Michigan governor goes down old, no-solution path

Michiganeconomy2

DETROIT - Michigan's new Republican governor, Rick Snyder, in his State of the State address last night, provided just enough details to indicate that his drive to "reinvent" Michigan is neither new nor a balm for this crisis-weary state.

Snyder began his talk with a warning to public workers, singling out their pension and benefit packages as the cause of the state's financial woes and calling it an "unsustainable financial model."

However his "sustainable business model" didn't apply to the $250,000 salary he gave his new CEO of the Michigan Economic Development Corp., $50,000 higher than the previous appointee's pay.

His claim that public workers have pay and benefits exceeding those in the private sector has been debunked by studies that show the opposite is the case.

In laying out his goals Snyder spoke about the need to create a "business climate" where entrepreneurs would be free of government restraint and able to create jobs. "Job one is jobs," he said. But as People's World economics analyst Art Perlo has written, jobs are created when workers see a rise in their income. The biggest problem for small businesses and entrepreneurs is not taxes but poor sales; they do not have enough customers because people are broke, unemployed, and drowning in mortgage and credit card debt.

Snyder talked about improving the state's business climate through regulatory reform and by eliminating the Michigan Business Tax.

His proposal to replace the business tax with a flat 6 percent corporate tax amounts to an estimated net $1.5 billion tax cut for big business. It would mean less, not more, money coming in to the state. How he plans pay for the state's $1.85 billion deficit was left unsaid but rumors of a higher sales tax have been heard.

Regarding regulatory reforms Snyder said, "We will partner with the Michigan Chamber of Commerce to stop the effort to establish mandatory and overreaching regulations on ergonomic standards." In other words, if he succeeds in this, unsafe working conditions and repetitive stress injuries loom on the horizon for many workers.

Not mentioned in his speech were the anti-worker bills his Republican colleagues are introducing in the GOP-dominated legislature. The opening session of the Michigan House of Representatives began with the introduction of House Bill 4054, which would create "right-to-work" (i.e., non-union) zones. Snyder has said he would sign such a bill if it came across his desk.

Snyder is correct when he talks of a crisis in the state. But it was not caused by an unfair business climate but rather by Michigan being an auto-industry-dependent state in an era of globalization and crisis in that industry.

Since 2001, the state has lost 700,000 jobs, and the closure of auto plants in Detroit, Flint, Ypsilanti, Grand Rapids, Hamtramck and other places was a big part of that number. Often these plants were a town's biggest or second biggest taxpayer. Plants closing and moving out of the country were a major cause of the crisis, not worker pay.

The short-term solution to Michigan's deficit problems is raising taxes. Of course, the question is, taxes for whom? The Michigan League for Human Services says changing Michigan's flat 4.5 percent income tax to a graduated tax increase would shift the burden to those who can afford to pay. Raising taxes on the top 5 percent of incomes, with a maximum rate of 8 percent, could raise an additional $600 million per year while cutting taxes for 90 percent of the people.

During the Republican gubernatorial primary last year, Snyder was the lone moderate running against four far-right candidates. His speech was not filled with the ugly rhetoric we have seen from so many in his party.

However now he is going down a route we have seen before: a shift in income, benefits and services away from working families to the very wealthy. Both houses of the state legislature are now controlled by Republicans, with many under the influence of the tea party. While Snyder may not encourage their stridency, he also is unlikely to stop it.

Photo: Boarded-up stores are a sign of the times along Detroit's Michigan Ave., one of the city's major thoroughfares. Vasenka CC 2.0 

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  • John, great article, nice work!

    Posted by Mark, 01/20/2011 8:53pm (4 years ago)

  • It may surprise the reader who calls himself "anticommunist" that the left has not been in power in Michigan over the last eight years nor during any period of time in Michigan's history. The Democratic Party is not "left" and often, it's not even progressive. We need to get the facts straight if we are to have a reasonable conversation on political affairs.

    Posted by Ann Devon, 01/20/2011 7:31pm (4 years ago)

  • Wow what a great review from the far left about the new governor. The whole it will not work speech was great. Too bad you had 8 years to fix it and guess what nothing. Yes auto-industry is mostly to blame, but raising taxes is not the answer. We must grow Michigan business. I am willing to give the right a chance, because the left failed it is their turn now.

    Posted by anit-communist, 01/20/2011 1:16pm (4 years ago)

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