Adjusting To The New World Order

SEARCH BLOG: ECONOMY and POLITICS

Last year, I wrote a series of posts about the proposed, then enacted, then repealed Michigan Service Tax [see links at bottom of the right column]. This was an ill-conceived and ill-timed venture into bleeding a sick patient... 18th century medicine for 18th century economics.

The State then "compromised" by jacking up the existing business tax so that businesses were often being charge several multiples of their previous taxes. Ditto.

Meanwhile, the State was alternately projecting deficits and surpluses based on various accounting surprises. Regardless, the approach was the same: increase budgets during a severe state economic recession. During all of this, my position remained the same: the State needed to budget according to the situation... cut the budget by 5%. Do what any business does when things get tough... do more with less... or at least do the same with less.

That's a difficult and foreign concept to governments. Governments have commitments! So do individuals and businesses. The difference is that governments too often see every program as a necessary commitment. Individuals and businesses understand that there are times when some spending simply has to stop or be reduced significantly. When a government fails to understand that, it comes in conflict with its residents and businesses. When that happens, residents and businesses leave.

That result is the opposite of the stated goal of this state's government.

Today's Detroit News ran the following headline: Michigan braces for another messy fight over budget, taxes

The fiscal experts say the national economic drop-off, skyrocketing gas prices, declining housing industry, lucrative tax credits and restructuring of the domestic auto industry will sock the struggling state -- leaving the treasury $472 million short of tax revenue projections made just five months ago.

As a result, lawmakers will try to make ends meet as they negotiate a deal over the next several weeks for the budget year that begins Oct. 1.

All sides have vowed not to raise taxes again this year. But spending for schools and colleges, municipal governments, job training and nursing programs, and Medicaid as well as tax breaks for filmmakers, the working poor and business all will be on the table.

...

"We won't be able to do the $600 million increase in spending the governor has proposed, but I want to see some modest increase, especially in higher education and community colleges and programs to help the less fortunate."

It's time to set priorities. It is also time to closely examine our assumptions. It is definitely time to set conditions upon any aid being provided. I'll give a "for example."

Rather than give scholarships or grants or other forms of educational aid without conditions, offer up loans [as available] that can be partially forgiven if the student completes the degree or program... and works in Michigan or for a Michigan company for a minimum of two years.

One of the biggest problems with the present government strategy of supporting universities and students with gifts of money is that the students leave the state to work elsewhere. We pay and other states benefit. At a minimum, the State should get its money back from the students if they leave for another state.

The point is that it's time for government to be more businesslike. Government has spent far too much trying to be coddling parents to its people rather than a steward of the commonwealth.

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