 Originally published at Mackinac Center.
Michigan’s economic health and fiscal policies are critical for its future prosperity. Understanding where the state stands in various economic freedom measures can help identify areas for improvement and guide policy decisions. Fraser Institute Rankings The Fraser Institute publishes the Economic Freedom of North America index, which evaluates how states' policies support economic freedom. The index considers three main areas: government spending, taxes and labor market regulations. Higher scores indicate greater economic freedom. In the latest report, Michigan ranks 31st in economic freedom among U.S. states. This ranking reflects areas where Michigan lags in supporting economic freedom and highlights opportunities for policy improvements. Government Spending: This component measures the size of government relative to the economy. Lower government spending relative to GDP indicates more economic freedom. Michigan ranks 28th, suggesting a need to control spending better. Taxes: This component assesses the impact of taxes on economic incentives. Higher tax burdens discourage investment and economic activity. Michigan ranks 19th, indicating room for tax reforms to enhance economic freedom. Labor Market Regulations: This component examines labor market regulations, such as minimum wage laws and forced membership in a labor union. Stricter regulations can reduce economic freedom by limiting the flexibility of labor markets, thereby making it more difficult for employers and employees to find the best fit for each other. Michigan ranks 38th, so improving labor market regulations can help Michigan enhance its economic freedom ranking — improving opportunities for employers and employees alike. Economic Factors Labor Market: The latest BLS data shows Michigan’s unemployment rate is 3.9%, the same as the U.S. rate. But the number of employed persons increased by only 0.9% over the past year, half the national growth rate of 1.8%. The slower hirings highlight the need for more job opportunities from faster economic growth in Michigan. Employment Trends: According to the Michigan Labor Market Information, the state has seen slow employment growth, with particular struggles in industries such as manufacturing and financial activities. This emphasizes the need for pro-growth policies to make it easier for businesses to grow, leading to more and better-paying jobs. Labor Force Participation Rate: Michigan’s labor force participation rate — the share of people ages 16 and over working or seeking work — is 61.7%. That’s lower than the national average of 62.3%. If you, as a consumer, find fewer employees when you need to talk to someone at a business, that’s an example of why the participation rate matters. Wage Growth: Wage growth in Michigan has been slower than the national average, affecting the economic well-being of its residents. Path to Improvement Tax Reform: Lowering tax rates can support economic growth and attract business investment. Reducing the state income tax and exploring other tax reforms can make Michigan more competitive with other states. A more favorable tax environment can increase business activity, job creation and wages. Regulatory Efficiency: Streamlining regulations can reduce the burdens businesses face. By simplifying regulatoryprocesses and reducing bureaucratic hurdles, Michigan can make it easier for businesses to start and grow, leading to a more vibrant economy with more goods and services available. Spending Discipline: Implementing strict budgetary controls can ensure that spending growth does not exceed the combined rate of inflation and population growth, maintaining the state government’s fiscal stability. Michigan can achieve long-term fiscal health by focusing government spending on areas with the largest impact and eliminating wasteful spending. Labor Improvement: Reinstating a right-to-work law will lead to more jobs. By addressing its economic and fiscal policy weaknesses, Michigan can improve its rankings and create a more robust and dynamic economy. Sustainable budgeting, tax reform and regulatory efficiency are key to unlocking Michigan’s economic potential. By implementing these strategies, Michigan can enhance its economic freedom, attract investment and ensure long-term prosperity for its residents.  Originally published at AIER.
As 2025 draws near, America teeters on the brink of a fiscal abyss. This impending fiscal cliff, marked by the end of tax cut provisions and a spending crisis, calls for immediate and decisive action by Congress to avert a worse economic situation than the one Americans feel today. The national debt from excessive government spending is on track to surpass $35 trillion soon, a stark increase of nearly $10 trillion since 2020. This level of debt per citizen exceeds $100,000; per taxpayer, it is nearly $267,000. Such figures are not just numbers but represent a looming burden that future generations will bear — a burden that transcends mere fiscal policy and ventures into the realm of ethical responsibility. The gravity of this debt is exacerbated by the interest payments it necessitates, which have soared to over $1 trillion annually, surpassing what the country spends on national defense. This situation illustrates a troubling scenario where the government, to manage its debt, resorts to issuing more debt, a practice unsustainable by any standard measure of sound budgeting. The economic repercussions of this cycle of debt are profound, leading to higher interest rates, likely increased inflation, and a misallocation of resources that stifles productive private sector activity. Amidst these challenges, the Tax Cuts and Jobs Act (TCJA) provisions, set to expire in 2025, play a pivotal role. These tax cuts have been instrumental in supporting economic activity across all income brackets by reducing their tax burden. If these cuts expire, they could reverse the economic gains achieved, reducing disposable income, dampening savings and investment, and contributing to an economic downturn in an already fragile economy. The cessation of these benefits would particularly impact families who have benefited from the near doubling of the standard deduction and enhancements to the child tax credit. Furthermore, the expiration of the $10,000 cap on state and local tax (SALT) deductions could have mixed effects; while it may benefit taxpayers in primarily blue, high-tax states, it complicates the fiscal landscape significantly. A balanced approach would be to maintain the increased standard deduction while simplifying the tax code further by eliminating complex provisions like the SALT deduction and the child tax credit, promoting a flatter, more equitable tax system with one low tax rate for everyone. This would also support more economic growth that, combined with spending less, can quickly get our fiscal house in order. This fiscal predicament is further complicated by President Biden’s commitment not to raise taxes on those earning less than $400,000 annually. This promise will be difficult to keep if the TCJA provisions expire without appropriate legislative adjustments, further imperiling his dwindling reelection hopes in November. This situation and recent tariff impositions that affect all income levels would represent a double blow to American taxpayers, dampening economic prospects. As we face these fiscal upheavals, the discretionary spending caps and the debt ceiling, due to expire in 2025, add complexity to an already challenging budgetary environment. The US risks a severe budgetary crisis without thoughtful reform, particularly in the so-called “entitlement programs” like Social Security and Medicare, which consume a substantial portion of the federal budget. These areas must be addressed because both will be essentially bankrupt over the next decade, and millions of recipients will face substantial cuts in benefits. Given all these challenges, fiscal and monetary rules are paramount. Congress should implement a fiscal rule after cutting federal spending to at least the pre-lockdown level in 2019. Implementing rules like the Sustainable American Budget, which caps federal spending based on population growth plus inflation, could provide a sustainable path forward. This approach, supported by Americans for Tax Reform along with the economic insights of Alberto Alesina and John Taylor, advocates for austerity focused on spending restraint and economic growth rather than tax hikes, as some on the “new right” have recently advocated. Regarding a monetary rule, the Fed should return to a single mandate of price stability, cut its bloated balance sheet to at least the pre-lockdown level in 2019, and adopt a strict rule that ideally would be on the growth of its monetary base. These steps would help reduce persistent inflation and remove the extraordinary distortions throughout asset prices and the production process because of years of quantitative easing and low interest rates. Combining these monetary and fiscal rules would provide the necessary checks and balances to give the economy time to heal from massive government failures and help support a stronger institutional framework for economic growth and individual flourishing. Moreover, the regulatory environment has grown increasingly burdensome under the Biden administration, with an estimated $1.6 trillion in new final rules imposed since President Biden took office through May 2024. These rules have been applied across the economy, including financial decisions based on ESG factors influencing the energy sector to increase car emission standards influencing the auto sector. But these ultimately influence producers’ and consumers’ costs of many goods and services. Removing the burden on Americans would unleash economic growth, helping with the fiscal and economic headwinds. The bad policies out of DC have created a dire fiscal and economic situation moving into 2025. If the Trump tax cuts expire, excessive spending will continue unabated, and corrective monetary policy will not happen. Uncertainty and expectations alone will result in a hard landing in the economy, job losses, and elevated inflation. Given the last four years of declining purchasing power for millions of Americans, this result is unacceptable, and the idea of raising taxes to attempt to solve this is naive. Instead, the US must leverage this crisis as an opportunity for sweeping reforms. By returning to principles of fiscal responsibility and market-driven activity, America can navigate away from the fiscal abyss and toward a future of economic stability and prosperity. Though fraught with challenges, this moment offers an unparalleled chance to reshape America’s fiscal landscape, ensuring a legacy of growth and stability for future generations.  Originally published at Mackinac Center.
Michigan’s economic and fiscal future hinges on adopting sustainable budgeting practices. Insights from other states show the tangible benefits of fiscal restraint, efficiency, and lower taxes. By examining how other states have managed their budgets, Michigan can learn valuable lessons in improving its fiscal health and thus secure a prosperous future. In 2023, Americans for Tax Reform launched its Sustainable Budget Project. This project monitors state government spending and tracks which states have enacted “sustainable budgets.” The Sustainable Budget Project defines a sustainable budget as one that grows no more than a specific rate: the inflation rate plus population growth, as expressed as a percentage. This project is similar to Mackinac Center’s Sustainable Michigan Budget. For comparison, Texas has focused on fiscal discipline and low taxes, creating a business-friendly environment that attracts investment. It has kept government spending in check, which fosters an environment conducive to economic growth. As a result, it projects a $21 billion surplus next year despite the recent large budget increase. In contrast, California faces a significant economic challenge due to high taxes and heavy spending habits. With the state facing an upcoming budget deficit of at least $45 billion, Gov. Gavin Newsom has proposed painful spending cuts to various social programs. This development highlights the risks of unsustainable budgeting. California relies on volatile revenue sources (especially a progressive income tax with high rates) and has failed to implement spending discipline, leaving it in a precarious fiscal situation. Other states, such as Alaska, Colorado, North Dakota, Oklahoma, Texas and Wyoming have kept spending growth below the rate of population growth plus inflation over the last decade. They’ve maintained lower taxes and enjoyed better economic health even though most of these depend partially on volatile oil and gas activity. These states have demonstrated that sustainable budgeting can lead to greater economic stability and improved quality of life for residents. Their commitment to fiscal discipline has allowed them to weather economic downturns more effectively and avoid severe budget shortfalls. Implications for Michigan Michigan's budget growth outpaces both inflation and population growth, placing a heavy burden on taxpayers. Officials can reduce this burden by adopting sustainable budgeting practices like those of successful states. This will support more economic growth and attract businesses. Sustainable budgeting can also enhance Michigan’s economic resilience, making it less susceptible to economic shocks and fiscal crises, which have historically burdened oil and gas states. The benefits of sustainable budgeting extend beyond fiscal stability. By reducing unnecessary spending and lowering taxes, Michigan can increase disposable income for families, encourage consumer spending, and boost total economic activity. This can lead to more jobs, higher wages and improved living standards for all Michiganders. To achieve sustainable budgeting, Michigan should implement strict budgetary controls, such as spending caps and mandatory budget reviews. Additionally, the state should focus on long-term fiscal and economic health by eliminating wasteful spending, increasing spending prudently and reducing tax burdens. Transparency and accountability in the budget process are also crucial for spending taxpayer money wisely. Sustainable budgeting is not just about balancing the budget — it's about ensuring a brighter future for all Michiganders. By adopting best practices from other states, Michigan can become a model of fiscal discipline and economic vitality, providing a stable and prosperous environment for its residents and future generations. How the Fed Destroys the Economy with Dr. Robert Gmeiner | Let People Prosper Show Ep. 1016/17/2024
Join me for Episode 101 of the Let People Prosper Show, where I discuss with the insightful Dr. Robert Gmeiner how the Federal Reserve's actions affect our economy. Dr. Gmeiner is an Assistant Professor of Financial Economics at Methodist University.
We Explore: 📉 How the Federal Reserve distorts market activity and creates inflation. 📊 How the Fed’s actions harm economic growth and manipulate interest rates. 💡 Why fiscal policy is not the primary cause of inflation. 🔮 How you should plan to deal with elevated inflation for years to come. Like, subscribe, and share the Let People Prosper Show, and visit vanceginn.substack.com for more insights from me, my research, and ways to invite me on your show, give a speech, and more.  Introduction Downtown Dallas has long been a hub of business activity, attracting companies with its vibrant urban environment and economic opportunities. However, there has been a troubling trend in recent years: businesses are increasingly leaving downtown for areas like Uptown Dallas, a Public Improvement District (PID) in Dallas just north of downtown, and surrounding communities. This exodus is driven by recent elevated crime rates and persistent homelessness issues, which undermine the quality of life and economic vitality in the heart of the city. To address these challenges, it is essential to adopt market-driven solutions that can effectively reduce homelessness and crime, ensuring that downtown Dallas remains an attractive location for businesses and residents. Details about Dallas, Texas Dallas has a rich history and a dynamic cultural scene. According to U.S. News & World Report, the Dallas-Fort Worth metroplex is the fourth largest in the country, with over 8.1 million residents. Dallas offers diverse attractions, from world-class museums and performing arts venues to professional sports teams and a burgeoning food scene. The city is known for its friendly residents and a blend of Texas pride with cosmopolitan offerings. However, the city faces significant challenges. Dallas has a higher cost of living than the national average, and housing prices have surged in recent years, making it less affordable for many residents. The median home price in Dallas is significantly higher than in many other parts of Texas, contributing to the economic strain on residents. These factors, combined with issues related to crime and homelessness, have impacted the city's overall attractiveness as a place to live and work. According to the U.S. Census Bureau, Dallas has a population of 1.3 million and a median household income of $58,231. The poverty rate is 19.3%, which is higher than the national average. The city's population is diverse, with 42.3% identifying as Hispanic or Latino, 29.1% as White, 24.3% as Black or African American, and 3.6% as Asian. The city's demographics highlight the need for inclusive and effective policies to address its socio-economic challenges. Overview of the Situation in Dallas Dallas has faced significant challenges in managing crime and homelessness, particularly in its downtown area. The 2023 Community Survey conducted by the City of Dallas revealed that 75% of residents identified homelessness as a major problem, with 61% citing crime as a significant issue. Despite efforts to provide services and support for homeless individuals, the lack of market-driven, charitable pathways hindered by excessive government planning with insufficient shelter beds and resources for a necessary policy force has perpetuated the cycle of homelessness and associated criminal activities. Crime and Homelessness Data The Point-in-Time (PIT) count by Housing Forward reported 4,244 homeless individuals in Dallas and Collin counties in 2023, a slight decrease from previous years but still a substantial number. The Supreme Court case City of Grants Pass v. Johnson, which addresses the regulation of homeless encampments, underscores cities' legal and logistical challenges in managing homelessness. This case highlights the complexities of balancing humanitarian concerns with public safety and urban growth. Crime rates in downtown Dallas have also been a concern. Reports indicate that prostitution and petty theft are rampant, contributing to a perception of insecurity among business owners and residents. Efforts by the Dallas Police Department to curb these issues have failed due to resource constraints and the sheer scale of the problem. A spike in murders in 2023 has exacerbated concerns. While overall violent crime was down 8% in 2023, murders increased by 15%, with 32 more killings compared to the previous year, bringing the total to 246. This surge in violent crime highlights the urgent need for effective solutions to improve safety in the city.  Impact of Supreme Court Decision The upcoming Supreme Court decision in City of Grants Pass v. Johnson could have significant implications for Dallas's policies on homelessness. The case addresses whether cities can criminalize sleeping in public places with insufficient shelter beds. If the Court rules against such criminalization, Dallas may need to revise its approach to managing homeless encampments and focus more on providing adequate housing and support services. This decision could force Dallas to increase investments in affordable housing and social services to comply with the new legal standards. It may also prompt the city to explore innovative, market-driven solutions to address homelessness more effectively. Daniel Roby from Austin Street Center noted that the lack of sufficient shelter beds is a critical issue, and a ruling in favor of the plaintiffs could highlight the need for more robust support systems for homeless individuals. Businesses Leaving Downtown Dallas The impact of crime and homelessness on downtown Dallas is evident in the number of businesses relocating to Uptown Dallas and other surrounding areas. The Uptown Public Improvement District (UPID), established in 1993 and renewed multiple times, includes about 2,181 properties, primarily business, office, and residential. Managed by Uptown Dallas Inc., UPID enhances public safety, builds and maintains public infrastructure, and improves common areas and pedestrian amenities. The current term lasts until December 31, 2026, with the annual budget and assessment rate requiring a public hearing and City Council approval. The UPID is a Dallas tax increment financing (TIF) zone that allows for part of the property taxes collected to be paid for improvements in the zone. TIFs are costly endeavors that centrally plan areas at taxpayers' expense instead of allowing the marketplace to work. Notable companies such as Invesco, Goldman Sachs, Deloitte, and Bank of America have decided to move their offices out of downtown, citing better security, amenities, and business environments as key reasons for their decisions. While these businesses may be leaving for reduced crime and homelessness issues, they also seek privileged tax situations in places like Uptown at a high cost to taxpayers. TIFs and other tax privileges that pick winners and losers should be eliminated so businesses are on a level playing field and the cost of government spending is not redistributed to other taxpayers. Invesco Invesco plans to move into 58,464 square feet at The Union, a premier office and retail space in Uptown Dallas. Invesco has been in downtown Trammell Crow Center for over a decade. The move is driven by a need for a more secure and attractive business environment. The estimated cost to build the new office space is $1.5 million. Invesco's relocation is part of a broader trend of financial firms moving to Uptown. Goldman Sachs Goldman Sachs has been a fixture in downtown Dallas for many years. They plan to leave 300,000 square feet in the Trammell Crow Center for new offices under development in the nearby North End project, set to open in 2027. This move will significantly impact the occupancy rate of the Trammell Crow Center, potentially dropping it to 62% if no new tenants replace Invesco and Goldman Sachs. Deloitte Deloitte, another major financial services firm, has also relocated to Uptown, joining a growing list of companies seeking better security and amenities. Deloitte has maintained offices in downtown Dallas for several decades, contributing significantly to the local economy. Bank of America Bank of America is relocating about 1,000 workers from its iconic downtown skyscraper to a new office tower in Uptown. The move to the Parkside Uptown Tower, a 30-story building overlooking Klyde Warren Park, is driven by the need for a more modern, amenity-rich work environment. Bank of America's departure from downtown Dallas will leave a significant vacancy in the 72-story Bank of America Plaza, impacting local tax revenues and economic activity. The adopted total property tax bill for this building at 901 Main St, Dallas, Texas 75202, was $2.96 million. Impact on Local Economy and Tax Revenue If businesses leave the City of Dallas, their departure affects the immediate economic environment and has long-term fiscal implications. These businesses' property and sales taxes contribute substantially to the city's budget. A decrease in this revenue could lead to budget cuts in essential services or costly tax hikes, further exacerbating the issues of crime and homelessness. Also, Walmart's downtown office closure, involving the relocation of over 1,200 employees, exemplifies the economic toll of these relocations. Walmart has been in downtown Dallas since the early 2000s. They have decided to consolidate their operations, asking employees to relocate to other U.S. markets, including its headquarters in Bentonville, Arkansas. The departure of such a major employer will result in a substantial loss of local tax revenue and economic activity. The estimated annual tax revenue losses below from the movement of specific businesses from downtown are derived from the typical contributions of these large businesses to the local economy. However, it should be noted that these businesses moving to Uptown will still be collected by the City of Dallas and other local governments but at a lower rate, given the TIF situation. For example, Invesco and Goldman Sachs, both significant financial institutions, contribute through property taxes and sales taxes. Walmart's substantial workforce and sales generate significant sales and property taxes by consumers and workers. Using conservative estimates, just these four businesses could provide $7.5 million less tax revenue for downtown Dallas annually. While this is a relatively small share of the City of Dallas’ $1.8 billion general fund budget for FY 2023-24, these revenue losses will continue to grow if these issues in the downtown area persist.  Comparisons with Other Cities
The situation in Dallas is not unique. Cities like San Francisco and Los Angeles have faced similar issues with crime and homelessness driving businesses away. For example, California has seen many businesses relocating to states with more favorable economic conditions, such as Texas, due to high costs and regulatory burdens. This trend underscores the importance of addressing underlying issues to retain businesses and ensure economic vitality. Interestingly, despite Dallas's economic potential, it did not make the list of best places to live in the United States according to a recent ranking by U.S. News & World Report. In contrast, other Texas cities like Austin, McAllen, El Paso, Corpus Christi, Brownsville, San Antonio, Houston, Beaumont, and Killeen were all ranked among the top 150 cities to live in the U.S. This discrepancy highlights the need for Dallas to address its underlying issues to enhance its attractiveness and livability. Economic Principle: Voting with Their Feet Businesses and residents relocating due to unfavorable conditions is often called "voting with their feet." This concept, rooted in economic theory, suggests that individuals and businesses will move to areas that offer better opportunities, lower costs, and higher quality of life. When the cost of staying in a particular location—due to high taxes, crime, poor services, or other factors—becomes too high, people and businesses will relocate to more favorable environments. As Ilya Somin explains in his article "Voting with Our Feet,” “People 'vote with their feet' by choosing which state or local government they wish to live under, thereby ensuring that states compete to attract residents by offering better services at lower costs." In the case of downtown Dallas, businesses are leaving because the cost of dealing with crime, homelessness, and outdated infrastructure outweighs the benefits of staying. This migration can create a negative feedback loop: as businesses leave, the local economy suffers, leading to reduced tax revenues and further cuts in public services, which in turn can exacerbate the very issues driving businesses away. Creating a more conducive environment for businesses through targeted, market-driven reforms is essential to break this cycle. Market-Driven Solutions To reverse the trend of businesses leaving downtown Dallas, it is crucial to implement market-driven solutions that address homelessness and crime without relying excessively on government intervention. Here are some recommended strategies:
The departure of businesses from downtown Dallas to areas like Uptown indicates the pressing issues of crime and homelessness that need to be addressed. By adopting market-driven solutions and fostering public-private partnerships, Dallas can create a more secure and supportive environment that attracts and retains businesses. It is essential to move beyond government-centric approaches and embrace innovative, market-based strategies to sustainably reduce homelessness and crime, ensuring downtown Dallas's long-term economic health and vibrancy. References
|
Vance Ginn, Ph.D.
|
RSS Feed
Proudly powered by Weebly