Tuesday, March 11, 2008

This is how state government does business

HB5221 - Introduced on September 15, 2007, to provide the “template” or “place holder” for a Fiscal Year 2007-2008 capital outlay budget. This bill contains no appropriations, but may be amended to include them. It was introduced two weeks before the Oct. 1, 2007 deadline for adopting a 2007-2008 budget, with no agreement in sight regarding how to close a $1.7 billion gap between desired spending and expected revenue in this and preceding year’s budgets. The bill could be a “vehicle” for an eventual solution, or could become a short term “continuation budget” if a deal is not reached by Oct. 1.

The Detroit News did a story on this capital outlay project. It is all for public university buildings. Read the story below.

YPSILANTI -- After a funding dry spell, the state is gearing up for the largest higher education building boom ever in an effort to kick-start the economy and replace some deteriorating campus buildings.
Gov. Jennifer Granholm has recommended nearly $1 billion in construction projects at 10 universities and 15 community colleges, including a biology building at University of Michigan-Ann Arbor, a biomedical research building at Wayne State University and expansion of the engineering and plant sciences buildings at Michigan State University.

I also not the following from the University of Michigan endowment website:
ANN ARBOR, Mich.—The University of Michigan's endowment grew from $5.7 billion to $7.1 billion in the 2007 fiscal year, benefiting from a 25.6 percent investment return and strong contributions from alumni and other donors, according to the annual Report on Investments presented by Regent Rebecca McGowan, chair of the Finance, Audit and Investment Committee, to the Regents at its meeting today (Oct. 25, 2007).


J. Bowen said...

the state is gearing up for the largest higher education building boom ever in an effort to kick-start the economy and replace some deteriorating campus buildings

As a student at the local 13th grade, I couldn't be more thrilled that the local facilities might get some much-needed repairs. However, I couldn't help but laugh at the notion that creating make-work jobs will kick-start the economy. This kind of thinking highlights the problem with legislators (I have a low opinion of most legislators, so please don't take my remarks personally).

Frederic Bastiat, one of the great economists of the 19th century, first developed the theory of the broken window fallacy in his essay That Which Is Seen and That Which Is Unseen. The basic idea is that you have to look at the consequences of a given action. When a window is broken, a job is created for a window-maker. The owner of the window, through his loss, has provided an economic benefit to the window-maker. Unfortunately, the owner of the window must now spend money to fix a window where he would have surely used that money for something that would benefit him more.

Unfortunately, those who adhere to the broken window fallacy out-number those who know the truth. Franklin D. Roosevelt believed that hiring workers to dig unneeded ditches would stimulate the economy. Children are taught at a young age that the second world war brought us out of the Great Depression, which, as it happens, was made longer by FDR's disastrous economic policies. Newspaper columnists and talking bobble-heads on the radio and television push the idea that war is great for the economy, when wars chiefly, and almost solely, help those industries that produce wasteful products (like bombs, bullets, and vehicles that act as targets for terrorists). Economists believe that the destruction of large skyscrapers provide a net economic good because of the jobs that will be created for the replacement of those buildings.

Scroll over to Michigan in 2008 and you have state officials creating new jobs by spending millions of dollars that it takes from people in a state where every dollar that a person has has become more precious by the fact that each dollar is worth less, prices of goods have risen, and jobs are harder to come by.

Is it wrong for the state to repair deteriorating buildings? No. Students deserve to study in a safe environment. But state officials should not be spending above and beyond what needs to be spent for the repair of the existing facilities when resources are so limited (which should be evident given the budget problems that we are having).

State officials need to start making an honest effort to look at what is unseen: small businesses who are hurting because of the high taxes (who, in an effort to recoup their losses, are forced to raise prices, fire workers, cut profit margins, close shop, or move shop out-of-state); home-owners hurting because of rising property taxes (which is almost required because of the mismanagement of the economy at the state level); a decrease in consumer spending because of increased taxes (the money that you take from me is money that I'm not spending at a local business). They need to stop opting for short-term fixes, assuming that they can take care of the consequences of those actions in the future. If they'd spend as much time on fixing the economic policies of this state as they do on renaming highways or on trying to prevent parents from making choices about when their kids can ride a snow mobile, maybe, just maybe, this state might turn around.

Anonymous said...

Consider the bills now rushing through the house and senate and off to the governor's desk that will give tax incentives to the film industry. Once again, we are buying another industry. And who foots the bill for these incentives? Every other business in Michigan. When will we realize that tax policy and ecomonic policy are one in the same? Lowering taxes for ALL, not just a chosen few, will create an environment that will bring business back to Michigan.