Editorial: What Michigan got right
A lot of folks argue Michigan’s recovery from its Lost Decade was coincidental, tracking the national comeback and riding the coattails of the surging automotive industry, and had little to do with the substantive reforms put in place by Gov. Rick Snyder.
That’s wrong, according to a respected, independent Canadian think tank that is urging the province of Ontario to mimic its American neighbor in adopting pro-growth policies.
In a report titled, “Ontario vs. Michigan: Policy lessons from the Wolverine State,” the Fraser Institute attributes Michigan’s turnaround to three specific policies enacted by Snyder and the Republican Legislature after they gained control of Lansing in 2011:
■Right-to-work legislation, which was passed in 2012 and took effect in the spring of 2013. The measure, which allows workers to choose whether to join a union, signaled to entrepreneurs that Michigan was no longer under the control of Big Labor, and eased concerns about investing here.
■Replacing the “complex and onerous” Michigan Business Tax with a simpler and flatter 6 percent corporate income tax that delivered an overall tax reduction for businesses. While decried as a corporate giveaway, the fairer tax structure removed a huge competitive barrier.
■Major budget cuts in 2012 and restrained spending since then that brought the state budget under control.
While the Fraser report acknowledges that the comeback of the auto industry helped Michigan’s fortunes, Michigan was in a single state recession for eight years before the national economic meltdown, including during periods when automakers were doing better.
Ontario, the report says, has a similar auto-heavy manufacturing base, and has not experienced a rebound comparable to Michigan’s largely because it has not changed policies.
The changes put in place by Michigan, the report concludes, “constituted a bold policy experiment.”
Noting the reforms had their detractors who warned they would have severe negative consequences, the researches say the evidence is proving them wrong.
The researchers cite data indicating Michigan’s economic growth is slightly ahead of the national average, and employment, after lagging the national average for a decade, is now matching it.
The Fraser Institute report is validation of pro-growth policies that are still being attacked as unfair, despite the hard evidence they are putting Michigan residents back to work.
The report serves as a warning to those who would revert to Michigan’s previous burdensome business tax practices and pro-union policy making.
Michigan was in a deep hole in 2011. It would not have climbed out by doing the same things that helped get it there. Ontario is proof of that.
As the Fraser Institute report confirms, aggressive reforms aimed a creating a climate friendly to investment and job creation work, and are worth mimicking.