Labor-state gets roadmap for economic revival

Mackinac Center Fiscal Policy Director Michael D. LaFaive Thursday called on Michigan policymakers to make transformational, market-friendly policy changes their top New Year's Resolution for 2008, warning that to do otherwise would all but guarantee continued loss of jobs and population.

"We were already at or near the bottom of many important economic rankings before the Legislature piled on $1.4 billion in new taxes," said LaFaive. "Does anyone really believe this hike will make Michigan more attractive to people and business?"

Indiana does not think so. The state has posted billboards along interstates near the border encouraging passers-by to come to Indiana if they're tired of high taxes and high business and housing costs.

Indiana is also running radio ads in Michigan and Illinois with the same message. They may have a compelling reason to do so. A new study by economists Arthur Laffer and Stephen Moore shows that record numbers of Americans moved last year and they tended to move south and west - to states with generally favorable tax and labor climates, among other things.

"People are everything to economic growth," noted Center adjunct scholar Michael Hicks. "They produce, they consume and they invest. As people move, they take their talents and energy with them. Every time people move they reveal their relative preference for other states."

In a new essay, "Michigan's Diaspora: A Revealed Preference for Leaving," LaFaive and Hicks argue that state policy must change to make Michigan relatively more attractive.

If changes are not made, they wrote, the state may need to change its motto from "If you seek a pleasant peninsula look about you," to, "If you seek a pleasant peninsula, move to Florida," which is where many Michigan residents are in fact moving.

The authors cite the latest United Van Lines data showing that through October, 66.4 percent of the company's 2007 Michigan client traffic was outbound.

The all-time record was set in 1981 at 66.9 percent, a year when the state averaged 12.5 percent unemployment.

"Our current unemployment rate of 7.7 percent is currently highest in the nation, but that figure is actually masked by our ability to export job seekers to states with greater economic opportunity," said LaFaive.

The authors recommend that Michigan become a right-to-work state, lower the regulatory burden and cut taxes as ways to stem the flow of jobs, people and opportunities to other states.

The essay can be found at: www.mackinac.org/9159


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