Failures

Michigan's unemployment rate is 15.2%, the highest in the nation. Back in the 1990's our state's unemployment rate consistently below the nation's average and for good reason. Its laws and regulations were business and family friendly. However, when Governor Jennifer Granholm got on the scene, the economy took a turn for the worse. Unfortunately, the governor's and the Democrats' solutions have only made it worse. Instead of implementing free market principles and policies of low taxes and minimal regulations to encourage businesses to come to Michigan, government instead used central planning economics with predictable results:

As Michigan's unemployment rate crept up, the state's liberal leaders decided to dig the economy into a deeper hole. Rather than creating a pro-business environment with low taxes and limited regulations that attracted all kinds of businesses, Michigan turned to central planning and created the Michigan Economic Development Corporation (MEDC). The MEDC is a government funded and regulated entity that provides discriminatory tax breaks to the businesses its board thinks are worthy of promotion. There are two serious problems with this. Naturally, the non-favored businesses then have a pretty good reason to leave the state, but on top of that, it is a highly inefficient means of attracting businesses. For example, the Michigan Economic Growth Authority (MEGA), which is staffed and administered by MEDC, issues tax credits to bring businesses to the state. The problem is it has only a limited number of tax credits a year, and not just any company can get these credits. Companies must apply for them and have their applications reviewed by MEGA's board to make sure they meet performance and job creation standards. If they don't meet these standards, they are denied the credits. This is a shocking level of arrogance and job elitism for a state that is hemorrhaging jobs and population. But that's not the only problem. According to a July 22nd report in the Detroit News, MEGA has reached its limit for tax credits for the entire year and is now "out of business" according to MEDC CEO Greg Main. The only option the organization has is to go back to state legislators and beg for more tax credits. While these companies get tangled in governmental red tape, inevitably they will begin looking at other states that don't require so much governmental hoop jumping.

Be sure to read all of it. You will be shocked to learn that Michigan's leaders are being awfully picky and choosy about what kinds of jobs they think are good enough when Michigan is at this very moment hemorrhaging jobs and is on life support. Feel free to leave a comment here or at the column itself. And while you're at AIP, be sure to read Kirsten Wright's column in which she asks "Is the California Budget Deficit Really Closed?" TJ Brown has a must read in which he wonders what would happen if ObamaCare drives doctors out of their profession. How do you have universal health care without doctors? Jimmie Bise has another great post where he warns us, he who pays the bills makes the decisions, and with a government takeover of health care, that won't be you.


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Comments (7)

"You will be shocked to lea... (Below threshold)

"You will be shocked to learn"

in a Casablanca kind of shocked? Actually, I'd be shocked if they weren't screwing things up.

On the other hand, they've ... (Below threshold)
Hank:

On the other hand, they've done wonders for affordable housing. If I recall correctly, aren't homes in the Detroit area averaging about 11K?

Yeah, the liberals have mad... (Below threshold)
GarandFan:

Yeah, the liberals have made Michigan a real worker's paradise. Sometimes I think all the Michigan pols are on the California payroll just to make Sacramento look good by comparison.

Sadly for us, Granmole does... (Below threshold)
Gizmo:

Sadly for us, Granmole doesn't have a clue about what to do. I think she's on her 4th or 5th "corridor" idea on how to economically save the state. We were going have a "High-tech Corridor" jobs like Silicon Valley (well, we do have lots of sand here!), then it was a "Health care Corridor", then a "Wind Turbine Corridor", and I think her latest idea, flush with Obama Porkulus dollars, is that we'll supposed to become the "Hybrid Car Battery Corridor". Jen just keeps flailing.

I would have loved to vote against her last time around, but the GOP ran Dick DeVos. I haven't forgiven Amway for aiding in ruining my parents financially ten years ago, and I loath anything or person connected to that company... so I left that part of the ballot empty.

Kim, all was not rosy befor... (Below threshold)
epador:

Kim, all was not rosy before 1995, Remember Jim Blanchard? Or the donkey in elephant hide Engler? I owned my own practice in MI 1981-1995, and I can not say that the state was "friendly" economically with 4+% personal income tax, small business tax on gross receipts, local income tax, sales tax, high workman's comp, liability and health benefit rates, huge property tax rates and policies that supported "big medicine" and haunted private practitioners.

Maybe they should learn tha... (Below threshold)
retired military:

Maybe they should learn that old rule.

"When in a hole stop digging"

instead they say

"You know I dont like hitting myself in the head with this claw hammer, let me try that sledge hammer for a while"

Michigan's fate has more to... (Below threshold)
jpm100:

Michigan's fate has more to do with the fate of the auto industry than anything else.

The auto industry was under the process of massive restructuring since 2001. This cutting was also forced down on suppliers. Then, all that propagated through the economy. So Michigan pretty much has autos, some farming, some mining and some tourism. Anything else lives by trickle down.

Past governments are no better than the current one really. Whats made the situation worse is that the tax base has shrunk immensely without the state budget and employees being cut back in step with the new reality. So, tax rates go up. So I don't really think policies have anything to do with Michigan's condition. In fact Granholm has been pretty inept at have any effect on anything. Its really clinging to business as usual that's the problem.

And I don't blame Michigan for trying to diversify its industries. That's smart and every state tries to attract business to their state. But I don't have a lot of confidence in Granholm's execution.




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