Oh boy. Something is wrong with the Michigan economy, and democrats and a few republicans in that state have just made matters worse.
During the .com bubble of the 1990s states, like Michigan, found their profits soaring. The eyes of the legislature lit up, "Wow! All that money to spend..."
Instead of spending that money wisely, and encouraging people to save and invest, state legislatures, like the one in Michigan, spent that money like it was going to continue coming in forever. Then, when the .com bubble burst just prior to the end of the Bill Clinton presidency, these states found themselves running in the red.
This isn’t the first time this has happened in American history, as few of the mistakes our government makes are. However, some of us learn from our mistakes and some of us never do.
Yes well managed government programs can be a good thing. Yes we do need to pay some taxes. We need this money for essential government programs like repairing roads, educating kids, social services, etc.
Ultimately you reach a point of diminishing returns. Michigan hit that point when the .com bubble burst.
This happened because our elected officials see a needy group of people and propose to solve their problem with a new government program, rather than creating an environment which allows them to solve their own problems.
Which goes to the old saying that some people think they know what’s best for others and propose to solve their problems. When governments do this they usually make the problems worse.
These programs might seem good on the surface, but the burden falls on tax payers, both individual and businesses. The result being that not only do the needy suffer, but so too does everybody else.
When taxpayers reach the point they have no money left after paying their bills and their taxes, they start to hoard their money. The economy falls into a recession.
In the past 100 years, we have had many recessions from which to learn from. Some have fallen into depressions and some have been shortlived.
Historically, as I’ve mentioned in previous columns, the short lived recessions are the ones where our government leaders relieved individuals and businesses from the burden of taxes.
George Bush understood this when he cut taxes. Overall, the economy in the United States is doing very well right now as a result.
"But...but if you cut taxes you will make less money for the government. We will have to cut programs."
The truth is, as history has proven, with sound economic policies which include tax cuts and eliminating wasteful government programs, governments have made more money with tax cuts than with tax increases.
And, by doing this, essential programs that remain can shine.
Harding, JFK, Reagan and Bush 42 all proved this.
The poor economy in Michigan is the result of overspending, overtaxing and overregulating businesses.
When taxes are raised again and again in order to support more and more government programs, the burden ultimately becomes too high for these businesses and they move to a more friendly environment or close their doors all together.
So, by cutting taxes, Bush did his part, now it was up to the states to do theirs. They needed to cut their own taxes, cut wasteful state programs, and create a good economic environment in their respective states as Bush did with the Fed.
While most states did this, Michigan did not.
What did Michigan do? Nothing. It continued to spend and spend. Thus, many of these once in the red states were now thriving, and Michigan continued to run in the red. Now Michigan is or is very close to being the worse economy in the United States.
A republican legislature had four years under the leadership of Governor Granholm to create a friendly economic environment in Michigan, but they refused to do anything that might create this friendly economy. They refused to stop taxing the people and businesses, and they refused to cut taxes.
The current democratic house, republican run Senate and a liberal Granholm in her second term continued to do nothing to help the burden on businesses and the good people of Michigan.
That, my friends, is what led to the crises that nearly led to a complete state shutdown this week.
To avoid the shutdown, Governor Granholm demanded that taxes be increased, and demanded that a 6% sales tax be expanded to many services, something business associations were adamantly opposed to.
Taxes on the people are already so much that people can hardly afford to pay their bills, so now the Michiganders will have to fork out even more money. This further sets the table for economic doom.
The same holds true for recruiting new businesses to come into Michigan. Why would any business come here when they know right away that the economy in most other states is freindlier on businesses than Michigans.
Economics 101 has proven over and over again that the best way to stop a recession is to lower the burden on the people and businesses by lowering their taxes. The money businesses do not give to the government they spend on building and new equipment, and this ultimately leads hiring more workers. Each one of these workers is a new taxpayer.
New businesses come into town because of the incentive of low taxes, and they too spend on new buildings and equipment and hire workers, all of whom, you guessed it, pay taxes.
And, by creating new taxpayers in this way, good and sound tax cuts can generate more money than tax increases.
Because it was clear that Granholm had no clue about economics 101 when her 1st term ended, I encouraged my friends not to vote for her. They did,however, and now we all have to pay the price -- literally.
While Michigan will not face a state shutdown for the time being, the tax hike Granholm petitioned for will in no way improve the economy in Michigan.
Until we get new leadership that understands how to run our economy, Michigan will be a sound example to all of the United States what will happen if Washington becomes more liberal.