Tuesday, April 24, 2007

Michigan: One-State Recession

From Stateline.org: The drumbeat of bad economic news out of Michigan keeps pounding.

The Great Lakes State has lost jobs for six consecutive years, Michigan’s longest run of workplace shrinkages since the Great Depression. Automakers are laying off tens of thousands. Pharmaceutical giant Pfizer is closing up shop in Ann Arbor and Kalamazoo. The state ranks among the top three in the country for home foreclosures and mortgage delinquencies.

Analysts at Comerica Bank, which is moving its headquarters from Detroit to Dallas, say Michigan is stuck in a “one-state recession.”

The state’s political leaders are under pressure to soften the economic blows, but the downturn in the economy means there’s less money in state government’s coffers to fight back.

The state is nearly broke and is bracing for a possible partial shutdown in May. Gov. Jennifer Granholm (D) and Republicans legislators in charge of the state Senate are at odds over how to turn the ship around. The governor stresses investing more in education and job training to develop a talented work force, funded by a new tax on services, while GOP leaders are calling for tax cuts and a leaner state government to lure more business.

2 Comments:

At 4/25/2007 1:02 PM, Blogger happyjuggler0 said...

Michigan should become a right to work state. Those union jobs are going to be kaput very soon anyway, but if Michigan ended its union foolishness then investors might actually open up shop in an unused factory in Michigan instead of building a greenfield one in the South which costs more money of course.

This would also likely involve less employee training than one in the South.

The other thing is to simply abolish all taxes on corporations. First off Michigan is clearly in zero sum game for many investments with other states, and is a clear loser in that battle. Second, there are positive sum gains from abolishing investment taxes. Local businesses which are healthy and itching to expand locally can do so more easily when the government isn't taking their money in the first place. Less corporate taxes equals more jobs.

Michigan looks to be on the wrong side of the Laffer Curve, however painful that may be for some to accept. Relocating businesses cause unemployment, which means less tax revenue from of course corporate taxation anyway, but also less taxes from the unemployed as well. Not to mention the increased spending on those unemployed that didn't exist before. Real estate prices are lower than they otherwise would've been, and this results in lower property taxes than otherwise as well.

 
At 4/26/2007 9:49 PM, Anonymous China Law Blog said...

I grew up in Kalamazoo and lived there through high school. My parents and younger broter are still there. Reading stuff like this really pains me. Michigan does have a lot to offer, but until it becomes truly business friendly, I see it continuing to suffer. What a shame.

 

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