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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Michigan Can't Innovate Without Manufacturing

A recent study by researchers at Carnegie-Mellon and MIT reinforce growing concern that a loss of manufacturing jobs adversely impacts a nation's strength in innovation, research and development.  For example, the migration of manufacturing from the United States to Asia could be having a significant impact on which advanced technologies are commercialized.  There is evidence that the shift is curtailing the development of emerging technologies in areas such as optoelectronics and advanced materials for the automotive industry according to a study.

For years some have advocated that Michigan should "diversify" its economy away from its core automotive and manufacturing sectors as a way of insulating itself from economic volatility and to grow its innovation sectors.  But this study adds more evidence that manufacturing is critical to our nation's future and that Michigan would be well served to retain and grow as much of it as we possibly can.

Being Vigilant

Business Leaders for Michigan releases its latest benchmarking report on Michigan's economic competitiveness next week.  The take-away:  Be vigilant!

• Vigilant to continue improving Michigan's competitivess now that we are starting to turn the corner into economic recovery.  
• Vigilant not to fall back into bad habits like spending what little new revenue is coming into the State Treasury on things that don't grow our economy for the future and pay down our debt.  
• Vigilant to recognize six months of good accomplishments by Governor Snyder and the new legislature does not constitute a turnaround.
• Vigilant in recognizing we live in a global economy and that we have to keep getting better if we want to grow jobs and incomes.  

Being competitive today is a requirement for growing the economy...and you're never done striving to get better at it.

The Turnaround Has Begun!

Several years from now, we will point to May 12, 2011 as the date Michigan began its economic turnaround.  That’s when the Michigan’s legislature voted to end the Michigan Business Tax and replace it with a new, simple, fair corporate income tax.  

Michigan is expected to go from having the 48th worst business tax system in the nation to the 22nd best, according to the Tax Foundation.  Simply put, it makes Michigan’s business climate more comparable to the state’s we most often compete with for jobs.  But that’s not all.  The legislature also ended the days of double taxation on small and medium-sized businesses.  

Of course, taxes aren’t the only thing that influences where jobs are created. There are literally dozens of factors that determine economic growth in Michigan.  But taxes do matter.  The states growing jobs and incomes the fastest are places where both their tax rates and costs for doing business are generally much better than Michigan. 

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The 2010 Census: The South Continues To Win the Economic Competition

For nearly fifty years the census has documented how the North has been losing the economic growth war to the South.  The 2010 census shows that over the past ten years – straight through the Great Recession – there has been no lessening of that trend.  Per capita incomes, population, gross state product and other measures of economic growth all rose fastest in a broad swath of America extending from the West Coast to Virginia in the so-called “Sun Belt.”    

Why?  The drivers behind this massive shift in economic power are easy to identify.  The Southern States generally have costs that are below the national average, attractive places to live, an increasingly well-educated workforce and a pro-business, pro-growth attitude.  These attributes translate to Southern locations being most often cited as the top places to do business and in surveys of business executives.    

What does all this mean for Michigan?  Two things.  First, we have to get more cost competitive if we want to level the playing field with these states.  Second, we have to provide more value for money than they do.  We can do that by having growing downtowns, better transportation connectivity and better higher education systems. 

Right-sizing the budget and growing the economy concurrently are tough, but necessary paths we must follow to have a different result in the 2020 census.  Once we accelerate revenue growth, we will be able to invest in areas that will promote future growth and keep us on the right path.