For the first time in a generation Michigan, its schools and local units of government have new revenue for public investments. An unprecedented amount of new money, anchored by the American Rescue Plan funding.
Which, of course, raises the question “how can those new funds be used to best help improve the well-being of all Michiganders?”
For us at Michigan Future, Inc, the prime economic challenge of our times is having an economy that provides family-sustaining jobs––not just any job––so that all working Michigan households can raise a family and pass on a better opportunity to their children.
We should not and cannot ignore that our economy structurally is leaving too many behind. This was the reality before the pandemic across all of Michigan and across all races and ethnicities. It was the reality during the pandemic-driven lockdown. And will be the reality going forward until and unless we change our approach to the economy.
We need to figure out how you get an American capitalism that as it grows benefits all. This is the time to make fundamental change in the state’s playbook to increase the economic well-being of all Michiganders. To achieve the goal of rising income for all.
We believed before the onset of the pandemic––and even more so now––that this is the time to make fundamental change in the state’s economic policy playbook. To us mid-course adjustment in what we have been doing is not the path to achieving rising income for all.
Our policy recommendations are explicitly designed to rethink what is foundational to state policy and programming to achieving rising income for all and go big in building that foundation. To identify the state policy levers that can have the highest impact on ending Michigan’s two-tier economy.
Achieving rising income for all requires both raising income of low-wage workers and growing high-wage jobs by preparing, retaining and attracting talent. Our recommendations are designed to do both at scale.
The state and its local governments should use the once in a generation American Rescue Plan funding, as well as other new sources of revenue, first and foremost, to lay the foundation for that transformative redesign of economic policy. Specifically we recommend using American Rescue Plan funds, as well as other sources of new revenue to:
• Greatly expand the Earned Income Tax Credit. The EITC is pro work and an incentive to go back to work. Nearly six in ten Michigan jobs pay less than what is required for a family of three to be middle class ($47,000). The pandemic made clear that these low-wage workers live paycheck to paycheck not because they are irresponsibly buying “unnecessary” luxuries, but because they are in low-wage jobs that leave them struggling to pay for the necessities. The reality is that most of those struggling economically, in good times and bad, are hard-working Michiganders who like us get up every day and work hard to earn a living. What these hard- working lower-wage workers need most is income, not programs.
(As an example of doing something substantial, $1 billion annually would expand the average state EITC benefit to $1,500 from a current average of $150.)
• Provide an annual government payment, above and beyond current education funding, for each child 0-21 growing up in an ALICE household. We strongly believe Michigan under invests in its children. Particularly its non-affluent children. There is no path to a rising income for all that does not include, front and center, far better education outcomes.
We believe that under investment starts at birth and continues through college. So we propose Michigan substantially increase its investment in the education of every child growing up in a household struggling to pay for basic necessities each year from birth through college. These payments would be both pro growth and pro shared prosperity by increasing the human capital of children growing up in non-affluent households.
We recommend, above and beyond fiscal year 2022 education funding, providing an annual government payment directly to ALICE households for each child from 0-21. Think of this as something that operates like a health savings account: where parents and students have the resources to make their own education spending decisions. Including the option of utilizing those funds for extracurriculars and out of school programming.
(As an example of doing something substantial, assuming one million children in ALICE households, $1 billion dollars a year would provide a $1,000 payment per child.)
• State match for regional American Rescue Plan spending on retaining and attracting talent. Our economic development priority should be high-wage job growth. Labor markets are regional and talent now is what attracts capital. So the way to achieve high-wage job growth is by creating regions where high-skill working age adults choose to live, play and work.
We propose the state offer matching funds to provide local governments a substantial incentive to use their American Rescue Plan funds, and other new revenue, to develop and implement regional strategies to retain and attract talent. Where funding can be used for all modes of transportation; water and sewer; broadband; housing; parks and outdoor recreation; and arts and culture.
Enacting these recommendations will put Michigan on a new path of economic policy making: one that both provides higher income for today’s low-wage workers and grows high-wage jobs by preparing, retaining and attracting the high-skill workers that matter most to high-wage employers. This is the recipe for creating an economy that as it grows benefits all. That achieves rising income for all.