Windmillin'

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Where politics and faith dance in the shadow of the windmill.

Just how green is that grass?

Saturday, Michael LaFaive signed up once more for the “Grass is Greener Club” in the Grand Rapids Press. We’ve seen it before –the  idea is pretty much the same: some state is outperforming Michigan on some standard, and only if we emulate that other state then we, too, will out perform.  Invariably our problem is that we are not somehow Oklahoma, Florida, Mississippi, or in this case, Texas.

The narrative is also inevitably  wrong.

To fall for the reasoning of “if only we had…” invariably places policy choices in a reactive setting. Strategically, this is bad reasoning, since it means that state action must invariably follow in someone else’s footsteps.  We surrender control of our destiny.  The second flaw is political: it teaches a politics of despair.   It is at the end, a moralistic argument: if only we did x, then we would be blessed.  Of course there is a long tradition of such jeremiads, particularly from the Right, particularly looking nostalgically (or this case, over the fence) to some other, imagined eden.

LaFaive is much more concrete.  His hook is the comparison of population loss in Michigan compared with the significant increase in Texas.    There’s no doubt the numbers are big and troubling – and costing our state at least one seat in Congress. And the reason?  Sunshine, no unions and lower taxes.  Economic virtue is rewarded, plus you get a beetter tan.  The evidence however points to a more complex answer.

Texas. Really?

LaFaive cites  the ALEC Competitiveness Index:  Michigan is at 34 while bastion of economic freedom, Texas is at 10. Of course, that was for the 2009 data. The 2010 report gives a different picture: Michigan now at 26, middle of the pack, and Texas at 19. So what happened?  Did our Texas suddenly fall on its sword?  Did Michigan suddenly acquire economic religion?

LaFaive goes on to admit that total net Michigan to Texas over the past decade may be as high 80,000 (we’re being generous), however with a job loss even add in the 68,000 net moves to Florida, and we’re still left with 400,000 moves unaccounted for.

With numbers like this, the claim that this is the result of a poor tax code or some other failure in the state’s economics.  Obviously, there is more at work.

Of course, the elephant in the room, the unacknowledged reality is the catastrophic implosion of the auto industry.  When General Motors alone sheds 200,000 jobs, this is not the result of bad economics in Lansing, it is something far more profound.  This is an industry meltdown.  A lower tax rate would not have rescued those jobs — the forces are work are far bigger than tax codes or even unions.

More importantly, it is also important to recognize that Michigan’s economy is not a single item, easily adjusted by a tax code.  Rather it is something of a mosaic.  Even over the past decade with its devastating losses in jobs and population, parts of Michigan’s economy continue to flourish.   Friday brought news that venture capital has increased ten percent in this past year.  State-wide GDP analysis shows pockets of growth throughout West Michigan in the past decade:

  • Professional and technical services up 42 percent in Kalamazoo;
  • Education up 19 percent in Kalamazoo;
  • Healthcare up 32 percent, also in Kalamazoo;
  • And in Grand Rapids, a 21 percent increase in IT.

What Michigan needs

If LaFaive let his politics distort thinking, that doesn’t mean the focus is wrong.  That answers are more complex.  The basic  resource of our state or of any state remains the workers who are here, who will remain here. This is the resource, the seedbed for entrepreneurial growth. More than tax code, it is this intellectual that the state needs. Yet Michigan lags in the number of residents with a Bachelors degree (24.7 % MI :: 27.4% US).

Clearly, an under-resourced educational system then functions as a disincentive to growth; likewise going cheap on infrastructure (roads or data pipes).  An ignored stewardship of natural resources also works against our long-term interests.  Yet it has been the repeated folly of the Legislature and its political allies such as the Mackinac Center to  refuse to fund the programs that actually create net returns to the State.

The problem, in short is not the stumbling tax code, but much more existential: will we have the resources, will we have made the investments necessary to grow our state?  Looking to Texas will not help.  The task at hand is right before us.

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Filed under: Economy, Michigan, , , ,

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