Howes: MI ‘comeback’ shows way for Ontario, study says

Daniel Howes
The Detroit News

Hold on to your mittens: a Canadian think tank is touting Michigan as a model for economic rehabilitation.

A new study — “Ontario vs. Michigan: Policy Lessons From the Wolverine State” — compares the Great Lakes State’s post-meltdown rebound to neighboring Ontario, and says its countrymen should learn a thing or two from the epicenter of American industrial collapse and its rebirth.

The overarching conclusion by the Fraser Institute, which bills itself as independent and non-partisan, is that a “bold series of reforms” pushed by Gov. Rick Snyder and Republican leaders in the Legislature revitalized the Michigan economy and delivered an “amazing turnaround” that “offers lessons for Ontario.”

Maybe. The study released this month rightly points out that growth in Michigan’s gross domestic product and declines in its unemployment rate are outperforming both the U.S. national average and the province of Ontario — reversals from its “Lost Decade” of economic stagnation.

“Ontario continues to perform below its full economic potential and remains burdened by substantial public debt,” the study argues. “Michigan’s economic revival shows the power of policy reform to help jumpstart even seemingly moribund economies.”

Predictably, the authors credit Snyder’s business tax reform, tightening of state budgets, reductions (if slight) in public debt and passage of right-to-work legislation. Less appreciated is how those initiatives coincided with the other ingredient of Michigan’s rebound: an expanding business cycle that helped reflate the bellwether manufacturing sector powered by the Detroit-based auto industry.

“The hit to Michigan was much harsher in 2009, but since then the state has enjoyed persistent and solid growth in manufacturing employment,” the study says. “In contrast, manufacturing employment is languishing in Ontario well after the recession ended, with negative growth in both 2013 and 2014.

“From 2011 to 2014, manufacturing employment grew at an average annual rate of 6.1 percent in Michigan, while manufacturing employment actually shrank at an average annual rate of 0.5 percent in Ontario during the same period.”

There is no denying Michigan’s jobs rebound from the depth of the Great Recession. In March 2010, the state’s non-farm payrolls lumped to 3.83 million, according to the Bureau of Labor Statistics, compared to a preliminary estimate of 4.35 million for July — an increase of 520,000 jobs.

There’s also no denying that the bounce only regained the jobs lost over the past decade. In January of 2006, more than a decade ago, non-farm payrolls totaled 4.37 million; as of last month, they’re expected to be 4.35 million, capping a decade of sharp decline and a steady crawl back to what is essentially even.

That’s less a model of policy driving economic dynamism and more an example of recovery powered by the recapitalization of the Detroit auto industry, pent-up consumer demand for cars and trucks and policy moves in Lansing to improve business confidence.

Yes, policy can — and did — improve the Michigan business environment. Without an expanding macro-economy and record low interest rates to deliver customers and drive jobs-creating reinvestment, however, state policy changes would have been necessary but arguably insufficient.

The Michigan “comeback” of Snyder’s telling rests in more than economic numbers cited by the Fraser Institute or the Wall Street Journal editorial page. The North American revival of Detroit’s auto industry is helping to set a tone also reflected in downtown revitalization powered by mortgage impresario Dan Gilbert and others; new leadership in City Hall; new housing developments from Midtown to the Riverfront.

The successful Chapter 9 bankruptcy of Detroit, the largest case of its kind in American history, relieved the city of $7 billion in debt and restructured another $3 billion in obligations; rescued the vast majority of pension obligations to city retirees; off-loaded assets to creditors now required to develop those assets; formed a regional water system whose members agreed to shoulder annual maintenance costs in exchange for shared governance.

Those contribute to Michigan’s economic rebound, too. To borrow the popular phrase, Michigan (and Detroit) feel like they’re winning again. For a place that spent a lost decade on its figurative knees, the bounce back is more exhilarating than official numbers may suggest.

The biggest threat is complacency — and forgetting how devastating a losing economy can be. That Michigan knows too well.

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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on “Stateside,” 91.7 FM.