Will the Real Reform Please Stand Up?

One question comes up again and again when my Mackinac Center colleagues and I speak to groups of all kinds around Michigan. What reforms will fix Michigan's problems?

While Michigan's private sector economy and population have shrunk, lawmakers have expanded our government even faster than inflation. Michigan has the weakest economy of all 50 states by any number of current annual measures, including unemployment, decline in personal income (over more than 3 years), decline in gross state product, number of jobs destroyed, population loss and others. Our state rankings in tax burden and regulatory climate are uncompetitive. Our union culture seems hostile to those who have capital to build businesses and create jobs.

These facts alone would give Michigan a black eye. But then, there are the national headlines: historic bankruptcies and federal takeovers of Michigan firms, embarrassing political scandals in our largest city, chronic budget deficits and the failure of our highest state officials to even enact a state budget on time, forcing brief government shutdowns two out the last three years.

I don't think the millions of dollars the state spends on TV ads touting "the Michigan advantage" are fooling anyone.

Bad public policy didn't create all of Michigan's problems. But we can't fix the problems without better policies. No single policy change will be enough. Mackinac Center analysts recommend hundreds of ideas, large and small, that add up to billions of dollars in state savings and rejuvenated economic growth. Just because there is no single legislative "silver bullet" doesn't mean a legislative "bold stroke" is not also necessary.

Michigan doesn't just have economic problems; it has major PR problems. Michigan needs a big change that not only has significant impact on economic growth, but also captures national attention and says Michigan is serious about reversing its slide.

What would a bold stroke look like? Here are some examples:

• Pass a right-to-work law. Under right-to-work legislation, no worker could lose a job for deciding not to join or support a labor union. RTW is already on the books in 22 states.
• Eliminate one major tax. Michigan taxes personal income, business, retail sales and property ownership. States that do not levy all these taxes tend to outperform Michigan. Michigan should replace the tax with spending cuts recommended by the Mackinac Center and others.
• Bring government-sector employee benefits in line with private-sector benefits. Despite the conclusions of studies written by tax-funded university professors, public employees typically enjoy the kind of benefits that went out of style long ago in the private sector.
• Repeal the Public Employee Relations Act. This is the law that resulted in the near-universal unionization of government employees in Michigan. Some states forbid, or limit, unionization of government employees that already have generous civil service and tenure protections.

What if lawmakers want to start with a half-step toward one of these bold strokes? They could:

• Enact right-to-work for government employees only, or just public school teachers.
• Convert state employee health insurance plans to health savings accounts, or adopt an idea similar to Democratic House Speaker Andy Dillon's, which would put public school teachers and state employees on the same plan. This could save hundreds of millions of dollars annually.
• Repeal the "prevailing wage" law. The cost of this pernicious law appears in no budgets, but it increases the cost of everything the government builds from bridges to schools by hundreds of millions of dollars per year. Repeal it and unions would again have to compete with nonunion construction workers.

Sometimes, we're asked if repealing legislative term limits or converting to a part-time legislature would help. Perhaps, but evidence from other states is mixed.

My colleague Jack McHugh noticed a pattern when he was investigating whether states without term limits or full-time legislatures outperformed Michigan. But the pattern was not related to term limits or lawmaking schedules. States that tend to have the same kind of problems as Michigan have something else in common: oversized, heavily unionized government workforces.

You may have noticed that most of the "bold strokes" above are related to unions in some way. That's because when one starts down the path of free-market reform in Michigan, the major obstacle blocking the path is very often a law that favors unions or the political power of the unions themselves. Until our elected officials face this fact and deal with it boldly, other reforms will likely produce marginal results.

We aren't ready to precisely quantify unions' effects on public policy and our economy. But we do know unions are the one policy area Michigan politicians seem most afraid to touch. We also know Michigan's historic relationship with unions is almost in a class by itself. And we know how fast Michigan's fortunes are falling relative to other states. It's time for the real reform to please stand up. 

Joseph G. Lehman is president of the Mackinac Center for Public Policy.