Mid-Michigan readers can hear Rick Cole every Wednesday at approximately 6:35 a.m. on Lansing radio station WILS 1320’s “am Lansing” program hosted by Walt Sorg.

Run it like a Business

by Richard Cole
October 16, 2009

I am getting tired of hearing that “we need a strategy to save Michigan.” We don’t need a strategy to save Michigan. We need a strategy to create a new Michigan — a strategy backed by real money.

Last month, Phil Power, the tireless promoter of Michigan, asked me to comment in his Center for Michigan e-newsletter on the status of the state budget process. My comment was relatively simple. It’s time to start running the state like a business.

That’s right. The first thing we need to do is to adopt that old saw that has been used against government “bureaucrats” for years. But we need to give it the new meaning it deserves.

One problem with the idea of running the state like a business is that there is a new organization of business leaders in this state that expects us to believe that some form of alchemy involving combining the ashes of an old state with the ground-up by-product of the castration of even more public services will — presto change-o — save the state from self-destruction.

This new group has formed out of the venerable Detroit Renaissance organization. I’ll give you the new web address in a minute. But I have to say that there is no business within the membership of this new statewide “business leadership organization” that could afford to pay its dues if the central strategy of its business plan were to cut its way to prosperity. Yet, this is exactly what it is demanding the state should do to itself.

Businesses grow when the leader has a big dream. Business leaders understand that growing a business means more than just surviving in the marketplace. Business doesn’t thrive on survival plans, and Michigan doesn’t need a survival plan either. Michigan needs an investment plan. That investment plan will begin with getting an already over-stressed population to cough up more taxes. That will not be easy, but it must be done.

Here is the notion being peddled by the modern-day nattering nabobs of negativism. The formula for this state to survive is by paving fewer roads; protecting fewer lakes; educating children with fewer teachers paid less; firing state employees and paying those who remain fewer dollars; hiring fewer police to protect us from the growing number of prisoners we are releasing. You get the picture.

This is as stupid an idea for running a state as it would be for running a business — unless, of course, your intention is to run the business into the ground. It’s a pipe dream in which otherwise smart people somehow think our state might hang on until the next crisis kills us off completely. This idea might be a lot of things, but it is not “running the state like a business.” And it’s not “conservative” either.

A conservative philosophy for running state government would be based on conserving what we have, and making sure that we leave our children with a state that’s in better shape than it was when we found it. A smart business leader is conservative, at least in this respect. He or she tells his or her employees that the only basis of long-term survival is to thrive — things either spiral up or they spiral down. And things don’t spiral up without the constant level of investment and reinvestment that comes from having a big dream for which you are willing to pay.

Now, along comes this new business group that believes it has the answer — “Five Steps to Top Ten Status.” You can read this “turnaround plan” at its website (http://www.businessleadersformichigan.com/michigan-turnaround-plan).

“Stronger financial management practices and right-sizing spending through structural budget reforms will get Michigan fiscally fit. Reducing the cost of doing business and making investments that leverage our assets will grow jobs for the future,” its leaders say in announcing the newly bottled statewide lobbying group. “Budget right-sizing is needed in the short-term because most structural reforms have long-term payoffs.”

We should “reduce the MBT to move Michigan significantly toward becoming a ‘Top-Ten’ state in lowest (business) tax burden.” (We are already placed at the mid-point of states ranked for business tax burden by the conservative Tax Foundation, and that includes an 11th-best ranking for low personal income tax.) And we can “change the tax structure,” they say, to “provide a more predictable and stable tax environment for business” and “to more closely match the changing composition of the economy.” And we can “eliminate the personal property tax” while we are at it.

Whatever practical recommendations this new group might have in its report get blown away by the irrational suggestion that this is the time we should be cutting state business taxes. It is as if this group believes anyone other than its membership is going to benefit from such largesse. And it is as if to say its business membership really wants to live in the kind of state fewer tax revenues will inevitably create.

This new lobby group insists that we can finance a Michigan turnaround through lower business taxes combined with further cutting our state’s civil service by up to 10 percent and, possibly, establishing in law that the wages of state employees must be set against an average state private-sector wage. This new business lobby rightly recognizes the inefficiency in the local control models that have created, arguably, an inordinate number of small governmental units and local public school districts. But I question whether its thinking will extend to advocating the elimination of the artificial borders that protect its members’ suburban enclaves from surrounding declining urban centers.

We are well past the point in time when we should tell those business leaders who want more business tax cuts “enough already.” Rather than advocating more tax cuts for business, these business leaders should be saying that “there’s no such thing as a free lunch,” and if we want the state to get well, we better hold the business taxes right where they are. “No more tax cuts,” is what they should be saying.

And then we need to tell these business leaders to suck it up and begin a campaign to take an additional percent or two out of our paychecks (and theirs) so we have the dollars to underwrite a workable investment plan for Michigan. That’s what one leader of business leaders did a half a century ago, and this head of a national manufacturers association headquartered in Detroit — George Romney — rode this income-tax based investment plan into the statehouse.

Our current strategy of attempting to cut our way to prosperity is no way to run a business, and it’s no way to run a state. We need these business leaders to understand a fundamental business principle, and to apply it to state government: “You can’t dig your way out of a hole.” More digging won’t help. We don’t need a deeper hole. We need to build a ladder.

So here’s the good news. Creativity is not iterative, it’s explosive. It happens in a void. And we do have a void. We need to think “big bang,” and understand that opportunity for change is created by the presence of absence. As nature abhors a vacuum, we are very close to reaching the “critical absence of mass” that might just make it possible to paint a picture of a new state worth investing in, and to invest in it before it’s too late.

A strategy to achieve a new vision of Michigan requires significant investment. We cannot get there with a continuation of the small-thinking, slash-and-burn politics of the business bureaucrats who are willing to do things to their state they would be unwilling to do to their members’ businesses. We need the business leaders to tell their hired guns to take a rest from crying for more business tax cuts. We need them to accept the painful reality that Michigan needs a significant injection of new money to create a viable future.

These are good people, smart people. Many are my friends. But they are wrong in thinking this is the time for a business tax cut.

Richard Cole is professor and chairperson of the Department of Advertising, Public Relations and Retailing at Michigan State University. The opinions expressed reflect his individual viewpoint and not that of the university.