Where are the Cuts?

(All of the budgetary data in this article was obtained from audited statements issued by the State of Michigan).

During the recent political circus to determine whether to raise taxes or cut spending, many spurious claims were made. The purpose of this article is to examine some of the fictional public positions held by the Chief Executive of the State of Michigan.

Fiction: Governor Granholm says she has cut the Michigan budget as deeply as possible. She frequently articulates this notion when arguing for increased taxation.

Fact: Revenue for the State of Michigan increased each year since 2002. Revenue increased from $35.4M in 2002 to $38.8M in 2006, a 10% increase. Further, the 2007 budget is $41.5M, and the yet-to-be-settled 2008 budget will be over $42.0M. In Granholm’s vernacular, the word “cut” is an Orwellian euphemism for “did not increase as much as I wanted to”. Certain departments or funds may actually have been cut, but those cuts were dwarfed by increases elsewhere.

Fiction: Governor Granholm’s mantra is that we need to invest in education in order to solidify the future of Michigan. In this proto-typical liberal plea on behalf of “the children”, taxes must be increased so that the next generation can compete.

Fact: Granholm has not increased spending on education a single penny. In 2002, the state spent $14.7M on education. In 2006, the state spent $14.7M on education, the exact same amount as four years earlier. Granholm’s public beatification of education is a smoke screen to play on the heartstrings and fears of Michiganders. The increased revenue is going somewhere else.

Fiction: Governor Granholm claims that Michigan must invest more in itself, in order to remain competitive with other states.

Fact: Michigan is the only state in the entire union that has experienced a reduction in real GDP over the past five years. We are ranked in the bottom 10% in the nation in attractiveness to businesses. We have the highest unemployment rate in the nation. Granholm has no idea how to attract businesses to Michigan. Increased spending by the state is certainly not the prescription. Here are some comparisons with more successful states:

• The government of Texas only spends $2842 per capita, whereas Michigan spends $4009. It is worth noting that Comerica pulled up stakes from Michigan and relocated to Texas.
• Closer to home and in size, the government of Illinois only spends $3279 per capita. What is Michigan getting for spending 30% more per capita than Illinois? Certainly not more jobs. What would Michigan get by spending even more than it does now? Certainly not more jobs.
• Florida, one of the fastest growing states, only spends $3280 per capita. What is Michigan getting for spending 30% more than Florida? Certainly not more sunshine.

Fiction: Michigan is a growing state with a solid manufacturing economy.

Fact: Michigan’s population is growing more slowly than almost every state in the union. In 2002, we numbered 10.0M. In 2006, we numbered 10.3M. That’s a population increase of 3% over four years. In that same period, the revenue of the State of Michigan grew 10%. In other words, the government is growing more than three times as fast as the population, to the point where there are now as many state and local government workers in Michigan as there are manufacturing workers. And it’s not because our economy is growing. In fact, our real GDP shrunk from $341B to $338B from 2002 to 2006. If you want to be a government worker or an unemployed union worker, Michigan is the place to be. Pure Michigan.

It is tragically disingenuous for Granholm to publicly declare that there is no more room to cut in the state budget. First, no cut has ever been made year-over-year in the total budget. Second, our situation begs for real cuts, given the stagnation in our population growth, the shrinkage in our GDP, our uncompetitive position with other states, and the continued growth of the state government. Third, it is an insult to the folks of Michigan to experience a diminishing lifestyle while the potentates in Lansing take bigger and bigger bites out of the economic pie.

Perhaps it is time to start “cutting” our leaders.