1. Michigan’s Comeback: Where Do We Stand, Where Are We Heading? Robert Genetski Website: ClassicalPrinciples.com West Michigan Policy Forum

2. Outline 1.Michigan’s comeback 2.Economic freedom and growth 3.Characteristics of best performing states 4.Characteristics of worst performing states 5.Michigan’s policy mix 6.How Michigan can become a top performer

3. Outline 1.Michigan’s comeback 2.Economic freedom and growth 3.Characteristics of best performing states 4.Characteristics of worst performing states 5.Michigan’s policy mix 6.How Michigan can become a top performer

12. Outline 1.Michigan’s comeback 2.Economic freedom and growth 3.Characteristics of best performing states 4.Characteristics of worst performing states 5.Michigan’s policy mix 6.How Michigan can become a top performer

15. Economic Policies Promoting Freedom 1.Low tax rates 2.Government efficiently spending on essential public services 3.Allow markets to operate freely 4.Respect the rule of law 5.Promote overall price stability

16. State Policies Promoting Freedom 1.Low tax rates 2.Government efficiently spending on essential public services 3.Allow markets to operate freely Right to work legislation Avoid laws fixing wages and prices Minimize regulations 4.Respect the rule of law

17. Outline 1.Michigan’s comeback 2.Economic freedom and growth 3.Characteristics of best performing states 4.Characteristics of worst performing states 5.Michigan’s policy mix 6.How Michigan can become a top performer

25. Outline 1.Michigan’s comeback 2.Economic freedom and growth 3.Characteristics of best performing states 4.Characteristics of worst performing states 5.Michigan’s policy mix 6.How Michigan can become a top performer

26. Characteristics of Poorly Performing States Policies restricting economic freedom: – High and rising tax rates – Wasteful government spending – Onerous regulations – Forced unionism (no Right to Work law) – Large union penetration – Overburdening debt

31. Outline 1.Michigan’s comeback 2.Economic freedom and growth 3.Characteristics of top performing states 4.Characteristics of bottom performing states 5.Michigan’s policy mix 6.How Michigan can become a top performer

32. How Michigan Compares to Other States Tax burden Spending on Education Spending Infrastructure Public employees compensation Union members Debt

34. State Spending % Income: Michigan & US (2012) US Average Michigan $ difference General Exp. 14.4% 16.2% $6.9 billion Education 4.4 6.1 6.4 Welfare 3.6 3.9 1.2 Highways 0.8 0.6 -0.8 Source: US Census; 2012 Annual Survey of State & Local Government Finances

35. State Spending % Income : Michigan & OGL (2012) OGL Michigan $ difference General Exp. 12.9% 16.2% $12.4 billion Education 3.9 6.1 8.4 Welfare 3.2 3.9 2.8 Highways 0.8 0.6 -0.8 Source: US Census; 2012 Annual Survey of State & Local Government Finances

36. Wages & salaries per worker: 2012 US average Govt. Premium Private Nonfarm: $37,400 State & Local employees: $45,500 22% Federal civilian workers: $74,000 98% Michigan Private Nonfarm: $35,000 State & Local employees: $44,000 26% Federal civilian workers: $68,000 94% Source: Census; US Bureau of Economic Analysis, Regional Data

37. Compensation per worker: 2012 US averageGovt. Premium Private Nonfarm:$44,800 State & Local employees:$66,500 48% Federal civilian workers: $105,000 134% Michigan Private Nonfarm:$43,000 State & Local employees:$64,500 50% Federal civilian workers: $100,000 133% Source: Census; US Bureau of Economic Analysis, Regional Data

39. Worse States for Accumulating Debt Burdens on Future Taxpayers 1. Connecticut $48,100 2. Illinois 43,400 3. New Jersey 36,000 4. Massachusetts 28,000 5. Hawaii 27,000 6. Kentucky 26,000 7. New York 21,700 8. California 21,400 9. Michigan 19,300 ($6,000 lower than previous year) 10. Delaware 17,200 Source: Institute for Truth in Accounting; Financial State of the States, 2013

40. Takeaways for Michigan 1.Michigan is no longer the worst performing state, it’s closer to the US average. This is a major improvement. 2.We’re a high-tax, high-spending state. Given its income, Michigan’s annual government spending is $7 billion higher than US average and $12 higher than neighboring states. 3.Michigan’s state & local employees wages & salaries are well-above (26%) the state’s private sector workers. 4.Michigan’s state & local employees have pensions that are twice as large as the state’s private sector workers. 5.Given its income, the state has underfunded highway infrastructure by $800 million a year compared to other states. 6.State debt is high (9 th worse) but coming down rapidly

41. How to make Michigan a top performing state 1.Cut tax burdens to below US average - cut or eliminate all income taxes -pay down debt 2.Limit state spending to essential public services: - reduce public employee compensation - shift public employees to IRA pension plans - end corporate welfare - increase spending on highway infrastructure 3.Remove regulations that inhibit individual freedom - repeal minimum wage to increase real wages