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Original article URL: http://bridgemi.com/2013/02/snyder-tries-to-sell-long-term-investment-strategy-to-michigan/

Phil's column

Phil Power is founder and chairman
of the Center for Michigan.

Snyder tries to sell long-term investment strategy to Michigan

Give a man a fish, and you feed him a day; show him how to fish, and you feed him for a lifetime.

Gov. Rick Snyder unveiled his proposed state budget for the next two years last Thursday. If there is a core idea in his $50.9 billion budget message, it’s the distinction between investments (teaching people how to fish) and expenditures (giving people a fish).

It’s not for nothing that the name on the title page of the budget proposal was “Rick Snyder, CPA.” The governor is, indeed, a Certified Public Accountant, whose thinking reflects both his professional credential, as well as his background as a businessman and venture capitalist.

A core idea of capitalist economics is the difference between investing — in tangible things like new plant and equipment or in softer things like education and training. In both cases, the key idea is that over time investments bear a net positive return.

You build a new manufacturing plant or buy a new machine, you expect there will be a positive return on your investment (ROI). When you try to decide which particular investment to make, you very often pick the one with the greatest ROI. If investments are well designed, they reduce costs and increase productivity.

A careful look at Snyder’s budget shows its most creative and interesting elements are, in his words, “strategic investments to move Michigan forward.”

* What to do about our crumbling roads — the governor wants to invest $1.2 billion more in state funds per year for road and bridge repairs and construction — got the biggest media notice. This certainly will be the most difficult program to get through the Legislature, partly because $1.2 billion is a whale of a lot of money and partly because the gas tax and fee increases to pay for it will hit ordinary citizens hard in the pocketbook.

Especially with all the freezing and thawing over the past few weeks, we all know that we simply have to do something about our roads. Because the return on infrastructure investments takes a very long time to show up, it’s a hard argument to make to a political system that typically regards the long run as sometime next week.

* One aspect of the governor’s infrastructure program that deserves greater attention is the terrific opportunity to make Southeast Michigan into an international mobility and logistics center. Often given the shorthand title “aerotropolis,” the idea is to turn the underdeveloped land between Detroit Metropolitan and Willow Run Airports into an economic development zone and to link that with investments in freight handling and transit via rail, road and water.

Enthusiasts say that making Michigan the international gateway to the middle of America will pay off in tens of thousands of new jobs and hundreds of new, growing companies.

* Other elements in the governor’s budget are straightforward. He wants to boost state spending for schools, community colleges and universities by 2 percent. Coming after years of deteriorating support, investing more in the skills, talents and innovation capacity of our citizens — “human capital” — will without question yield an enormous long-term return.

Equally, covering 470,000 Michigan residents for Medicare — with the total tab picked up by the feds for a few years — makes sense because an investment now in the health of poor people will avoid increased health care costs in the future.

* Because I’ve been involved for more than a year in advocating for increased spending on early childhood education programs, this part of the governor’s proposals drew my greatest interest.

The Great Start Readiness Program (GSRP), the state’s pre-K system for 4-year-olds, has been getting a little more than $100 million a year, little more than a rounding error when compared to the $13 billion we spend on K-12 schools. Research shows poor and often minority kids who participate in GSRP are 25 percent more likely to graduate from high school than kids who don’t.

The governor wants to increase state investment on GSRP by $130 million, to about $240 million total by fiscal 2015. This will provide thousands of new slots for the 29,000 kids who qualify for the program but can’t enroll because there aren’t enough state-funded slots.

What’s the payout from this kind of investment? Big, if you look carefully at reduced grade repetition, reduced special education, less unemployment, reduced criminal behavior and other outcomes for young people who graduate from high school. Taking all these things into consideration, yields something near $350 million in long-term savings.

Snyder’s investment-oriented budget doesn’t just give our people fish; it gives us the ability to learn how to fish. It’s a far-reaching and courageous budget, and it deserves praise and support.

Editor’s note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics. He is also the founder and chairman of the Center for Michigan, a nonprofit, bipartisan centrist think–and–do tank, designed to cure Michigan’s dysfunctional political culture; the Center also publishes Bridge Magazine. The opinions expressed here are Power’s own and do not represent the official views of the Center. He welcomes your comments via email.

 

8 comments from Bridge readers.Add mine!

  1. Patricia Szczepanski

    Mr. Power, we are Michiganders! Now as to the Governor’s tax plan, most of my fellow citizens and I who reside here in the lower 50% of the average median income, are very much aware that WE will have to pay more in taxes to fix everything the Governor laid out in his State of the State speech. With the flat income tax, possible hike in the sales tax, less funding from our State for public education at the K-12 level (as well as college/university level), we are also very much aware of our local government tax increases are awaiting us as well. We do not need someone who is a former newspaper publisher and a U. of M. regent to continue to tell us we have to pay more for what we want. We are not stupid, sir. With all of the increases in taxes that my fellow Michiganders and I will be seeing and our wages stagnating because of our Unions being blindsided by the Governor and his fellow republicans, our ability to pay for any other costs to live here( utility fees, medical insurance, car registration fees etc..) will very much take any spendable income we would normally have for dinner out once in a while, vacations, movies, etc, away and pretty much make us indentured “workers” of the State of Michigan.

  2. Chuck Fellows

    “We have learned through our history that if you are hungry, if you are afraid, if you live without love and caring you will not learn.” P. Sahlberg. Finnish Lessons.

    Much of the “problem” with education is not how much we invest (not enough currently) but how we distribute the spending and the overbearing centralized control exerted by the MDE, politicians and all the special interests whose survival is dependent on spending done their way. (Publishers, testing companies, Academic specialists, administrative overhead . . . ).

    Instead of tens of millions (or more when all costs are included) for useless “census applied” standardized testing and central accountability schemes, already out of date textbooks (available for free or a nominal fee on line) and millions to consultant (to tell us what we already know over and over again), why don’t we spend some money on the children starting before birth? How about a little love and caring where it is needed the most?

  3. William

    Infrastructure spending will pay dividends; I support more charges for gas and road use to help with the Michigan Bridges and Roads.

    The transportation hub in SE Michigan is a terrific idea, so long as it doesn’t get hijacked by the union movement and “prevailing wages”.

  4. T.W.Donnelly

    In his first budget, Snyder gave $1.8 billion in tax cuts to corporations to “stimulate job creation”. Snyder reduced K-12 by a billion, and further gouged out millions for colleges out of the K-12 budget.

    Had Snyder not reduced those corporate taxes, there would be sufficient funds to repair the roads AND still fund K-12 education.

    So, I appreciate the increase in funding for pre-K as a sensible step for the proper development of the minds of children. But I don’t see the need for new revenue streams for road repair when give-aways to corporation came first. As a retired senior, I’m now paying about $1200. more on my 2012 income tax. I lost another 200.00 on the property tax rebate and another $100.00 from my contributions to public television. I am expected to pay an additional 120.00 for my license tabs on my birthday and 14 cents more per gallon on the gas I buy?

    Unlike Mr. Snyder, I am not a multi-millionaire living in a gated community, transported by a special security squad of State Police, sending my children to private schools.I don’t think that Snyder is operating in the best interests of the citizens of the State of Michigan other than Dick DeVos.

  5. Robert Gorsline

    As all Government programs, taxes that supposedly have a purpose are never given an “end of life” cycle. Their taxes just simply add to other taxes without any deadline. For example, Michigan use to have a 4% Sales Tax. Our Governor at the time said he will lower our Property Taxes and increase our 4% Sales Tax to 6% Sales Tax to help our School Systems in Michigan. Well, the 6% Tax took effect and the Property Taxes went down for only 6 to 12 months. Then they started back up again and went back to the original level after about 2 years. Thus now we have a 6% Sales Tax, original high level Property Tax, and our Michigan School Systems are failing. THEN they wanted to legalize the Michigan Lottery to help raise money for our Michigan School Systems. They legalized it and still was not enough. The Michigan School Systems are still struggling to have funding for them. So MONEY doesn’t solve a thing! Now they want to raise Gas Taxes to pay for road repairs BUT without any “lifetime deadline” for the extra taxes. Michigan is already among the highest paying taxes on gas. Yet our neighboring states, Minnesota, Illinois, Ohio, etc., are not paying as high a tax rate! Why doesn’t Michigan find out how THEY do it before coming to the Michigan Citizens for more money! Doesn’t that make more sense?

  6. Charles Richards

    There is no question that increased fuel taxes and registration fees will have a significant impact on lower income citizens and that is extremely regrettable. But what is the alternative? Sacrificing the future welfare of the state at large, including those with tight budgets. This is another unfortunate, but all too common, case of the interests of some individuals conflicting with the interests of the community at large. Surely, we should not sacrifice the long term common interest for the sake of a few.

    One of the hallmarks of successful societies is their ability to invest for the future. Communities with low discount rates tend, over the long term, to prosper much more than those with high discount rates. These are hard times for many people, and will work a real hardship on them, but investing for the future is essential.

  7. Duane

    Mr. Power is singing his one note song again, Money, Money, more Money. He talks easily about how business puts capital work based on ROI, but ignores that business holds those who spend that capital accountable for that ROI. When has Mr. Power ever mentioned holding those who spend those tax dollars accountable?
    When I think of education it is about academics and socialization. It’s about how we can help the kids to better learn the necessary academics and skills to be a contributing member of society. Mr. Power never seems to ask about if we are getting the education that taxes dollars are being spent on.
    If Mr. Power were more interested in learning rather than money, maybe we could find ways to improve learning without spending more. It could be as simple as extending the school day by an hour and make that a safe environment with volunteers coaching to help the kids learn by doing homework. An hour with no teachers just volunteers ensuring, is not about money, it is about learning. Mr. Power doesn’t even care if GSRP will be implemented effectively, he only wants to spend money on it.
    We have more and better educated retirees than ever before, I wonder if Mr. Power has ever thought past the money to think about that State resource, retirees that are willing to volunteer. I wonder how many retired business people, scientists, engineers, teachers, successful parents (now grandparents) would step forward to help kids learn, help the State improve other services.
    What we hear from Mr. Power is money, money, more money. It is disappointing we never hear from Mr. Power asking how and what we can do to change results, he seems to only see spending more on what we have been doing even when it doesn’t work.

  8. David Kessel

    Unfortunately, the Governor created a substantial amount of ill-will by signing off on the so-called right to work law . I agree that putting the question on the ballot was a mistake, but the lame-duck session of the Legislature was full of mistakes. Whatever the merits of Gov. Snyder’s proposal may be, this action is going to affect its reception.

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