Cut and then what?

Insightful Rick Haglund column on He makes the point that after the reset of Michigan state government this year the state faces a fundamental choice in where it goes from here. One path is to do more of what we did this year: less taxes, less spending. The other is to resume public investments that many argue are key to growing the economy: education, infrastructure, vibrant central cities, etc.

The Governor campaigned on the need for increased public investments. Many of his supporters have described the Administration’s strategy as cut and invest. Once we get to a structural balance we can move to priority investments. But listen to what the Governor said to Rick. Snyder recently told me that once the state is financially stabilized, he wants to end the annual cuts to such areas as higher education and revenue sharing to local governments. End the annual cuts is far different than increased public investments to grow the Michigan economy.

As Rick writes: You can bet, for instance, that if an improved Michigan economy results in a surplus of tax revenues, there will be intense pressure by Republicans to cut taxes again, rather than increase spending on higher education or cities.  That would be a mistake, say those who believe the state is losing economic competitiveness because of a poorly educated work force, bad roads and the loss of bright young people who are flocking to Chicago and other vibrant cities outside of Michigan. “I understand that we need to have a moderate tax policy, but a poor quality of education leads to a poor standard of living,” said Doug Stites, CEO of Capital Area Michigan Works, a job-training agency in Lansing. States that have a high level of education in their work forces, without regard to their tax policies, have high standards of living” .

Haglund argues the lesson the private sector has learned is: We can’t just cut our way to prosperity. …. if the cuts are too deep, the future of the enterprise can be threatened. The same is true for Michigan. Cutting taxes and cutting back on public investments has been the path Michigan has travelled on for more than a decade. The result has been we are now one of the poorest states in the country (36th) and nearly all the states even poorer than us are low tax states. We need to get on a new path if we are to recreate a high prosperity Michigan.

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