Budget crisis -- the kids are counting on you

Even if the legislature can manage some sort of budget resolution in the eleventh hour tonight, eight months of political game playing, postponing, stalling, bickering, heel digging, posturing, neglect, irresponsibility, and dereliction of duty have left a permanent stain on Michigan and her people.

Today, a friend confided that her son -- a very bright, promising high school student -- read an account of the budget dealings in Lansing and said, "Mom, Michigan sucks."

The budget crisis -- an historic and monumental embarrassment -- has demolished this young man's sense of pride and honor in his state. He's the kind of kid we want to educate well and keep in Michigan, but he'll probably attend college elsewhere and never return. Why should he?

He is bright enough to see that the legislature is populated by politicians more concerned with winning elections than responsible stewardship of the commons. He knows that schools have not yet received funds they were due months ago and that these funds were part of a sleight of hand balancing illusion. He understands that his access to education was considered potentially expendable in a high stakes game of chicken. Why on earth would he want to stay here?

Michigan has always been his home, but how welcoming can it feel tonight, as the prospect of government shutdown hangs over his home?

Good luck, legislators. The kids are counting on you.

The shutdown -- it's personal and political

I started this blog for two reasons: to seek understanding and to offer hope. Neither seems within reach as the legislature bickers itself toward irrelevance and the government toward shutdown.

If the legislature cannot resolve this issue by Sunday, Governor Granholm can assert executive authority and declare a fiscal emergency, according to an analysis by Patrick Anderson, a former deputy state budget director, in consultation with analysts from the Citizens Research Center, Michigan Chamber of Commerce and public schools and universities. (source)

That might not be such a bad option. The analysis says she would have authority to:

• Outline a limited spending plan.

• Assure creditors the state is not bankrupt and would pay its bills.

• Announce automatic, temporary extensions of state registrations, permits and licenses.

Too bad Governor Granholm can't also lay off the House and Senate without pay, rather than 35,000 state workers who actually deliver necessary services to the people of Michigan.

Partisanship hurts Michigan economy -- both sides in tax debate agree

(cross-posted at Michigan Messenger)

Activists and experts with differing views on taxes agree on one thing: Lansing partisanship hurts Michigan's economic prospects.

Rose Bogaert, chair of the Wayne County Taxpayers Association, has been fighting tax increases in Michigan for 30 years and believes strongly in her cause. "We are way behind other states in terms of economic development partially because we're unable to change things in Lansing. I don't care -- Democrat or Republican -- we need to do something to bring about change in this state," she said.

Some experts believe that bipartisan tax policy -- even if it involves a tax increase -- attracts business because it has more staying power."If you have decisions made on a bipartisan basis, chances are they will be more durable over time and you'll know what the ground rules are for investing in the state over the long term," said Paul Hillegonds, who served as president of non-profit Detroit Renaissance from 1997-2005.

"To the extent that policy is partisan and swings back and forth as the partisan winds change, economic development becomes less predictable. That makes a state very unattractive," said Hillegonds. "In the end, economic development is not a partisan issue."

A number of regional economic development organizations pursue their work without involving state government. "These are bipartisan efforts that include business trying to come to grips with this transformational economy," said David Hollister, executive director of Prima Civitas, a non-profit economic development organization. "They are trying to find ways to wrestle with it outside of the political process."

Prima Civitas works to build collaboration among disparate community groups. Hollister said, "The whole idea is stewardship -- putting the interest of the community first and building collaborations."

"There are so many pieces and it's all based on enhancing the general good and doing it without the legislature. We try to keep them informed, but as far as our strategy it's just not even in the equation," Hollister said.

To be sure, the two sides still differ over taxes. Tax foes argue that higher taxes drive away new business; economic development experts contend that increasing taxes will attract new business investment.

Bogaert and other anti-tax activists believe new taxes enable government waste and that the burden on taxpayers is high enough. They are frustrated and concerned that economically stressed people may face a higher tax burden.

Economic development experts say investment in public infrastructure and talent requires new revenues. "No one is going to invest in a state that does not invest in itself-no one. It's impossible to invest in talent with a cuts-only approach to finances," said Bill Rustem, president and CEO of Public Sector Consultants.

Still, the two sides do agree that the continued political bickering hurts the economy.

Consumer sentiment holds steady in September, UM reports

The final September University of Michigan consumer sentiment index has held steady at 83.4.

Mr. Greenspan pitches his book

Former Federal Reserve chairman Alan Greenspan is on the book circuit pushing his memoir, The Age of Turbulence: Adventures in a New World. He's popping up all over the place offering advice and placing odds on everything from inflation (it's going to accelerate) to recession (more likely than one would want). (source)

Actually, he's changed his mind on recession. On September 12 he put it at 1 in 3. Today, he says just less than 50/50. One recalls Jimmy the Greek in advance of a fight or Monday night football.

He's criticized President Bush and Republicans:

"Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he said.

He has cautioned against abrupt Federal Reserve rate cuts:

Greenspan said the Fed should be careful not to cut rates too aggressively because the risk of an "inflationary resurgence" is greater now than when he was chairman, the Financial Times reported.

And in some quintessential Monday-morning quarter backing, admits the global credit crunch was well in view on the horizon for some time:

"We did know what was going on and the reason we didn't stop them was that to a large extent these types of questionably egregious actions are taken by people who have their own money invested," he said. (source)

You mean like average homeowners, who in good faith put their own money down for mortgages and find themselves flipped because property values are falling? What about the egregious actions of disreputable lenders pushing loans onto people who couldn't afford them in order to feed the insatiable appetite for potentially high-yield securities?

Well, we're all adults here and it is a new world; Ben Bernanke is chairman now. And he preferred the risk of doing too much to doing too little on interest rates. (source) A man of action almost as daring as Indiana Jones.

Partial government shutdown imminent

What more can be said? The legislature has had nearly eight months to do its work. Partisanship and politicizing the commons have utterly crippled the legislative process. With a shutdown, the Legislature cannot perform oversight in numerous areas. Important committee work has been canceled for the last two weeks and will not resume until after a shut down. For example, hearings on predatory lending in the House are on hold indefinitely. Meanwhile, foreclosures are ripping through communities and devastating families.

What's worse, our partisan Legislature communicates to the rest of the world that Michigan is a bad investment risk. Not because we are fiscally challenged, but because we are unable to collaborate and to create sound public policy in our own best interest as a state. We apparently lack the will to help ourselves.

Politicking is easier than governing. Running for office is easier than carrying out legislative duties--just as getting pregnant is far easier than raising a child.

Without substantive change to tax structures and government programs, this will happen again.

Preparing for September Consumer Confidence Number

It's been a heck of a month. Let's review:

1. August orders for durable goods take their biggest decline in seven months. (source) 9/26/7

2. Existing home sales drop for the sixth straight month in August reaching the lowest rate of sales in five years. (source) 9/25/7

3. The Conference Board consumer confidence index dips to a 2-year low. (source) 9/25/7

4. Crude oil tops $84 per barrel. (source) 9/20/7

5. U.S. dollar and Canadian dollar hit parity for first time in 30 years. (source) 9/20/7

6. Fed cuts interest rates for the first time in four years. (source) 9/18/7

7. RealtyTrac reports foreclosures jumped 36% in August. (source) 9/18/7

8. Crude oil hits record $80 per barrel. (source) 9/13/7

9. U.S. payrolls decrease by 4000 instead of increasing by the expected 110,000. (source) 9/7/7

10. GM announces fourth quarter production will be cut by 10% in response to weak August sales in a tightening credit market. (source) 9/4/7

Bank of America to release 1500 Michigan workers

Detroit News reports:

"Bank of America Corp. will close its $21 billion deal to purchase LaSalle Bank next week, a move that will trigger the beginning of 1,500 layoffs of LaSalle workers in Michigan over the next two years."

Lawrence Di Rita, a spokesman for Bank of America, headquartered in Charlotte, N.C., also said with respect to customer experience,"There are typically hiccups along the way, but we try to minimize them. There is no reason to believe this won't be a smooth transaction."

Do you suppose the 1500 lost jobs will be experienced by the workers as mere "hiccups along the way?" Will their children who experience disruption in home life and stressed parents find the circumstance a mere inconvenience, a blip in the grand scheme of their formative years?

Well, that's not Bank of America's problem. In the last two weeks Bank of America announced it was raising ATM fees for non-Bank of American customers in order to provide better service to its own customers. How about sending a small portion of those fees to a fund for displaced Bank of America workers to assist with transition to some other knowledge-based, new economy job?

Budget gridlock: are term limits to blame?

cross posted at Michigan Messenger

As the budget embarrassment continues, people across Michigan's political spectrum blame term limits for the intensification of partisanship and profound legislative dysfunction in Lansing. According to Republican and Democratic veterans of Michigan government, term limits have led to ineffective working relationships, a devaluing of public service as a career, and set a focus on running for office rather than governing.

"Term limits don't work, not as short as they are in Michigan. Would you go to a doctor and ask for someone only if they have less than four years experience? Government is complicated," said Bill Rustem, president and CEO of Public Sector Consultants.

"I never liked the idea of term limits in the first place. They've turned out worse than I expected in terms of their impact on the process," said Paul Hillegonds, vice president at DTE who served in the Michigan House from 1979 to 1996. "The artificial term limits make it difficult to deal with complex issues. It sometimes takes a long time to work through an issue. Today you pass the baton before you get halfway through the issue."

Strong working relationships across party lines brought budget resolution in 1983 when Michigan faced a more extreme fiscal crisis than the current one. "I was in state government in the early 1980's when unemployment was 17.5% in some parts of the state. We rallied in a bipartisan way to solve that budget crisis," said David Hollister, who served in the Michigan House from 1973 to 1993 and is executive director of Prima Civitas.

"I think, especially in the House, limiting a person's tenure to six years just isn't enough for people to develop relationships," said Hillegonds.

Michigan's term limits, among the nation's most restrictive at 6 years in the House and 8 years in the Senate, match those in California and Arkansas. Enacted in 1992, they came to full effect in the House in 1998 and the Senate in 2002.

Hollister says bipartisan collaboration was possible before term limits because legislators took time to develop friendships across party lines and shared a commitment to public service as a career. "I have wonderful friends in the Republican party. We served together. We traveled together and socialized. I continue to treasure their friendship. Those kinds of relationships are just not there anymore."

"People saw 20 years in the legislature as positive public service," Hollister said.

Connecting lack of collaboration and the current crisis Rustem said, "The only way things really get done in the political process is through accommodation--finding a common interest between people and building from there. That's what our legislature isn't doing."

Hillegonds sees the problem in an even deeper way--working across partisan difference can help a legislator mature as a policy maker. "With relationships comes a broader perspective. When I first went into the legislature, I had some preconceived ideas, but as I developed relationships and worked through problem solving my perspective broadened. And I think my view of economic development and other issues changed over time."

"I think the best representation is a combination of listening to your constituents, but also informing your constituents about the complexity of issues that goes beyond geography or the predominant philosophy. If a representative can have that dialog with constituents and grow in their own view of the world over time, I think the process turns out better," said Hillegonds.

But in an environment of nearly perpetual election cycles and a focus on winning, that depth isn't possible. The minute legislators "hit their seat they're running for something else. They get into the House and they're running for the Senate. Or they are running for judge or attorney general or governor or county commissioner," Hollister said.

Acknowledging the impact on voter sentiment, Rustem said, "People across Michigan are getting rightly angry at the partisanship. And they should. They should look at candidates running for office and ask are you ready to do something for Michigan or are you just going to worry about the winners and losers in the political sphere."

"It used to be you got involved in party politics to run for office; now you run for office to get involved in party politics. It's backwards. It needs to change," said Rustem.

Grover Brought the Kool-Aid

Grover Norquist, anti-tax ideologue, is reported to have pitched rebranding the Michigan GOP as an anti-tax party at this weekend's Mackinac gathering. And, reportedly, it met with thunderous applause.

The fiscal situation in Michigan is complex. That is why Norquist's idea can hold sway; it appeals to the intellectually lazy. The economic transformation happening in Michigan is overwhelming. In order to understand this transformation, its relationship to state finance and how to move Michigan to the next place, you have to do some homework. Lots of brilliant people have worked to explain it. For example the Citizens Research Council generously provides a power point presentation on our crisis, updated on September 7, laying out the cold hard facts. (See also: Michigan's New Economy--Basic Reading List)

Let's put this in perspective. Michigan is just a week away from a government shutdown. Certain GOP strategists want a shutdown. This is the ugly side of politics. The people advocating government shutdown are playing politics with the operation of the commons. They have contempt for We the People of Michigan. They cannot be concerned for Michigan's future, only their own electoral prospects.

What's worse, they are being used by outside forces hoping to deliver Michigan to a GOP presidential candidate.

GOP legislators, who tasted and enjoyed Norquist's Kool-Aid, must certainly be ignorant of the fiscal facts in Michigan. How else could they assent to his irresponsible, single issue grunt? It's quick. It's easy. And it's dead wrong.

Loonie Greenback Parity--kids' stuff

For the first time in 30 years, the Canadian and U.S. dollars are at par. This is good news for Michigan tourism, but not such good news for Michigan kids hoping to stretch an allowance dollar on Canadian souvenirs.

Many of us in Michigan remember family vacations where the exchange rate seemed a magical thing. We could buy many strange and wonderful souvenirs over the border with our powerful American allowance money. Remember rubber band guns and enormously fat pencils and mini banners and deerskin pouches? You might as well just go to a tourist trap up north for those goodies at this point. While Michigan kids' allowances will buy less over the border, Canadian children can finally experience the upside of fluctuating exchange rates.

More significantly, Michigan can expect an influx of Canadians flexing their greater loonie power. That's a good thing for tourism. According to George Zimmermann, vice president of Travel Michigan, "Visitors spend about $17.5 billion annually, which employs 193,000 people statewide and contributes $971 million in state taxes.”

Mr. Franklin's advice for Michigan

"An investment in education pays the best interest."
Michigan's future depends on an well-educated populace. Companies in knowledge-based enterprises are attracted to where there are smart, educated people. Phil Power has something to say about the partisan wrangling impeding our way forward and developing our talent.

"Beware of little expenses. A small leak will sink a great ship."
A latte here, a bagel there. Well, it's a little different in government, but the principle applies. Michigan's budget has a long-standing leak (more of a gaping hole actually) called the structural deficit. It cannot be fixed through new revenues or tax cuts alone or together. It's much bigger than that. And there is no more extra money to stuff into it. To move forward will take cuts, new revenues and structural changes. It's a case of "both and" not "either or."

"We must, indeed, all hang together or, most assuredly, we shall all hang separately."
The budget crisis and the fight for Michigan's future economic wellbeing are beyond partisanship. There is a We in this, We the People of Michigan. Not just We the Democrats or We the Republicans. There are progressive, reasonable people in both parties. Just as there is counter-productive ranting on both sides. John Bebow has something to say about this Partisan Cancer.

"Life's Tragedy is that we get old to soon and wise too late."
It's a little like the current life cycle of a Michigan legislator. Just when you figure things out and understand the system of government from the inside, it's time to leave and never return. Currently, 15 states have term limits. Ours match those of California and Arkansas--6 years in the house and 8 years in the Senate.

"If passion drives you, let reason hold the reins."
Go ahead, pursue the public good with all your heart, but don't forget to consult your brain every inch of the way. Over simplifying with a single issue cripples the governing process. John Bebow weighs in on the MTA recall campaign.