The Detroit Lions stink. The Big Three can't do anything right. The State is a mess. Sound like a recap of 2008 headlines? It's easy to point out what's wrong and who's to blame. It's harder to come up with solutions and work to get them accomplished.
Winston Churchill, one of my favorite individuals, captured this sentiment in 1918 (a time when those in England thought it was the beginning of the end "as they knew it" as well):
"How easy to destroy, how hard to build. How easy to evacuate, how hard to capture. How easy to do nothing, how hard to achieve anything."
In 2009, we have to stop dwelling on how we got here and focus on what we're going to do about it. We can start by getting whoever is elected Mayor of Detroit focused on the basics: jobs, safety and services. We can create jobs by asking local leaders to put aside politics so regional development solutions, like the aerotropolis and university-driven economic development strategies, can get started. We can build the next Michigan by asking the Governor and legislative leaders to make reform of the budget, taxes and government their top priority.
Daniel Howes of the Detroit News correctly identifies that we've been living in a "Detroit Bubble" that has insulated us from the real world. The year 2009 is the year to burst that bubble in a good way.
Enough of the self-pity, 'us against them' mindset, and feelings of desperation that plagued us in 2008. 2009 is a new year and a time to start re-taking control of our own destiny.
Here's a few things we can do next year to start feeling like we're on the road to a true renaissance:
1. Tell Lansing we're ready for real change. Cut spending where we should (e.g.: corrections, employee benefits, health care, etc.), increase it where we need to (e.g.: higher education, transportation, etc.), restructure the entire Michigan tax system, and create real incentives to consolidate school districts and local governments.
2. Support candidates for the Mayor of Detroit. Ones that embrace regional solutions and understand that only when the City starts providing basic services effectively (e.g.: schools, security, lighting, trash, etc.) will the exodus of businesses and people turn around.
3. Embrace new. I'm not talking about forgetting who we are and where we came from. But, think about describing your hometown in new ways. Encourage your kids to look for jobs here at home with new companies. Help your company work in new ways.
We can either fight change or embrace it. If we embrace it, 2009 can be our "turn-around" year. Let's make it happen!
In spite of the tough economic times, Detroit Renaissance corporations committed $40 million to start a new venture capital fund - the Renaissance Venture Capital Fund. The Fund made its' first investment this week in Arboretum Ventures, an Ann Arbor-based VC firm specializing in medical device and health care investments. The ultimate goal is to increase the size of the Fund to $70-100 million in the next year.
Our own hometown businesses are betting on the future of the region - a "bullish" vote of confidence in Detroit.
Governor Granholm and the state legislature approved closing two state prison facilities as part of a package of Executive Order budget cuts this week. We would have liked to have seen additional structural reforms, like adoption of two-year budgeting, and elimination of onerous provisions of the Michigan Business Tax. But it was a start in the right direction.
For decades, Michigan has been a "donor state" - we've sent more of our money to Washington, D.C. than we got back in return. This transfer of wealth literally fueled the growth of the very same states whose Congressional leaders mock the plight of our auto industry. Examples include agricultural subsidies in the south, defense subsidies in the south and west and health care subsidies in the east.
So how does Washington react when Michigan needs help? Essentially, by offering a "lay-away" plan. Congress says they'll help after we submit a down payment (the detailed recovery plans they have requested from each auto maker) and make installment payments along the way (the auto companies must demonstrate month after month they are following through on their plans).
This week, the University of Michigan forecasted state budget deficits as great as $1 billion by 2010. These estimates don't anticipate the possible collapse of one of the Big Three automakers, the number of people coming off "buy-out" packages or the ripple effect of the economy on local government budgets.
Wouldn't this be the perfect time to develop serious proposals for reducing Michigan's 1500 (that's right - 1500!) local units of government, consolidating the 500 local school districts, adjusting public employee benefit levels to those in the private sector, or closing a few prisons? You'd think so. But as of today, there is no movement on any of those ideas or others that fundamentally restructure state government.
Worse yet, we heard this week that state officials were optimistic a federal bailout package for Medicaid and maybe some other state programs would solve most of the budget problem. This is "old Michigan" thinking - prolong the status quo.
President-elect Obama is embracing the opportunity to use the financial crisis to make change. You may not agree with every change he makes, but he understands that the old ways aren't working. Why doesn't Michigan embrace the same spirit?
Current revenue forecasts put the current year state budget at a $500-800 million deficit.
This comes AFTER the State increased taxes last year by nearly $1.5 billion.
This comes BEFORE we know what will happen to the fate of Chrysler and the rest of our auto industry.
This comes WITHOUT knowing how many of the thousands of auto employees who recently received buy-out packages will no longer earn income to pay the state income tax.
We could be looking at deficits in the billions.
We recently produced a report outlining ways of saving over $800 million/year in structural costs. But it will take time to fully achieve these savings and even they might not be enough. We need to enact all of those ideas plus many more.
While blue ribbon committee's are out of vogue, why not use them to identify prisons, community colleges, state universities and school districts that could be consolidated? What about reformulating revenue sharing and public education spending formulas to require a very high level of administrative efficiency (which only can be reached through large economies of scale) to receive the full state allocation? Everything has to be on the table. Is there a better time to get started on this work?
As I sit in North Carolina writing this Blog, I am struck by how different the emotional mood is here than back home. The whole country is feeling economic anxiety today and North Carolina is no exception. But North Carolina, a state I cited previously as a “benchmark” for Michigan to emulate, remains optimistic about its future. They believe their public institutions are largely doing the right things and their private leaders remain engaged to see things through.
The focus down here remains on economic development the “old fashioned way” – creating good jobs. There’s
a strong interest in rebuilding downtowns, transit, etc. But they focus on the fundamentals: maintaining a competitive business climate and cost structure, remain welcoming and appreciative of business investments, and build on the state’s assets that most impact the economy – higher education
and infrastructure.
It’s hard to have North Carolina’s optimism given what we seem to be experiencing every day. But if we can’t lift the negative emotional cloud that hangs over us, we will only make matters worse. So much in business is based on confidence in the future. Who will want to stay or move to a place where people are pessimistic about the future?
We can lift our spirits by getting engaged, not withdrawing from the public arena. The way to get Michigan back on track isn’t that complicated. Yes, it will take some time to get the economy growing again, but we know how to do it. Do we have the will
to fight back? If we don’t, who will?
A few weeks ago I wrote in the Detroit Free Press that we need to chart a uniquely Michigan Path to Prosperity instead of copying the strategies of other states. One pillar of the Michigan strategy is to reduce the cost of doing business.
Let's face it, we need to do something bold to jump start our economy. Here are some ideas we should be thinking about:
What if we adopted all the suggestions proposed in a Public Sector Consultants report we recently released and eliminate the MBT surcharge?
For the cost of revenue we appear to be giving up to lure temporary film production work, we estimate the state could practically make Detroit a tax free zone for new business investment. Wouldn't this have a greater economic impact?
What if we recognize the MBT isn't much better than the SBT it replaced and get serious about designing a new business tax system that really makes Michigan competitive?
What if we required a fiscal note for every new regulation proposed by a state agency or the legislature that increases the regulatory burden on business? Better yet, what if we placed a moratorium on all new regulation and conducted a statewide audit to peel back some already in place?
What if we adopted serious incentives for school district and local government consolidation and disincentives for failure to consolidate to reduce costs so that we can enable a more competitive tax structure?
Any of the above actions would immediately get national attention and increase business confidence in our state. Why not get started right now?
Yes, it has been another rough couple of weeks around our region. More auto cutbacks, unheard of market caps of our corporate icons, belt tightening everywhere.
But look closer and you'll see the signs of economic transformation.
Hundreds of people show up at a national conference in Detroit to hear how the creative economy can help re-brand our image and grow jobs.
The federal government seems to finally recognize our auto industry is critical to the nation's economic security.
The new North Terminal opens at Metro Airport giving our region the finest air gateway in America.
Automation Alley, Tech Town and the MEDC announce more new companies opening their doors or expanding - many you've never heard of before.
Oakland County forms a life sciences initiative to grow medical jobs.
Legislation gets introduced to attract business to the new Detroit Aerotropolis.
State legislators are actually talking about making meaningful cuts in Corrections spending and reducing business taxes.
A Cobo Hall deal doesn't seem too far out of reach.
Compare these developments with what's been going on in the past year. We've experienced a bitter fight over raising state business taxes, the Kwame Kilpatrick melodrama and the public "diss-ing" of the auto industry by national leaders.
Yes, it's been a rough couple of weeks. More are coming at us. But many of us are not letting events often outside our control stop forward progress.
