Michigan: "A+" for Public Relations, "F" for Economic Growth

In the face of their failure to reverse an economic decline that's been underway for an entire decade, Michigan politicians are perennially desperate for ways to show they're "doing something" to fix the problem. The approach they've mainly adopted is a massive expansion of discriminatory tax breaks and subsidies for particular firms selected by state bureaucrats or political appointees. Perhaps the most public face for this strategy is provided in the "Upper Hand" advertisements from the Michigan Economic Development Corp., featuring actor Jeff Daniels.

The failure of such programs has created another political need, which is a way to demonstrate that this approach really isn't a massive waste of time and money.

Enter the annual Governor's Cup ranking by Site Selection magazine, which is considered the "company paper" for economic development bureaucracies around the country.

A leader in creating such bureaucracies — if not in actual economic growth — Michigan has done very well in these rankings, placing in the top 10 every year, and our politicians are often eager to spread the word. For example, here's Gov. Jennifer Granholm trumpeting Michigan's second-place ranking in the 2005 Site Selection, as reported by the Gongwer news service (subscription required):

"This is a remarkable showing for Michigan that speaks directly to the effectiveness of our strategy for attracting new business and new jobs to the state. Although it is great to be recognized as a national leader, what's truly important is that these expansions result in thousands of jobs for Michigan workers."

The only problem with this outstanding record is that it generates a sense of cognitive dissonance for taxpayers, who wonder, "How can we be doing so well if we're doing so poorly?" The source of the dissonance is clearly illustrated in the accompanying chart.

It's easily explained, however: It all depends on what you measure. If it's economic performance, Michigan can't get much lower; throughout this decade, Michigan placed at or near the bottom in employment and gross domestic product growth, and at the top in unemployment rate.

However, if what you measure is how energetically bureaucrats hype big facilities — a relatively tiny handful of such facilities compared to the size of this or any state's economy — Michigan ranks right up at the top: Site Selection proves it!

Awarding selective tax incentives is more about giving politicians stories of good economic news. Real reform would focus on changing the overall tax, labor and regulatory climate to promote growth for all businesses, not just those few lucky enough to get Lansing's blessing.

This issue of The Lowdown was written by James M. Hohman, a fiscal policy analyst at the Mackinac Center for Public Policy. He may be reached at hohman@mackinac.org.

Two important court cases, one before the U.S. Supreme Court and another that may come before Michigan's Supreme Court, could drastically impact the rights of beachfront property owners. In both cases, a governmental unit is trying to claim title to a portion of the land that would deprive the owner of access to the water.

The U.S. Supreme Court case is Stop the Beach Renourishment v. Florida Department of Environmental Protection and was argued in December. In that case, the court was faced with the question of whether a state court decision had improperly permitted the State of Florida to wedge — through a replenishment program meant to repair damages due to hurricanes — a strip of land between beachfront property owners and the ocean. Some justices questioned if this was allowed, and if there would be anything that would prevent the state from creating a wedge to allow for increased spring break tourism.

The case also raised the issue of state judicial takings. The federal courts already recognize that actions by state executives or state legislatures can constitute takings that require compensation. To date, the U.S. Supreme Court has not addressed whether a decision by a state court that so upsets traditional property rights — perhaps like the Michigan Supreme Court's decision in Glass v. Goeckel allowing a heretofore unrecognized right to beach walk on private property — would also constitute a taking.

The Michigan case is 2000 Baum Family Trust v. Babel. The Michigan Supreme Court is currently considering whether to review the Michigan Court of Appeals' decision. The lower court was faced with the question of whether beachfront owners who have a county road between their home and the water have "riparian rights," including the right to place a dock in the lake.

The Court of Appeals held that the test to determine riparian rights depends on whether the road was created via a statutory dedication or at common law. A common law road maintains riparian rights for the owner. A statutory dedication, however, only maintains riparian rights if those rights are expressly saved in the dedication, otherwise the riparian rights are with the public. This latter situation will undoubtedly come as a surprise to many "lakeside" property owners.

Beachfront property has long been highly valued because it affords owners the right to access the water. But as the public's demand for access to the water grows, the courts have slowly eroded traditional property rights. Hopefully, the U.S. Supreme Court will at least require that the owners be compensated when the courts do so.

Patrick J. Wright is the senior legal analyst at the Mackinac Center for Public Policy where he directs the Mackinac Center Legal Foundation. He may be reached at wright@mackinac.org.