Michigan, once an economic leader among the states, has regressed to having the worst state economy in the nation. The same fate may be in store for the country if congressional Democrats follow through with their attempted $400 billion tax increase.
In the 1990s, Michigan’s economy prospered. When newly elected Gov. John Engler took office in 1991, he faced a staggering 9 percent unemployment rate and a $1.8 billion deficit. His comeback formula included cutting taxes to spur economic growth, reducing spending to balance the budget, reforming welfare and making education the state’s top priority.
Mr. Engler’s bold reforms helped reduce the unemployment rate to 3.4 percent, generated a $1.3 billion surplus, slashed welfare rolls by 70 percent, restored Michigan’s AAA credit rating and cut state government employment by 20 percent (while protecting public-safety employees). His leadership also reduced violent crime by 25 percent, invested record amounts in roads and made an unprecedented commitment to educational funding and improving global competitiveness.
As a state legislator during most of those years, I had the honor of participating in Michigan’s revitalization. By leaving $32 billion more directly with the people through tax relief and encouraging hard work, risk-taking and investment, we offered hope and opportunity for Michigan families. Governed by these principles, Michigan flourished and inspired many members of Congress to adopt the same pro-growth economic policies.
Congress adopted welfare reform in 1996, cut the capital-gains tax in 1997, and enacted substantial tax relief in 2001 and 2003 — empowering policies that aided U.S. recovery from the economic doldrums of the 1990s and the terrorist attack of 2001. The tax relief succeeded in its goals, producing 8 million new jobs, $16 trillion in additional household wealth and a national unemployment rate below 5 percent.
Unfortunately, rather than continue as a national leader for reforming government and lessening the tax burden, Michigan’s bold leadership ceased when Gov. Engler left office.
The next governor, Jennifer Granholm, called a state legislator treasonous for suggesting spending restraint and tax relief would help Michigan’s ailing economy.
In the face of an economic downturn, the Granholm administration proposed a $1 billion tax increase in the form of a 2 percent sales tax on services, including business-to-business transactions. The Senate Republicans rejected her tax raise, but now the governor is demanding an 18 percent boost in the income tax, or she will allow the government to shutdown.
The results of her administration are deplorable, yet not surprising. According to the Mackinac Center for Public Policy:
(1) “Per capita personal income in Michigan is now 6.7 percent below the national average … the lowest … since 1933.”
(2) “Since August 2003, Michigan has lost 87,000 jobs. In that period more than 7.8 million jobs have been created nationwide.”
(3) “Michigan was dead-last in an index of changes in housing prices.”
The tax-spend-and-regulate policies of the Granholm administration have inflicted horrifying harm on the people of Michigan: falling personal incomes, high unemployment, diminishing home values, population flight, a diminished state bond rating and the constant specter of massive budget deficits.
The new majority in this Congress has a choice. The new majority’s attempt to hide pork-barrel earmarks and infect the Medicare prescription drug plan with Hillarycare is bad enough, but their $400 billion tax increase on families, workers, small businesses and investors will surely plunge America into a recession like Michigan. By advancing a $400 billion tax increase — $3,000 per taxpayer — they are following the Granholm model of how to drive an economy into the ditch.
To stop the Democrats $400 billion tax increase, I have introduced H.R. 2734, the “Tax Increase Prevention Act” which would make the 2001 and 2003 tax relief permanent. If my bill becomes law, the American people will not see any of the tax increases Democrats are proposing on things like marriage, childbirth, adoption, earning money, saving money, paying college loans and dying.
By making tax relief permanent and continuing to grow our economy, Congress can go a long way to restore the trust of the American people, build a better, brighter future for our country — and avoid the economic suffering now felt in Michigan.
As for Michigan, I remain optimistic that with our well-trained work force and strong system of education, recovery is possible, if Congress and the Michigan governor allow economic growth to occur.
Tim Walberg, Michigan Republican, is a member of the U.S. House of Representatives.