Still Addressing the Economy

by Gongwer News Service
January 01, 2010

Governor Jennifer Granholm’s final State of the State address is set for Wednesday, February 3. We can guess that much of it will deal with the state’s ongoing economic malaise, the unfortunate condition she has had to deal with during her entire tenure.

It will also mark four years, roughly, from what will go down as — unfortunately for the governor — her most memorable and quotable remark during a State of the State address: the 2006 statement that the state’s economy will be so altered that in five years the state would be “blown away.”

State of the State addresses rarely result in memorable positive statements, to the misfortune of the governors having to deliver them. One of former Governor John Engler’s best known comments came in his first address, when he vowed the state would not see General Motors close its Willows Run plant, only to learn shortly after that GM was closing the plant. At former Governor James Blanchard’s first State of the State, his announcement that the state would have to seek an income tax increase was greeted with silence broken only by the solo applause of former Sen. Basil Brown.

The “blown away” comment, joined later that year by Ms. Granholm’s assertion that she was “thrilled” with the progress her economic plan was making, became a constant Republican theme during the 2006 election. As the state’s economy struggled further and collapsed with the world’s economy, it still shows up in partisan digs, especially on Facebook and Twitter postings. Should Lt. Governor John Cherry Jr. be the Democratic nominee for governor in 2010, count on the “blown away” comments being replayed throughout the campaign.

There’s no question that the comment was a political flub, Ms. Granholm’s equivalent of former President George W. Bush’s “mission accomplished” banner. But what made it a flub, and why did she say it in the first place?

Why it was a flub is obvious and evident: the state’s economy collapsed further. With 2009’s unemployment rate bound to average somewhere above 12 percent, we would be desperate to have back the 2006 unemployment average of 6.9 percent.

Could Ms. Granholm have had any inkling of the severity of the ongoing collapse when she promised a blowing away? No. No one did. The dimensions of the upcoming collapse were so dramatic, so total and so novel that virtually no one could have anticipated how bad things would become. The economic collapse of 2007-09 was triggered largely by real estate, by the collapse in housing, the record number of defaults. One literally has to go back nearly two centuries to find similar collapses triggered by land speculation.

And it is time finally to face political reality on the dimensions of the economic collapse. For all the hyperbole that cutting taxes and cutting spending would therefore assure economic success is nonsense. How would have cutting state taxes in any way made General Motors better manage its company, better design and build cars, better sell them so it did not end up in bankruptcy? How could cutting taxes have prevented record home foreclosures and collapsing home values? Or blocked massive energy cost increases that forced people to curtail spending?

This is not to say that state fiscal and economic policies are impotent in terms of boosting a state’s economy. In normal economic times they can be a big incentive to a state’s fortune. These were not normal economic times. What we have and are enduring is a major systemic failure that even national governments had trouble controlling. The best any state could hope for in this tsunami was to hold on and manage as best as possible.

Not often considered, however, was whether there was any reason for Ms. Granholm to make the “blown away” comment in the first place. The answer is: sort of.

Remember that the state had already struggled with five years of recession. It needed a positive jolt to the system, it needed hope and some optimism. And, in fact, there was actually reason to think the state had finally approached a corner it could turn. Job losses had shrunk dramatically in the previous two years. State revenues had grown. The stock market was strengthening. The national economy was firmly in recovery and there was reason to hope Michigan would catch up. In addition, Ms. Granholm and her economic team had settled on the dimensions of a policy calling for development in alternative energy, bio-sciences and other industries.

It was reasonable, and proper, for Ms. Granholm to be positive in her 2006 address. Even then she should have been cautious in expressing optimism, but the governor likes to speak in broad strokes and scumble the words later.

We can still hope that in a year we will be blown away by economic developments. We know it is unlikely, but we can hope. We’ll certainly think about it during the governor’s final State of the State.

For nearly 50 years in Michigan, Gongwer News Service has provided independent, comprehensive, accurate and timely coverage of issues in and around Michigan’s government and political systems. For subscription information, including a free trial, visit Gongwer online.