Michigan’s Comeback: Where Do We Stand, Where Are We Heading?

1. West Michigan Policy Forum Michigan’s Comeback: Where Do We Stand, Where Are We Heading? Robert Genetski Website: ClassicalPrinciples.com

2. Outline • Michigan’s comeback • Economic freedom and growth • Characteristics of best performing states • Characteristics of worst performing states • Michigan’s policy mix • How Michigan can become a top performer

3. Outline • Michigan’s comeback • Economic freedom and growth • Characteristics of best performing states • Characteristics of worst performing states • Michigan’s policy mix • How Michigan can become a top performer

12. Outline • Michigan’s comeback • Economic freedom and growth • Characteristics of best performing states • Characteristics of worst performing states • Michigan’s policy mix • How Michigan can become a top performer

15. Economic Policies Promoting Freedom • Low tax rates • Government efficiently spending on essential public services • Allow markets to operate freely • Respect the rule of law • Promote overall price stability

16. State Policies Promoting Freedom • Low tax rates • Government efficiently spending on essential public services • Allow markets to operate freely Right to work legislation Avoid laws fixing wages and prices Minimize regulations • Respect the rule of law

17. Outline • Michigan’s comeback • Economic freedom and growth • Characteristics of best performing states • Characteristics of worst performing states • Michigan’s policy mix • How Michigan can become a top performer

25. Outline • Michigan’s comeback • Economic freedom and growth • Characteristics of best performing states • Characteristics of worst performing states • Michigan’s policy mix • How Michigan can become a top performer

26. Characteristics of Poorly Performing States • Policies restricting economic freedom: • High and rising tax rates • Wasteful government spending • Onerous regulations • Forced unionism (no Right to Work law) • Large union penetration • Overburdening debt

31. Outline • Michigan’s comeback • Economic freedom and growth • Characteristics of top performing states • Characteristics of bottom performing states • Michigan’s policy mix • How Michigan can become a top performer

32. How Michigan Compares to Other States Tax burden Spending on Education Spending Infrastructure Public employees compensation Union members Debt

34. State Spending % Income: Michigan & US (2012) US AverageMichigan$ difference General Exp. 14.4% 16.2% $6.9 billion Education 4.4 6.1 6.4 Welfare 3.6 3.9 1.2 Highways 0.8 0.6 -0.8 Source: US Census; 2012 Annual Survey of State & Local Government Finances

35. State Spending % Income : Michigan & OGL(2012) OGLMichigan$ difference General Exp. 12.9% 16.2% $12.4 billion Education 3.9 6.1 8.4 Welfare 3.2 3.9 2.8 Highways 0.8 0.6 -0.8 Source: US Census; 2012 Annual Survey of State & Local Government Finances

36. Wages & salaries per worker: 2012 US averageGovt. Premium Private Nonfarm: $37,400 State & Local employees: $45,500 22% Federal civilian workers: $74,000 98% Michigan Private Nonfarm: $35,000 State & Local employees: $44,000 26% Federal civilian workers: $68,000 94% Source: Census; US Bureau of Economic Analysis, Regional Data

37. Compensation per worker: 2012 US averageGovt. Premium Private Nonfarm: $44,800 State & Local employees: $66,500 48% Federal civilian workers: $105,000 134% Michigan Private Nonfarm: $43,000 State & Local employees: $64,500 50% Federal civilian workers: $100,000 133% Source: Census; US Bureau of Economic Analysis, Regional Data

39. Worse States for Accumulating Debt Burdens on Future Taxpayers • 1. Connecticut $48,100 • 2. Illinois 43,400 • 3. New Jersey 36,000 • 4. Massachusetts 28,000 • 5. Hawaii 27,000 • 6. Kentucky 26,000 • 7. New York 21,700 • 8. California 21,400 • 9. Michigan 19,300 ($6,000 lower than previous year) • 10. Delaware 17,200 • Source: Institute for Truth in Accounting; Financial State of the States, 2013

40. Takeaways for Michigan • Michigan is no longer the worst performing state, it’s closer to the US average. This is a major improvement. • We’re a high-tax, high-spending state. Given its income, Michigan’s annual government spending is $7 billion higher than US average and $12 higher than neighboring states. • Michigan’s state & local employees wages & salaries are well-above (26%) the state’s private sector workers. • Michigan’s state & local employees have pensions that are twice as large as the state’s private sector workers. • Given its income, the state has underfunded highway infrastructure by $800 million a year compared to other states. • State debt is high (9th worse) but coming down rapidly

41. How to make Michigan a top performing state • Cut tax burdens to below US average -cut or eliminate all income taxes -pay down debt • Limit state spending to essential public services: - reduce public employee compensation - shift public employees to IRA pension plans - end corporate welfare - increase spending on highway infrastructure • Remove regulations that inhibit individual freedom - repeal minimum wage to increase real wages