Michigan headed for auto-like crisis

| Thursday, October 21, 2010
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Listening to gubernatorial candidates Virg Bernero and Rick Snyder in their recent debate reminded me of conversations I've had with auto mechanics over the years.

You know the drill. Your car is making troubling noises, so you take it to the dealer or repair shop, where you're told, "We can't tell you how much it will cost to fix until we get in there and figure out what's going on."

That's essentially the way Bernero and Snyder responded to questions about how they would cut spending to balance the state budget in light of their stated refusal to raise taxes.

Snyder talked about his "value for money" budgeting plan in which spending priorities would be established based on the value of government services being provided. He said he wouldn't know the full extent of the spending problem until he could examine the budget as governor.

Likewise, Bernero promised to perform a "forensic audit" to determine where spending cuts should be made. He asked us to take it on faith that he could balance the state budget without a tax increase because he's done it for five straight years as Lansing mayor.

But as anyone who taken his car into the repair shop knows, we're unlikely to get out of the state's fiscal mess for free. You can read more on my take on this topic here.

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Sales, property taxes are bigger burden than the Michigan Business Tax

| Monday, October 11, 2010
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An annual study by the Council on State Taxation throws some cold water on the widely held notion that the Michigan Business Tax is what makes Michigan uncompetitive with other states.

In reality, property and sales taxes make up a far larger share of the business tax burden in Michigan, according to the study prepared for the council by accounting firm Ernst & Young.

That was the topic of my weekly column, which you can find here.

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Smaller cars, smaller paychecks

| Friday, October 8, 2010
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At a ceremony Thursday to formally announce that General Motors Co. will build two small-car models at the Orion Township assembly plant near Pontiac, GM President Mark Reuss held up a T-shirt that read: "Turn around America--good jobs now."

But a good job in the auto industry ain't what it used to be. Under an unusual agreement with the United Auto Workers union, 40 percent of the plant's hourly work force will earn $14 an hour. That's the so-called second-tier wage for new hires negotiated in the automaker's 2007 contract with the UAW.

But some of those $14-an-hour workers could be current GM employees called back from layoff. Those workers had been earning $28 an hour.

GM will assemble the subcompact Chevrolet Aveo, now built in South Korea, at the plant. It also will assemble the new Buick Verano compact at the plant. GM says it will update the Aveo and likely change its name.

The automaker is aiming to become the first to profitably build a subcompact car in the United States. That necessitates cutting wage rates, GM says.

Many rank-and-file UAW workers are stunned that their wages are declining. But some experts have warned for years that the global economy would inevitably erode the value of low-skill manufacturing production jobs.

Manufacturing will remain an important segment of the state's economy. There will continue to be high-paying jobs in engineering, design, sales and management. And every new manufacturing job results in six or seven spinoff jobs.

In this economy, we need every job that can be created. But, as the Orion labor agreement demonstrates, we can no longer depend on assembly plant jobs with declining wages to "turn around America."

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Ilitch Pistons purchase plan shows cost of sprawl

| Wednesday, October 6, 2010
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Pizza-and-entertainment impresario Mike Ilitch has been given an exclusive 30-day window to negotiate the purchase of the Detroit Pistons from Karen Davidson, widow of long-time Pistons owner Bill Davidson.

(Kudos to Bill Shea at Crain's Detroit Business for breaking this story wide open.)

If the deal goes through, Ilitch probably would seek to build a new arena housing the Pistons and his Detroit Red Wings in downtown Detroit. That would return the Pistons, which left the city for the suburbs in 1978, to Motown.

And taxpayers would likely aid in the move, as they did when the Pistons landed at the Palace of Auburn Hills 22 years ago.

Here's some history, as I remember it:

Davidson originally moved the Pistons from Cobo Arena to the Pontiac Silverdome, where the team played for a decade. During that time Davidson developed plans for the Palace further north off of I-75 in a largely undeveloped area.

Davidson was widely praised for privately financing the new arena at a time when taxpayers were being called upon to cough up hundreds of millions of dollars for new sports arenas--a practice that continues today.

But there was a public cost to the construction of the Palace. As I recall, the Michigan Department of Transportation recommended against the site, saying the new arena would require the costly widening of I-75 and rebuilding of exit and entrance ramps at Lapeer Road to accommodate the increased traffic.

And indeed, all of that happened. To be fair, Auburn Hills was growing rapidly at the time and the I-75 expansion would have likely happened anyway. But a good deal of that growth was the result of companies moving north out of Detroit.

If Ilitch builds a new arena for the Pistons in downtown Detroit, taxpayers will likely be asked to contribute in some fashion. It could be tax breaks, a bond issue or road and other infrastructure improvements.

I'm not saying this is a bad thing. It could be a very good thing for struggling Detroit, the state's largest city.

But all of this shows there can be a high cost to sprawl, especially when it amounts to just moving entities around the region like chess pieces on a board.

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Michigan job growth forecast revised downward

| Tuesday, October 5, 2010
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There was wide media coverage today of the University of Michigan's latest state economic forecast, which predicts job growth will return to Michigan next year after an unprecedented decade of declines.

That's good news, of course. But today's forecast isn't as rosy as the one U-M economists issued in May.

The new forecast calls for Michigan to add 23,000 jobs in 2011. That's way down from the 41,100 jobs next year U-M economists foresaw in May.

The job-loss forecast for this year also was boosted slightly from May. U-M expects the state to lose 20,200 jobs, up from 19,700 jobs in the May forecast. Still, that's a vast improvement from the 230,200 jobs the state economy shed in 2009.

In a brief e-mail to me, chief U-M forecaster George Fulton attributed the downward adjustment in his state forecast to a slowdown in the national economic recovery.

But 2012 looks better. Michigan should produce 60,200 new jobs and see personal income grow by 3.6 percent, according to the new forecast. Compare that to 2009 when personal income fell 3.1 percent, the first such decline since 1958.

While it doesn't feel to most of us like the Great Recession is over, the numbers at least show we're slowly climbing out of a deep hole.

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