Where are the Cuts?

(All of the budgetary data in this article was obtained from audited statements issued by the State of Michigan).

During the recent political circus in Michigan to determine whether to raise state taxes or cut spending, many spurious claims were made. The purpose of this article is to examine some of the fictional public positions held by the Chief Executive of the State of Michigan.

Fiction: Governor Granholm claims she has cut the Michigan budget as deeply as possible. She frequently articulates this when arguing for increased taxation.

Fact: Revenue for the State of Michigan increased each year since 2002. Revenue increased from $35.4M in 2002 to $38.8M in 2006, a 10% increase. Further, the 2007 budget is $41.5M, and the pending 2008 budget will be over $42.0M. In Granholm’s vernacular, the word “cut” is an Orwellian euphemism for “did not increase as much as I proposed”. Certain departments or accounts may actually have had their funding cut, but those cuts were dwarfed by increases elsewhere.

Fiction: Governor Granholm’s mantra is that we need to invest in education in order to solidify the future of Michigan. In this typical liberal plea on behalf of “the children”, taxes must be increased so that the next generation can compete.

Fact: Granholm has not increased spending on education a single penny. In 2002, the state spent $14.7M on education. In 2006, the state spent $14.7M on education, the exact same amount as four years earlier. Granholm’s public extolling of education is intended to play on the heartstrings and fears of Michiganders. The increased revenue is going somewhere else.

Fiction: Governor Granholm claims that Michigan must invest more in itself, in order to remain competitive with other states.

Fact: Michigan is the only state in the entire union that has experienced a reduction in real GDP over the past five years. We are ranked in the bottom 10% in the nation in attractiveness to businesses. We have the highest unemployment rate in the nation. Granholm has no idea how to attract businesses to Michigan. Increased spending by the state is certainly not the prescription. Here are some comparisons with more successful states:

• The government of Texas only spends $2,842 per person, whereas Michigan spends $4,009. It is worth noting that Comerica Bank pulled up stakes from Michigan and relocated its headquarters to Texas.
• Closer to home and in size, the government of Illinois only spends $3,279 per person. What is Michigan getting by spending 30% more per person than Illinois? Certainly not more jobs. What would Michigan get by spending even more than it does now? Certainly not more jobs.
• Florida, one of the fastest growing states, only spends $3,280 per person. What is Michigan getting by spending 30% more than Florida? Certainly not more sunshine.  Certainly not more growth.

Fiction: Michigan is a growing state with a solid manufacturing economy.

Fact: Michigan’s population is growing more slowly than almost every state in the union. In 2002, we numbered 10.0M. In 2006, we numbered 10.3M. That’s a population increase of 3% over four years. In that same period, the revenue of the State of Michigan grew 10%. In other words, the government is growing more than three times as fast as the population, to the point where there are now as many state and local government workers in Michigan as there are manufacturing workers. And it’s not because our economy is growing. In fact, our real GDP shrunk from $341B to $338B from 2002 to 2006. If you want to be a government worker or an unemployed union worker, Pure Michigan is the place to be.

It is disingenuous for Granholm to publicly declare that there is no more room to cut in the state budget. First, no cut has ever been made in the total budget. Second, our situation begs for real cuts, given the stagnation in our population growth, the shrinkage of our GDP, our lack of competitiveness compared to other states, and the continued growth of the state government. Third, it is an insult to Michiganders to experience a diminishing lifestyle while the potentates in Lansing take bigger and bigger bites out of the economic pie.

Perhaps it is time to start “cutting” our leaders.