Step 1 of the Michigan Turnaround Plan: Getting our fiscal house in order

There is a lot of discussion in the world today about the debt being racked up by many nations.  In most cases, this debt was accumulated after years of not following sound fiscal and accounting practices.  America is a good example.  For years we’ve failed to balance our budget, based budgets on overly optimistic revenue forecasts and did not take into consideration the long-term costs of our policy actions.  Our growing debt obligations has led to a great deal of uncertainty about the future.  This has caused job providers to slow investment and consumers to cut back on spending.  Michigan experienced much the same situation during the past decade and this has contributed to our “one state, decade long” recession.

This is why Business Leaders for Michigan made the first step of the Michigan Turnaround Plan about responsibly managing finances.  The Plan is a holistic, fact-based strategy to make Michigan a Top Ten state for job, economic and personal income growth. 

Our original plan called for the state to manage its money the way a responsible household or business would – by balancing the budget without one-time gimmicks, projecting revenues using sound information and projecting spending needs over the long-term.  Fortunately, the state has implemented many of these suggestions during the past year and as a result has been able to start paying down debt and generating a small budget surplus.  As a result, business confidence is up and Michigan’s economy is turning around.

We must build on the solid foundation laid this past year by memorializing in policy or law the practices outlined above so we don’t slip back into bad habits after this Governor and legislature leave office.  We need to continue paying down the billions of debt we racked up the past decade and require that every piece of proposed legislation have a “price tag” attached to it so policy makers understand the consequences of their actions.  We also recommend the state adopt a long-term strategic plan that clearly identifies what we should expect from state government to guide annual budgets.   

Adopting sound accounting practices and fiscal policies don’t get much attention in the news.  But we’ve seen around the world what happens when we ignore these basics.

Yes Michigan, The Turnaround Has Begun

Six months ago we declared Michigan’s economic turnaround had begun based on the dramatic reforms being passed in Lansing that align with the Michigan Turnaround Plan and the optimism these changes were fueling among our members – Michigan’s largest job providers.  The skeptics wanted to wait until the hard data came in.  Now it has and it says Michigan is in full turnaround mode.

Michigan’s unemployment level has dropped faster than the national average while personal income and the overall level of economic output is rising faster than most states over the past year.  The rebound of our automotive industry and the manufacturing sector have been major drivers of these improvements and underscore the importance of continuing to support these critical businesses.  But the state’s turnaround is also being powered by businesses from all sectors, large and small, that are gaining renewed confidence in Michigan as a place that is finally committed to a long-term turnaround.

 When Business Leaders for Michigan unveiled the Michigan Turnaround Plan in 2009, we thought it would take five years to implement most of the recommendations and another five to see major results.  In one year, thanks to a tremendous commitment from Gov. Snyder, Senate Majority Leader Randy Richardville and House Speaker Jase Bolger to accelerate Michigan’s job recovery and return our state to prosperity, much of the original Michigan Turnaround Plan either has been fully or partially addressed. We are already seeing tangible economic benefits.  From adopting long-term budget plans and aligning public sector employee benefits with the private sector to getting Michigan’s business taxes in line with other states and reforming archaic regulations, Michigan is on a path to global competitiveness. 

One year doesn’t complete an economic turnaround and, after a decade of decline, Michigan will need several more years of progress to accelerate growth as fast as we would like.  But 2011 was the year the state’s long-awaited turnaround began.  Happy New Year 2012 – you have a hard act to follow. 

Michigan makes huge strides in 2011

Column by Doug Rothwell, President and CEO of Business Leaders for Michigan and Phil Power, the Founder and President of The Center for Michigan 

Michigan has much to be thankful for as this year comes to a close: Better managed state and local government, a brighter economic outlook and more efficient delivery of public services. Our state’s turnaround has begun, but in many ways the hardest work still lies ahead.

A year ago, our two organizations held a summit, “Common Sense Reforms for a New Michigan” in Lansing. We drew nearly 400 people, including newly elected Gov. Rick Snyder and many legislative leaders for a discussion of structural changes we felt were needed to turn around Michigan and put us firmly on the path to prosperity.

The summit resulted in recommendations to improve state and local government efficiency, business climate and quality of life in our state.  We also pledged to report on progress one year later — hence this column. There is much progress to report.

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There is no single solution for turning Michigan around

When you’re down, you often look for role models to inspire your growth or a simple way to fix whatever is holding you back.  In Michigan’s case, this has meant searching for the “ideal state” we can emulate or a “silver bullet” policy prescription we can adopt in an attempt to improve our economy. 

When searching for role model states, some point to Indiana because it’s a bordering state that has grown at a better rate than we have for years.  Others point to North Carolina or Texas as states that have diversified their economies and have been consistently ranked as some of the best states for business. Some even say we should aspire to be like California because they have Silicon Valley! 

The latest role model being suggested is Minnesota.  Why?  Because Minnesota has a higher per capita income than Michigan and it’s a “mid-west” state.  But comparing Michigan to Minnesota demonstrates the difficulty of comparing us to any other state.  Minnesota’s population is half our size and about one-third less diverse.  In Minnesota, one city drives over half its economy, versus Michigan’s more diverse economic geography.  But what’s more significant is that since 2002, Minnesota’s per capita income and employment rates have been falling.  In fact employment growth has ranked 39^th worst since 2002 according to non-partisan think-tank Minnesota 2020. 

Similarly, Michigan has often searched for the "silver bullet" that would grow jobs.  For years we tried a number of different tactics to spur growth such as targeting certain industries or diversifying away from manufacturing.  We tried building big projects with the thinking that more development will naturally follow the anchor investment.  We’ve even tried eliminating taxes entirely in places to jump start growth.   Recent theories suggest the best way to grow Michigan's economy would either be to just increase the number of college graduates or invest more money in community amenities, like parks, transit, cultural centers, etc. to make them more attractive places to live and work. 

All of these ideas can be part of a well-rounded economic growth strategy.  But Michigan runs the risk of delaying real economic progress if we look at them as stand-alone solutions.

The truth is there is no one state we can emulate or one solution we can adopt that is going to lead to sustainable growth.  In practice, the places that offer the best value for the money are the ones that grow the most.  Like a customer shopping for a product, businesses both large and small generally select locations that offer a wealth of amenities for a reasonable cost.  It’s the reason why Ford sells more cars than Porsche.  It’s a better value proposition. 

That means Michigan has to have competitive costs, reasonable regulations, functional government, excellent service, a strong infrastructure, nice communities and lots of amenities - not one more than the other.  Business Leaders for Michigan developed the Michigan Turnaround Plan because Michigan needs a holistic strategy to get back to being a Top Ten state again for job, economic and personal income growth. 

So rather than look to one state for the answers let’s focus on getting as competitive as we can in today’s global economy.  Rather than focusing on one dimensional policy solutions, let’s recognize we need to work on multiple fronts concurrently to grow our economy.   But perhaps most importantly, let’s focus on growing a new Michigan that builds on our competitive assets and unique strengths and doesn’t try to copy some other place. 

Michigan’s economy began turning around this year because we have begun to follow a uniquely Michigan path to economic success.  Unlike other states, we are improving the business climate without pitting one group against the other.  We are recognizing that our automotive and manufacturing sectors not only distinguish us, but are keys to our long-term success.  And we’re taking pride in what defines us – a state, like the commercial says, “that has been to hell and back” but embodies grit, determination and stamina. 

Michigan doesn’t need to be like some other state or search for the next silver bullet to grow again.  We need to be who we are – a state that works hard doing some things extraordinarily well and offers good value for the money.

America and Michigan need big business to help drive growth

There’s a lot of talk these days about how to grow the economy.  Much of it focuses on how to increase business start-ups and grow small businesses.  That’s because small businesses have been responsible for most of the nation’s job creation.

What often gets over-looked is that small business is also responsible for most of the job reductions because they fail at a higher rate than large businesses.  A good deal of their business is also dependent on contracts with large companies as corporations focus on staying lean.

But what might be most over-looked is the role big business plays in driving exports.  The more a region exports, the more income it brings in from outside its borders that grows the wealth of its citizens.  To grow income significantly, you need to export at scale and only big business has the size, brands and capabilities to export at a large scale. 

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