Rick Haglund: Whitmer’s economic strategy focuses on people over corporations

February 3, 2019 11:37 am

Gov.-elect Gretchen Whitmer speaks at a Democratic election-night party on November 6, 2018 in Detroit | Bill Pugliano, Getty Images

Business leaders and local economic developers have publicly urged Gov. Gretchen Whitmer to stay the course set by her predecessor, former Gov. Rick Snyder, in building on the state’s economic momentum.

It’s easy to see why. Under Snyder, Michigan’s jobless rate plunged 7 percentage points, from 11 percent in January 2011 to 4 percent in December. The state added 569,600 private sector jobs during Snyder’s two terms, following a decade of net job loss. And the state’s business tax climate ranking jumped from 17th to 12th best in the country, according to the Tax Foundation.

Snyder’s approach to economic development was right out of the Republican policy playbook: cutting business taxes and regulations to make the state more welcoming to investment. He also signed controversial Right to Work legislation in a slap at organized labor and spent millions of dollars on training high school students for “middle-skill” jobs that require less than a bachelor’s degree.

Whitmer’s economic strategy flips Snyder’s focus on improving the business climate to putting more money directly into the pocketbooks of middle-class and low-income residents.

She and others say far too many Michigan residents aren’t sharing in the state’s economic pie. About 40 percent of the state’s population, composing more than 1.5 million households, cannot afford the basic necessities of life, according to a 2017 Michigan Association of United Ways report. Those items including housing, food, child care, transportation and health care.

Whitmer has proposed boosting Michigan’s minimum wage from the current $9.45 an hour to $15 an hour, phased in over three years. She also wants to overturn Right to Work and enact paid family leave. She’s also signed an executive directive aimed at ensuring equal pay for equal work by state employees.

Right to Work protest at the Michigan Capitol, December 2012 | Susan J. Demas

And the new governor has repeatedly said she wants to end the tax on retirement income, the so-called pension tax, which Snyder and the Legislature enacted in 2011 to help pay for a $1.8 billion business tax cut.

Whitmer plans to continue Snyder’s emphasis on skills development. She has proposed a Michigan Opportunity Scholarship that would award high-performing high school students with two years of free college or job training.

While details are sketchy, Whitmer has said she plans to “unleash” the Michigan Economic Development Corp. to pursue new business investment and jobs. That will no doubt please local economic developers who have been pushing the state to restore business tax credit programs, including those for brownfield developments and historic preservation projects.

Snyder eliminated the Michigan Economic Growth Authority tax credit program, which had committed $9 billion to support new business investments, as being too costly. He replaced it with a less lucrative incentive program that gives qualifying businesses upfront cash for new job-producing investments.

In her jobs policy paper, Whitmer said Michigan has “unilaterally disarmed when it comes to fighting for and attracting good jobs over other states.” She said Michigan’s failure to win the fight for Amazon’s second headquarters “is a mandate to get our house in order.” That seems to suggest she’ll propose expanding Michigan’s business investment incentive programs.

Potholes on a Brighton, Michigan road | Susan J. Demas

For all of the economic progress Michigan made under eight years of Snyder’s leadership, serious challenges remain for Michigan. The state’s roads are still a mess, four years after a plan was approved to spend an additional $1.2 billion a year to fix them.

Despite the steep drop in unemployment, Michigan’s jobless rate ranks just 30th in the country. Per-capita personal income rose steadily during the Snyder years to $46,201 in 2017, but is $5,439 below the U.S. average. Michigan’s per capita income, which ranks 31st in the country, has not exceeded the national average since 1995.

In addition, Michigan lags competing states in economic output per person, education performance and investment in communities.

Michigan’s economy grew steadily during Snyder’s eight years in office as the national economy bounced back from the Great Recession and the state’s automakers recovered from a nearly fatal financial smashup. But Whitmer might not be so lucky.

General Motors Co. and Ford Motor Co. are eliminating tens of thousands of jobs in restructurings, in part to preserve capital needed for investments in autonomous vehicle technologies.

General Motors headquarters, Detroit | Susan J. Demas

And while the state’s economy is still expanding, job growth appears to be slowing. A recent University of Michigan economic forecast predicts the state will add 35,800 jobs this year, down 35 percent from 55,200 jobs created last year.

Whitmer also faces tight state finances that will make it difficult for her to implement new initiatives. Revenues in the state general fund — the state’s main checkbook — are expected to grow by just 1.4 percent from the current fiscal year through 2021, according to state economic officials at last month’s consensus revenue estimating conference.

While the economy is still strong, some storm clouds are brewing. The trade war with China, steel and aluminum tariffs, and uncertainty over continued free trade with Mexico and China have Michigan business leaders on edge.

The economic winds are shifting. A course correction is in order.

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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.