Economic Challenges in Michigan

By Guest Columnist Rich Studley

For the past 25 years, I’ve had the privilege of working for the Michigan Chamber of Commerce—a conservative, statewide business organization. Throughout those years, three traditional values have guided our legislative and political action programs. These values are a strong belief in personal responsibility, limited government, and free enterprise.

These three core values for the Chamber are very similar to the guiding principles for Citizens for Traditional Values (CTV) concerning the proper role of government and excellence in education. The Michigan Chamber strongly agrees with CTV on the importance of promoting a free enterprise philosophy of government which includes freedom from excessive taxation and government regulation (more on that later). We also agree with CTV on the need to strive for academic excellence in the instruction of our children, and that ultimate responsibility for a child’s education lies with the parents.

On March 15, 2007, it was my honor to speak at CTV’s Annual Legislative Briefing in Lansing. My role in the briefing was to provide an update on Michigan’s economy, state government’s budget woes, and clarify the status of the current financial situation. Sadly, as I write this article at the end of May, little has changed over the past two months. Michigan’s economy continues to struggle, especially in the area of manufacturing. State government continues to face a budget deficit in the current fiscal year. The Single Business Tax has been repealed, but not replaced. And the state budget for next year (starting on October 1, 2007) is also estimated to be in a deficit.

How did we get into this situation? The economic trends for our state have been clear for some time: seven years of declining employment, with job losses forecasted to continue, means lower revenue to the State treasury. Meanwhile, total state spending is up significantly while general fund expenditures have fallen, and government costs are rising. Now is the time for Governor Granholm and legislative leaders to bring the size and cost of state government back into line with taxpayer ability to pay. It is also time for those in the public sector to realize that a strong and growing economy is really the only guarantee we can have that there will be enough revenue to adequately finance state and local governments, and public schools.

More than just an arcane debate over line items in appropriation bills, it is very important for citizens with traditional and/or conservative values to understand that the current budget debate is a conflict between two dramatically different visions of Michigan. The Governor’s proposed budget for next year includes more than a dozen proposals for new or expanded government programs, and over $1 billion in higher taxes on working families and job providers. On one side of the debate are lawmakers who believe in substantially increasing the size and cost of state government and greatly expanding the role of government in our daily lives. On the other side of the debate are lawmakers who want to focus on growing the economy and requiring state government to live within its means.

The best approach to balancing the state budget for the current fiscal year is a combination of permanent spending reductions and real cost-saving reform measures. At the Michigan Chamber, we have identified a series of practical government reform measures that would generate $500 million to $1 billion in cost savings. An important next step to grow the economy would be to replace Michigan’s burdensome, job-killing Single Business Tax, on or before June 30, 2007, with a new system of business taxes that will encourage employers to invest in our state.

Another challenge we face is Michigan’s problematic political environment. Currently in Lansing we have a lame duck Governor, a divided legislature, and two new legislative leaders. While term limits opened the door for some fresh faces with news ideas, it also means that we have institutionalized inexperience, and have weakened the legislative branch of state government. It is time for all of us who are players in Michigan’s political scene to take a long, hard look at revising term limits.

The policy challenges facing state government also create an opportunity for conservative organizations like CTV and the Michigan Chamber to work together on issues of common interest such as the proper role of government and excellence in education. We look forward to building on the positive relationship between our two organizations.