Sunday, January 23, 2011

Woe is Michigan

I published this post at The New Clarion a few days ago. I repost it here to let my readers know why I don't think Gov. Rick Snyder will have the solutions to Michigan's problems.

After reading news articles on Michigan's new Republican Governor Rick Snyder's State of the State address I'm disappointed. He ran on a platform of making the state government smaller, more efficient and called for a return to free market principles. But it looks to me like Mr. Snyder is not going to be the solution to Michigan's woeful economic problems.

His slogan "reinvent Michigan" is one telltale sign. Michigan doesn't need to be 'reinvented.' It needs to be freed from the job killing regulations and taxes that have chased businesses out of the state.

Another telltale sign is his decision to go with a government owned second bridge--Detroit River International Crossing, DRIC--over the Detroit river connecting Detroit to Windsor Canada. I had hoped Snyder would have at least opened up the bidding to private enterprise, especially since Matty Marroun, the owner of the Ambassador Bridge from Detroit to Windsor has offered to build the second bridge and pay for it himself. (Yes, the Ambassador is the only privately owned international bridge in the nation)

Snyder, a businessman and former CEO of Gateway, knows that private enterprise is much more efficient than government sponsored enterprises yet he chose the public option anyway. Why? He was lured by the promise of federal Transportation Dept. loot. From a 1/21/11 Detroit News article by Tom Greenwood:
"Snyder, a businessman-turned politician, told The Detroit News that it was the "old accountant" in him that made him ask the federal government whether a $550 million loan from Canada to cover Michigan's share of the roads for the bridge project could be used to leverage matching federal dollars for other roadwork in Michigan.
"That's part of the value-added we brought to the table," Snyder said."
Unfortunately, for several years, the Michigan toll receipts will be handed over to Canada to repay the loan.

This is pure pragmatism on the part of Gov. Snyder. Pragmatism of course is a range of the moment expediency sans concern for long range consequences i.e. unprincipled. It is this kind of thinking that brought Michigan's economy to ruin in the first place.

Now, Snyder want's to replace the oppressive Michigan Business Tax--credited with chasing many small businesses out of the state--with a 6% tax on corporate profits. This despite the fact that he knows wealth creation and therefore a rising standard of living come from only one place--profits. So it seems then that he wants to sacrifice the profits of big business to small business. Neither this nor the public bridge option are free market principles. Then again, pragmatists disdain principles.

All is not lost yet though. Gov. Snyder does want to repeal the item pricing law that forces retailers to price mark every item they sell. In another News article by Jaclyn Trop we learn:
"The law mostly affects retailers that sell many different items, such as grocers and hardware stores, costing them more than $2 billion annually in labor and materials, according to a report by the Anderson Economic Group that Snyder cited"
It is on things like this that the new governor needs to be concentrating. Reduce crippling regulations and he wouldn't need to replace the Michigan Business Tax. He could just repeal it.

But that is just one of the regulations Snyder considers 'needless' implying that others are needed. He does not understand that all government regulations are 'needless.' I know this was just Mr. Snyder's first major speech and I shouldn't be too pessimistic yet. But it's hard to be optimistic when I see business groups applauding his speech. Back to the Greenwood article:
"Business leaders 'thrilled'
Members of the Detroit Regional Chamber also applauded the governor's endorsement.
"We were thrilled that the governor said he was all in for the DRIC," Detroit Regional Chamber chief executive Sandy Baruah said. "I love the fact that he found a very inventive way to tie the interests of the DRIC to every legislator in the state of Michigan by tying those transportation dollars to the DRIC project. I thought that was brilliant. I think it will be the key that gets the DRIC done."
The editor of the Detroit News also hailed the Governor's pragmatism in a 1/23/11 editorial in which editor Nolan Finley says:
"Rick Snyder's first substantive speech as governor left a lot of folks scratching their heads, trying to figure out which political slot he fits into.
The answer is, he doesn't.
He's not a politician. He's a businessman. If that wasn't clear during the gubernatorial campaign, it should be now that Snyder's opening State of the State address is out of the way.
It will be pragmatism rather than partisan ideology that guides his administration."
And:
"That was best demonstrated during the speech by his embrace of the Detroit River International Crossing. Conservatives chafe at government involvement in building a new bridge, since a private investor claims to be willing to build one with his own money.
But for Snyder, it was just a big real estate deal, and one he feels he got the best of by convincing the Obama administration to permit the leveraging of a $550 million loan from Canada to repair Michigan's highways.
He wasn't about to let a debate over the free market system get in the way of a windfall."(MY emphasis)
To be fair the editorial did go on to extol Snyder's pledge for accountability for all money spent and to get rid of growth inhibiting regulations. All nice sounding words until one reads this:
"Likewise, liberals will find unexpected opportunities to applaud the governor, as they did his view that the state must nurture education from the womb through adulthood, and that government has a stake in the waistlines of its citizens."
AARRRG!! Michigan is joining California in committing economic and educational suicide with the blessings of media and business.

When I look at Michigan and the new governor I feel like that adult who has explained to an adolescent that doing X will result in failure and misery for him but who still insists on doing x anyway suffering the adult to a future of having to watch the calamity unfold. Sigh.

Maybe some of the newer State Republicans will guide him in a better direction. Not holding my breath though.

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