Search This Blog

Wednesday, September 20, 2006

Song remains the same

In this earlier post I wondered if politicians in Connecticut contributed to their own woes through bad policy choices. This Rich Lowry column makes me ask, might the same question apply to Michigan?

Liberals dissatisfied with the Bush economy have, through the wonders of federalism, an alternative. They can move to Michigan. The state represents a rough approximation of ideal liberal economic policy. It is heavily unionized, taxed, and regulated in a failed attempt to close its eyes to the dynamic forces of the market and globalization all around it.

This stew has helped make Michigan the economic sick man of the Midwest. It is suffering from a one-state recession all its own, mostly because it has failed to foster the most profound economic force in the universe — opportunity.

Michigan was the only state in the country not hit by Hurricane Katrina to lose jobs between September 2004 and September 2005.

Michael LaFaive of the Mackinac Center calls Michigan “the France of North America.” Economically competitive states might have a personal income tax, or corporate income tax, or sales tax — Michigan has all three. It has long been the only state with a European-style, value-added tax — the Single Business Tax.

The state still insists on trying to target tax incentives and other special breaks to favored businesses, in a doomed replay of 1970s-era industrial policy.

It used to be that unions could force unnaturally high wages and benefits on U.S. manufacturers, and the costs would be passed along to consumers. Those were the days prior to globalization when the U.S. auto industry had a lock on the domestic market and experienced little international competition. It was inevitable that Michigan would find the new competition disruptive, but not that it would react to it so poorly.

The way to thrive in a globalized environment is to create a low-tax economy without the rigidities that come with heavy unionization and regulation. For those who disagree, Michigan beckons.

The story sure seems familiar.


Duck said...

Like a drug addict or alcoholic, they will have to hit bottom before they are willing to change their ways. Until GM and Ford have abrogated the last of their union contracts and shut down all of their production in Michigan, union activists and their political allies will fight a rearguard action tooth and nail.

You can't build the new until you've let go of the old.

Hey Skipper said...

It used to be that unions could force unnaturally high wages and benefits on U.S. manufacturers, and the costs would be passed along to consumers.

There, in one concise sentence, is virtually everything worth knowing about unions: they are rent seeking cartels whose is utterly illusory where it isn't destructive.

If all jobs are unionized, then the value of the high wages is an illusion. That argues for being a union member in a largely non-union economy, but that, in turn, requires rent-seeking protection in order to avoid unionized companies foundering in the face of non-unionized competition.

I live in Michigan; Mr. Lowry has nit the nail on the head.

Looked at through the prism of my property values, this is a very bad thing. But from a wider perspective, this points out the genius of federalism: every state, to a decent extent, is its own economic/social experiment. It just so happes this particular experiment is pointing out that which has long since been obvious to anyone wiht even a marginal analytical bent.

Hey Skipper said...


Completely OT, but both my kids loved that book series you recommended several months back. That's no challenge for the woman-child, but to get the man-child to sit still and read for hours at a stretch is a non-trivia accomplishment.

Bret said...

hey skipper,
Glad your kids enjoyed the series. My older daughter actually rates it above Harry Potter.