Eerie Similarity Between Lansing and Washington DC

 

The 2006 Michigan elections saw a return to power by the Democrats in the Michigan State House of Representatives and the retention of Republican control over the Senate.

 

The 2012 national elections saw a return to power by the Democrats in the U.S. Senate, and the retention of Republican control over the House.

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Governor Jennifer Granholm heading into her second term, continues to blame her predecessor as she claims she was, "dealt a bad hand"

 

President Barack Obama, heading into his second term, continues blame his predecessor as he claims he was, "dealt a bad hand"

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The partisan division of power in Michigan's state government led to a showdown between Gov. Granholm and lawmakers over the FY 2008 state budget that resulted in a four-hour shutdown of nonessential state services in the early morning of October 1, 2007.

  

 

Will the partisan division of power in Washington will lead to another showdown between Pres. Obama and lawmakers, as we face the "fiscal cliff?" Will it lead to shutdown of nonessential federal services, in 2013?

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With the dust settled on the 2012 Presidential Election, it might be interesting to review Michigan's budget history.  

Having lived through the 2007 Lansing budget debacle, I think it's interesting to point out some similarities between what happened in Michigan and what we might see in Washington DC.

 

Promises to raise Michigan taxes in 2007 were backed up by veto threats. Compromise, or else, was the battle cry back then, as well. As state employees received gloomy email updates on the state budget, they were asked to contact their legislators. Emails cried out for bi-partisanship, "YOU ALL NEED TO COMPROMISE!!! I don't care how you do it... just work together to get the job done!!!"

 

 

This was a common theme to our offices. You're likely to hear those same pleas for Washington to "get the job done", though the pleas, without a doubt, will come with no specific instructions.

 

Lansing Budget 2007: It was said that Michigan's budget was cut to the bone. Those advocating for tax increases claimed that the governor already cut $3 billion from the budget. The problem, though, was that each year from 2006 to 2010 the budget increased by $1 billion. In 2007, as the governor insisted on nearly two billion dollars in tax increases, she also promised 17 new programs with a billion dollar price tag at the same time. From my perspective, I saw no attempt at compromise in that State of the State speech, nor through the remainder of the year.

 

It's just a matter of scale, I suppose, but the Governor sent layoff notices to 100 State Troopers, yet no other department was to face cutbacks. Current;y, in Washington, the Defense Budget is to be cut automatically as the result of a deal cut to avoid a fiscal crisis. Those military cuts are to happen within weeks, while promises of new "investments" in other programs continue to be made.

 

"Investment" in your own government was the buzzword of the day in 2007; a word meant to replace the term "spending". Investments into roads and bridges never actually happened as Stimulus Money was diverted to cover fiscal budget gaps. Investments into education never fully reached the classroom, and ultimately caused near panic in the education community when the magic pot of stimulus money ran dry. Investments into social welfare programs such as the Low Income Emergency Energy Fund (LIEEF) were tapped to pay for efficient street lights and "special projects", such as an experimental wind-study buoy in Lake Michigan, leaving vulnerable families a little short of cash.

 

 

New regulations were being written at an alarming rate. Businesses were choking on red tape, even as the promise was made to make Michigan more business friendly. The governor pushed for a 25% Renewable Energy Standard, but settled for 10% after much debate. Washington, with it's push for renewable energy and outrageously high gas mileage standards for Detroit automakers is not far behind us.

Green energy was to be the salvation of Michigan's manufacturing base. $2.6 billion dollars of Michigan Business Tax Credits were authorized, which I admittedly supported some of, and tens of millions of dollars for a "No Worker Left Behind" program, which I did not support at all. 

 

 

Washington caused it's Solyndra failures, but is further frightening off true capital investments in traditional manufacturing, with all of it's economic uncertainty; think Obamacare, EPA rules, labor rules, tax increases, etc...

 

 

In Lansing, clean coal power plants were denied permits (In Holland, Roger City and Essexville) as the Dept. of Environmental Quality plotted with the Public Service Commission staff to kill the projects.

 

In Washington, the president vowed to bankrupt the coal industry, even as it "necessarily increases the cost of electric energy." EPA Regulations are keeping the promise to put an end to coal energy, at the same time the administration is moving forward in green-energy "investments".

 

 

Taxing, spending and naively driving untested green-technologies with cash: we've learned a lot since then in Michigan. So the question begs to be asked: Will the 2nd term of President Obama reflect the 2nd term of Governor Jennifer Granholm?

 

 

 

 

 

"We cannot cut our way to prosperity," ~ Governor Jennifer Granholm (January 8, 2007)

 

 

 

 

"We can't just cut our way to prosperity” ~ President Barack Obama (November 9, 2012)

 
 
 
 
 
 
Here's a wrap up of the Governor Graholm's two terms, by Lansing journalist Peter Luke. Knowing what we know, today, you can judge the success of those eight years for yourself
 
By Peter Luke | Bridge Magazine MLive.com 
   on December 19

 

LANSING — As Jennifer Granholm concludes her eight years in the governor’s seat, the talk is that she was dealt a bad hand on the economy. The more relevant discussion is how she played that hand.

As she said in a summing-up speech on Mackinac Island in June, it would have been nice to be governor in the late ’90s, when budgets were flush and unemployment dipped below 4 percent.

But she wasn’t.

 

And so Granholm leaves office on the morning of Jan. 1 much as her three predecessors did, leaving to her successor, Rick Snyder, a troubled state whose prospects nonetheless show signs of improvement.

 

Probably no one could have held off the economic tide that began to turn in 2000 as the domestic auto industry was cresting at 2 million Michigan jobs. By the time Granholm took office in 2003, few figured the loss of 200,000 of those jobs was just the beginning.

 

In dealing with what followed, the Democratic governor and lawmakers in both parties seized some opportunities and forfeited others. Did they do all that could have been done to put Michigan in the best possible position? On that, the Granholm record is mixed. “She had the bad luck to be the governor of a state in which the major industry that has an overwhelming effect on the economy tanked,” said Timothy Bartik, an economist with the W.E. Upjohn Institute for Employment Research.

 

“She certainly took some very good positions on issues. She was able to do some things that didn’t require new money,” Bartik said. “What she was not able to do was get through enough significant revenue and spending reforms, or significant new investments.”

 

Net employment was to slide by 630,000 more jobs through Granholm’s two terms. And Michigan’s national ranking in per-capita income dropped from 18th to 37th. That follows, since Michigan was depending on wages from durable-goods manufacturing (read: auto-industry) for a fifth of the total.

Meanwhile, the Michigan Business Tax that Granholm signed into law in 2007 appears headed for repeal. And taxpayers haven’t been asked to pay more for roads and schools, putting both under enormous financial strain.

 

Speaking of education, it costs twice as much to go to state universities than eight years ago. Michigan now spends more money on prisons. But as Granholm departs, there are hopeful signs — even if her dismal approval ratings suggest few residents see it.

 

The reclamation of jobs appears to be under way. Unemployment is down 2 points from a year ago, to 12.4 percent. Private-sector payrolls are up, although just by a net 1,000. A University of Michigan forecast sees job growth of 87,000 through 2012.

 

Granholm and the Legislature did make massive investment in alternative energy technologies designed to preserve Michigan’s future in advanced manufacturing. And the departing governor spoke up last year for a federal rescue of the auto industry, with Ford selling for a buck a share and GM and Chrysler headed toward liquidation.

 

In her last month in office, GM is cranking out the first Chevy Volts, Chrysler (along with GM) is hiring thousands of engineers and Ford is retooling its Michigan Assembly Plant to produce electric and hybrid powertrains.Yet the story to which Granholm keeps returning is Greenville, rocked by the loss of 2,700 jobs during her first year in office when Electrolux decided to shut down the country’s largest refrigerator plant and move the work to Mexico — despite rich incentives from the state.

 

In an October speech at the Brookings Institution in Washington, Granholm said the same “is happening all over the country.", “The economy is just not going to come back the way it has before, so it means we’ve got to do things differently,” Granholm said. “I wish I could cut the ribbon on a new economy all over Michigan, but I’m not going to be able to.” So what was she able to do? And where did she succeed?

 

The budget

Keeping the state afloat wasn’t pretty, but it could have been a lot worse. Michigan spent about a billion dollars less in 2010 than it did in 2003. There are 7,415 fewer state employees. Revenue collections are more than $8 billion below the constitutional limit.

 

And spending has changed dramatically since 2003: $800 million more for Medicaid and prisons, versus $1.2 billion less in areas widely viewed as critical to the economy: higher education, city services and transportation infrastructure.

 

Granholm and lawmakers stumbled in several ways. They wiped out the $4,000 Michigan Promise college scholarship, did little to help struggling municipalities and failed to adequately fund transportation. The 2010 budget that ended Sept. 30 is $400 million to the good, Granholm says. That leaves, however, a new shortfall of more than $1 billion.

 

Taxes

Michigan collected less in taxes and fees this year than in Granholm’s first year, even counting the 2007 hike in income tax. Michigan now allows more in breaks, credits and exclusions than it annually collects. The tax code is a mess.

 

The sales tax on goods generates less every year as the service economy grows. Three times, Granholm tried to extend it to services. In 2007, she signed an unpopular, misshapen bill that targeted some services, but not others — ski tickets, yes; golf fees, no. It was quickly replaced with even higher taxes on employers. Her February proposal to finance business tax cuts and K-12 schools with a broad expansion never received a hearing.

 

Meanwhile, the tradeoff for her 2007 increase will further cut income-tax revenue beginning in 2012 when the rate begins to drop from 4.35 percent to 3.9 percent. That’s on top of generous new tax benefits for the working poor and exclusion of most retirement income for seniors. And back to our crumbling, crowded roads: Transportation taxes and fees have been in annual decline. Expert advice on ways to raise road money and create construction jobs — from a panel set up by the governor and lawmakers in 2007 — are sitting on the shelf.

 

Michigan’s old business tax, eliminated through a petition drive, was replaced by an even more unpopular system. Manufacturing is faring better, but the service sector is paying more. Snyder has vowed to get rid of it, and his party has the majorities to do so.

 

Economic development

For all the complaints that Granholm was ineffectual or Republicans obstructionist, there has been genuine bipartisan accomplishment. Seventeen advanced battery facilities are planned from Holland to Sterling Heights, with help from $288 million in state tax credits when they kick in in 2013 and $1.3 billion in federal stimulus cash. Total investment of $5.8 billion is estimated to eventually create 63,000 jobs.

 

Similar developments in alternative energy — solar and wind — are happening in mid-Michigan and the Upper Peninsula. A 2008 energy reform law requires 10 percent of the electricity generated in Michigan to come from renewable sources by 2015. The lame-duck Legislature even salvaged $10 million in ad buys for the national “Pure Michigan” tourism campaign.

 

Education

Closely tied to the economy is, of course, education. Granholm’s 2007 No Worker Left Behind program has provided free community college training for more than 147,000 unemployed or underemployed workers.

 

As for K-12 schools, Granholm, lawmakers and the State Board of Education approved tough curriculum standards and set up a framework for mandatory overhaul of failing schools. The reforms could allow more state oversight for the length of the school year and tie teacher evaluation more closely to student performance. As state education superintendent Michael Flanagan said last week: “Economic development in this state is dependent upon our students getting a lot smarter, quicker.”