The economy of my home state of Michigan is in dreadful shape. The state has lost jobs pretty steadily since 2000, and in 2005-06 it was evidently one of only three states to lose jobs. The other two, Louisiana and Mississippi, had a hurricane. Michigan has the Big Three auto companies, which are in various levels of economic woe. I've blogged a fair lot about Michigan’s economic problems, which seem related to the overdependence of the state’s economy on the Big Three, the management mistakes of those companies, and the difficulties of applying supple management in companies with workers represented by the United Auto Workers. Here are some reflections by several knowledgeable writers.
Now I find that Michigan’s Democrats, restored as the majority in the Michigan House by the 2006 elections, have come up with a solution to Michigan’s economic difficulties. The state will solve its economic problems by having state government buy an MP3 player or an iPod for every child in a Michigan public school. (Hat tip to Captains Quarters.) I can remember when Steve Jobs of Apple Computer was lobbying to have governments require every classroom to be equipped with computers. He obviously had something to gain, but he also could make plausible arguments that equipping students with computers would educate them better for the future.
But let’s try to get into the mind-set of people who think that providing kids with music machines might help solve a state’s economic problems. The Detroit News’s story doesn’t mention MP3s or iPods but has a sidebar saying the Democrats want to spend $38 million “to bring new computer learning tools to classrooms,” plus $100 million more for “local downtown revitalization projects.” This sounds a lot like Gov. Jennifer Granholm’s “cool cities” initiative that she began in 2003, her first year in office. The idea is that economically creative people can be attracted to communities that have kicky shops, cool restaurants, and late-evening entertainment.
The problem is that, as urban economics expert Joel Kotkin points out, there’s not much evidence behind this. The biggest growth in America comes in decidedly uncool surroundings; cool cities that did grow in the late 1990s (San Francisco, Boston) have lost population since 2000. There are more cool downtowns in Michigan than you might think: downtown Royal Oak and downtown Birmingham in southern Oakland County, or Oxford north of Pontiac, or the little downtowns of tiny communities near Torch Lake in the western part of the state or Oscoda in Iosco County on the shore of Lake Huron. But cool entertainment districts are patronized and old neighborhoods are renovated by affluent people, most of them making their money in uncool work. Royal Oak isn’t drawing people to Michiganor even keeping people therewho don’t think it’s a good place to make a living.
The House Democrats, however, seem to think that cool cities will bring unusually economically productive people to Michigan. Seems kinda unlikely. Rich people who like to pay very high taxes already have lots of nice places to live: Manhattan, northwest Washington, San Francisco, etc. The House Democrats also seem to think that “new computer learning in classrooms” is going to produce a significant enough improvement in educational outcomes that it will provide some noteworthy quantum of economic growth in the state. That’s a version of the argument that teachers unions have made for years for higher education spending (especially for members of teachers unions). It’s a policy that’s been triededucation spending has risen sharply over the past two generationsand that hasn’t produced the results promised. Assume that providing Michigan kids with MP3s and iPods improves their test scores and economic creativity. What’s to stop them, once they’re grown up, from moving across the state line to someplace where they can keep more of the money they earn? Not much, it seems. The Census Bureau tells us that from 2000 to 2006, net internal migration from Michigan was 239,439. That net outflow was only partly balanced by positive international migration of 151,435.
In my judgment, the Detroit News gets it right when it says that “Michigan can’t tax or spend its way out of this economic catastrophe.” The payoff from spending on cool cities or student iPods is distant and uncertain. The negative drag exerted by high taxes is immediate and obvious.