China has become the political bogeyman during elections in Michigan.

Democratic candidate Virg Bernero as well as Congressman Mark Schauer have both used the country as a dig at their opponents.

Yet, James Hohman of the Mackinac Center for Public Policy says what is being ignored is the good that trade with China has done for the state of Michigan.

According to Hohman's research:

• The Chinese now buy more Michigan products than France and the United Kingdom combined. China is behind only Canada and Mexico as a market for Michigan goods.
• This has been a recent development. In 2000, China had only purchased $212 million in Michigan products. This grew to $1.3 billion in 2009. Michigan is on pace to export more than $2 billion this year.
• Michigan is surpassing national growth rates in trade to China. Total U.S. exports to China rose 35.7 percent for the first half of the year, and Michigan's exports to China rose by 120 percent. Since 2000, total U.S. exports to China rose by 326 percent, while Michigan's exports to China grew by 530 percent.

"How many other economic trends has Michigan beaten the national average? I can't think of any," wrote Hohman, a fiscal policy analyst, in an e-mail. "Politicians love playing on people's fears that their jobs will disappear to low-wage China. But the exponential growth of exports to China shows that Michigan firms are able to compete and thrive in the world marketplace. Trade with China, in fact, has been one of the few things going right in the state economy."

Yet, Schauer has campaigned on the state of Michigan losing 67,800 jobs including 4,700 in the 7th Congressional district, due to unfair trade with China. Schauer is up against GOP candidate and former Congressman Tim Walberg.

"For years we have watched our country's trade deficit with China grow due to unfair practices like currency manipulation, and this bill will force China to play by the rules," said a Schauer press release announcing new trade regulation. "It's time we stopped shipping our jobs overseas, and I'm committed to helping American businesses and manufacturers create jobs here at home for our workers, not workers in China. China has a long history of suppressing the value of its currency to make exports cheaper than they would be if it allowed its currency to be set by the market."

Doug Bandow, senior fellow at the Cato Institute, specializes in foreign policy. He said that no one knows the "right" value of currency.

"It seems strange for a policymaker to argue that it would be better for Americans to pay more for everything they buy from China. I doubt many people would complain if OPEC was selling oil extra cheap. The fact that the Chinese government may be hurting its own people is no reason for the U.S. government to hurt American consumers. Our economy will grow faster and produce more jobs if we take advantage of the mistakes of other nations rather than let U.S. politicians arbitrarily intervene for their own electoral advantage. China long has been a major supplier of U.S. markets. As it grows in wealth, China is becoming an increasingly important market for U.S. products. Michigan is one of the beneficiaries of growing Chinese demand. In this way trade is demonstrating yet again that it is an important job-creator for Americans."

While running for governor, Bernero has tried to use his opponent Rick Snyder's ties with China against him.

Bernero has attacked Snyder for a company he invested in opening up an office in China.

"Who's side is Rick Snyder on?" a Bernero press release stated.

Anthony Randazzo, director of economic research for the Reason Foundation, said in an e-mail that Michigan was built on exporting cars throughout the country and then the world and politics shouldn't stand in the way of Michigan returning to the growth model.

"In an economy where housing will be slumping for the next several years and consumers are more focused on paying down debt than returning to their free spending ways of the past decade, the biggest bright spot is the potential of increased exports," Randazzo said. "There is not a lot of investment in the U.S. economy today because banks and private equity are facing a mountain of new regulatory requirements and the threat of increased taxes. But investors are willing to open up their vaults to good ideas. The more Michigan businesses focus on expanding their exports, and are able to demonstrate growing foreign demand, the more cash will flow into the Wolverine State. Michigan is a state that was built on exporting cars across state lines throughout the country and then the world."

Michigan Capitol Confidential reviewed some of the past job projections on the state's economy by the University of Michigan's Research Seminar in Quantitative Economics (RSQE) and how some have been incorrect about job growth in the last eight years.

Two University of Michigan economists responded to the article in e-mails posted below.

U-M Economist George Fulton, director of RSQE:

"We do document our forecast record yearly for our primary forecast release, which occurs each November at our annual Economic Outlook Conference. By the way, we are the only forecasting organization of which I'm aware that does so. The data cited are based on the annual change in calendar-year averages, the most standard method of presenting these data.

In the period between 1982 and 2000, we correctly forecast the direction of job change for every succeeding year.

In the eight years since 2001, (i.e., 2002-2009, inclusive), we have correctly forecast six years of job decline for the succeeding year, and twice have incorrectly forecast modest job gains for the succeeding year. The two years where we forecast modest job gains (0.8 percent for each year) were 2004 and 2005, when the smallest losses of the decade subsequently occurred (0.4 percent and 0.2 percent, respectively). This was a time of cyclical job recovery in the nation, and the Michigan economy did suffer much smaller job losses then, but structural difficulties among the Detroit Three automakers held back growth from moving into positive territory for the state.

Although we have correctly forecast job loss during most of the decade (an unprecedented run of job loss for the state, by the way), the losses have tended to be more severe. This is particularly the case for 2009, when we forecast the largest job loss the state had ever seen, but were still too light on the losses-as was everybody else, including forecasters of the national economy.

Last November, we forecast a job loss of about two percent for 2010. With eight months of data now reported, it appears that we will indeed lose jobs again this year, but at a smaller rate-around one percent.

I hope that this gives you a broad perspective of our forecast record."

U-M Economist Don Grimes, senior research area specialist RSQE:

"Forecasting is a tough business. The difference between most forecasters and RSQE is that RSQE puts out forecasts on a regular basis, thus their accuracy can be tracked, while most forecasters put out their numbers on a more ad hoc basis. RSQE, in fact, every year as part of their November forecast reports on the accuracy of their previous years forecast.  I have never seen any other forecaster acknowledge their errors on a regular basis.

People need forecasts to make decisions. That includes both businesses and governments.  The two ways forecasts are made are "educated" guesses and structural models.  All of the structural models incorporate educated guesses as well.  The problem that structural models have is that they are predicting the future based upon some historical relationship (educated guesses tend to incorporate some sort of informal mathematical relationship as well). For example, the history in the U.S. up until about 2000 suggested that if U.S. vehicle sales increase by 10% than employment in the auto industry in Michigan would go up by 8% (balance reflects productivity gains).  The problem is when this historical relationship breaks down.  Auto sales go up, but they are all by imports/transplants and so Michigan's employment doesn't increase.

The 2000s, seem to have been a period where a lot of the historical relationships are breaking down, at least temporarily, not just in Michigan and not just with respect to the auto industry, but nationally and with a lot of markets. For example, with mortgage rates this low, the historical relationship would suggest that housing sales should be booming, but of course they are not. Other unincorporated (and often immeasurable) features are holding sales back, but would it be appropriate to assume that the market will never boom if interest rates stay this low?  That seems illogical to me.

So if people have to have forecasts then it seems to me that you have to eventually incorporate mathematical historical relationships, which should generate a reasonable set of forecasts in the long-run. Unfortunately the models can generate inaccurate forecasts in the short-run, especially when the historical relationships are breaking down.

RSQE's state of Michigan forecasts over the past decade have tended to be too optimistic, as they acknowledged every year, but that is because all of the historical evidence in the post World War II period would have said that when the national economy was growing the Michigan economy (as measured by jobs) would be growing.  In sum, during this past decade, Michigan's economic performance was decoupled from the national economy.

Ironically those old historical relationships may be returning in 2010, so far employment in Michigan has been behaving more like the 1950-2000 period than the 2000-2009 period with respect to the nation.  You will want to check this, but I think the Nov. 2009 RSQE forecast for employment in Michigan in 2010 looks like it was slightly too pessimistic so far this year.

It is very easy to criticize forecasting errors in hindsight, but critics who haven't systematically laid out their own forecasts and opened themselves up for similar assessments are nothing but a bunch of Monday morning quarterbacks. I have a lot more respect for critics who put their money (or in this case their forecasts) where their mouth is than those who only complain about someone else's forecasts in hindsight, and you should too.