charles l. ballard department of economics michigan state university east lansing, mi...
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Michigan’s Economy: Past, Present, and Future Presented to: Winning the Debate: How to Talk About the Public Sector and Our Unions April 5, 2011. Charles L. Ballard Department of Economics Michigan State University East Lansing, MI [email protected]. - PowerPoint PPT PresentationTRANSCRIPT
Michigan’s Economy:Past, Present, and Future
Presented to: Winning the Debate: How to Talk About the
Public Sector and Our Unions
April 5, 2011
Charles L. BallardDepartment of EconomicsMichigan State University
East Lansing, [email protected]
Manufacturing’s Share of the Economy Has Shrunk Dramatically
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
0
10
20
30
40
50
60
Manufacturing's Share of Gross Product, for Michigan and for the United States, 1963-2009
Michigan
United States
Year
Perc
ent
The unemployment rate in Michigan has now decreased for 17 consecutive months.
There is good reason to hope that the worst is over.
Despite our struggles, Michigan is not a poor place.
If we want to educate our children properly, and provide other public services, the resources are there.
1929
1934
1939
1944
1949
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Inflation-Adjusted Per-Capita Personal Income, In Michigan and the United States, 1929-2009
Michigan
United States
Year
Per-C
apita
Per
sona
l Inc
ome
(in 2
009
Dol
lars
)
Although Michigan is not a poor place, there are poor people in Michigan, and incomes are distributed much more unequally than they were 35 years ago.
The United States Has Returned to a Degree of Income Inequality Not Seen For 100 Years
0
2
4
6
8
10
12
Percentage of Income in the United States Received by the Top One-Tenth of One Percent of Households, 1913-2007(Source: Thomas Piketty and Emmanuel Saez)
Year
Perc
ent
In the United States, those with the very highest incomes have done EXTREMELY well
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
0
1
2
3
4
5
6
7
Percentage of Income in the United States Received by the Top One-Hundredth of One Percent, 1960-2008
Including Capi-tal Gains
Excluding Cap-ital Gains
Year
Perc
ent
Michigan Has Big Regional Differences in Per-Capita Income (2008)
1. Oakland County $53,650 2. Midland County $41,990 3. Leelanau County $40,656 4. Washtenaw County $39,107 7. Macomb County $36,462 13. Kent County $35,099 Michigan Average $34,953 15. Ingham County $33,685 23. Wayne County $32,094 34. Saginaw County $30,143 43. Genesee County $29,488 68. Ionia County $25,371 83. Luce County $22,158
The Decline of Labor Unions is An Important Reason for the
Increase in Income Inequality.
The Structural Deficit:
None of the major sources of revenue for state and local governments in Michigan keeps up with the economy.
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
0
5
10
15
20
25
30
35
40
45
50
Percent of the Labor Force Who Are Union Members, In Michigan and the United States, 1964-2010
(Source: Barry Hirsch, David Macpherson, and Wayne Vroman)
Michigan
United States
Year
Perc
ent
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
0
5
10
15
20
25
30
Percent of the Private-Sector Workers Who Are Union Members, In Michigan and the United States, 1983-2010
MichiganUnited States
Year
Perc
ent
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
0
10
20
30
40
50
60
70
Percent of Public-Sector Workers Who Are Union Members, In Michigan and the United States, 1983-2010
MichiganUnited States
Year
Perc
ent
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
0
10
20
30
40
50
60
70
Percent of Michigan Workers Who Are Union Members, 1983-2010
Public Sector
Private Sector
Year
Perc
ent
Also, although Michigan is not a poor place, our economy has not grown as fast as the national average.
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
85
90
95
100
105
110
115
120
125
Per-Capita Personal Income: Michigan As Percent of the United States, 1950-2009
Year
Perc
ent
Many of the most successful states have been those with high levels of educational attainment.
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
85
90
95
100
105
110
115
120
125
130
Per-Capita Personal Income in Massachusetts and Michigan, As Percent of the United States, 1950-2009
MassachusettsMichigan
Year
Perc
ent
At a time when education is so crucial to our future, Michigan has pursued a policy of systematic disinvestment in education.
1959
-60
1962
-63
1965
-66
1968
-69
1971
-72
1974
-75
1977
-78
1980
-81
1983
-84
1986
-87
1989
-90
1992
-93
1995
-96
1998
-99
2001
-02
2004
-05
2007
-0810
20
30
40
50
60
70
80
Sources of Funds for Michigan State University, 1959-60 to 2009-10
Tuition & Fees
State of Michigan Appropriations
Year
Perc
ent
In order to be equivalent to the real budget reductions of the last eight years, we would have to cease state support for:
Eastern Michigan, Ferris State, Grand Valley State,
Lake Superior State, Michigan Tech, Northern Michigan, Oakland, Saginaw Valley State, UM-Dearborn, and UM-Flint.
• Michigan is Underinvested in Education, Training, and Skill,
From Pre-School to Ph.D.
• In addition to the big premium for a Bachelor’s degree, the social returns are very large for
(1) early-childhood education, and
(2) high-school completion.
State and Local Taxes As Percent of Personal Income:
• Michigan used to be above the national average, but is now below
• The national average has fallen substantially
Tax Effort Has Reduced Substantially
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
7
9
11
13
15
17
19
State and Local Taxes As Percent of Personal Income, 1972-2008
New YorkMichiganUnited StatesTexas
Year
Perc
ent
State Revenues Have Fallen FAR Below the Constitutional Limit
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-10
-8
-6
-4
-2
0
2
-0.600000000000001
0 0.2
-2.4
-3.9 -4.2 -4.4 -4.2-4.9 -5.3
-4.7
-8.0-8.9
Deviation of Michigan Revenues from Constitutional Limit (the "Headlee Limit")
Fiscal Year
Dev
iatio
n fro
m C
onst
itutio
nal R
even
ue L
imit
(In B
illio
ns o
f Dol
lars
)
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
State Government Employment in Michigan, Fiscal Years, 1970-2010
All State Employees
All But Correc-tions
Thoughts on Gov. Snyder’s Budget Proposals
Moves toward a more level playing field among sectors.
Continues the trend toward greatly reduced public services.
Reduce business taxes.
Moves toward a more level playing field among sectors.
Exacerbates the budget deficit.
Hack away at the thicket of business tax credits.
(This also moves toward a more level playing field among different sectors, and it raises revenue.)
Reduce the preferential treatment of retirement income.
(This moves toward a more level playing field among different sources of income, and it raises revenue.)
Slash funding for K-12 schools.
Slash funding for higher education.
Slash revenue sharing for local governments.
Eliminate the Earned Income Tax Credit.
Other Potential Sources of Tax Revenue:
• Extend the sales tax to services and entertainments.
• Establish a graduated income tax, or at least raise the flat rate of the current income tax.
• Decouple from the Federal Estate Tax, so that we can once again collect estate taxes.
• Convert the excise taxes on beer and wine to a percentage basis, and/or return them to earlier levels.
Better Attitudes for a Better Michigan
• A Culture of Lifelong Learning
• Innovation and Entrepreneurship
• An End to Bitter Partisanship
• A Positive Attitude, to Keep Going Through Difficult Times
Michigan, My MichiganA song to thee, fair State of mine,
Michigan, my Michigan.But greater song than this is thine,
Michigan, my Michigan.The whisper of the forest tree,The thunder of the inland sea,Unite in one grand symphony
Of Michigan, my Michigan.