Why Michigan Pension Reform Matters

Michigan now a national leader on fixing pension problems

The passage of the 2017 public school pension reform is a transformational change for Michigan. The new reform places Michigan at the forefront of states that have gotten a grip on out-of-control government employee legacy costs.

Michigan had accidentally made school employees its largest creditors and this imposed huge costs on taxpayers. The new law limits that damage by making it much harder for lawmakers and state officials to promise pension benefits to new school employees and then push the costs onto tomorrow’s taxpayers.

All employees in Michigan’s public school districts, community colleges and a few other institutions are mandatory participants in the state’s school pension system. It covers 189,761 people, meaning roughly about one out of every 24 individuals employed in this state are earning benefits from this system.

But the pension fund is underfunded. The state owes the system’s members $29.1 billion, the difference between how much it has saved to pay for their pensions and the amount the system’s managers expect it to cost.

This is not a new problem. In 42 out of the past 43 years the pension system has not had enough money to cover the costs of the benefits it has promised.

The underfunding makes the plan more expensive, but it provides no boon to members. Michigan taxpayers are now paying 37 percent of school payroll to keep this system afloat, with 89 percent of those contributions going to catch up on unfunded liabilities, rather than being set aside to pay for the pensions being earned by current school employees each year.

The benefits pensioners receive are not especially lavish, even with these high costs. Half of school employees don’t even become eligible for pension benefits, failing to meet the eligibility requirement of logging 10 years in the public school system.

The key problem is that the politicians responsible for the pension system have weak incentives to pay for the promises they make. They make choices each year of how many scarce resources to allocate to pensions. Pension funding typically ranks low on the list of priorities, especially when competing against spending that produces more immediate political benefits. The $29.1 billion unfunded taxpayer liability demonstrates how little of a political return there is for a well-funded pension system.

The new law contains this problem. New employees will get substantial employer contributions to a 401(k)-style, defined-contribution plan. Alternatively, new school employees can still choose to enroll in a conventional pension plan, but they will have to share the cost if managers fail to properly fund it.

Lawmakers also limited that plan from getting out of control. If the plan’s funding falls below 85 percent of the total liability for two consecutive years, it will automatically close and no new employees will be enrolled from then on.

The chances of that are reduced by another change: the new law says that pension fund investments can only be assumed to earn a more conservative 6 percent return over time. The state’s other retirement systems use more optimistic rates of 7 percent and 7.5 percent, which contributed to underfunding when pension managers don’t hit these investment targets.

The new reform leaves the benefits of people working today unaltered. So lawmakers will need to ensure that benefits are properly funded for current workers and retirees even as it contains its ability to underfund benefits for new employees.

This is unusual among the 50 states. Total state and local government pension underfunding in the U.S. is at least $1.1 trillion and perhaps as high as $4.8 trillion. There have been some reform efforts elsewhere, but politicians tend to focus on the wrong problem — tweaking systems by reducing benefits or requiring higher employee contributions. What they should address is how the persistent mismanagement of these systems allows inadequate pension fund contributions to go on for years on end.

In 1996 Michigan took a leap forward in containing the ability of managers to underfund lifetime benefit promises when it stopped granting defined-benefit pensions to new state employees. Local governments, which are not required to be part of a state-run system, have also started transitioning to 401(k)-style benefits for new hires.

One other major reform has been implemented here. Under a law passed in 2012, Michigan no longer gives post-retirement health insurance coverage to new state or school employees. Instead they get contributions to a retirement health savings account. Local governments have likewise started to move in this direction. This also prevents shifting the costs of today’s government services onto tomorrow’s taxpayers.

That last point is the purpose of all these reforms: Michigan is getting closer to paying all the costs of today’s classrooms and other government services today, rather than pushing those costs onto the next generation of Michigan residents.

This honors the intent of the statesmen who drafted Article IX, Section 24 of Michigan’s state constitution, and the voters who adopted it in 1963. It puts this state firmly on the path to solving a fiscal problem that threatens states and communities across the country. And it protects government employees and taxpayers alike.

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Why We Can’t Build Infrastructure Like We Used To

Regulatory burdens just as much to blame as political gridlock

Hardly a week goes by when we don’t see an article or news story about America’s crumbling infrastructure and utilities. Contractors say it’s bad and getting worse, so do engineers, universities and think tanks. People experience it too, driving on bad roads, dealing with water main breaks and unreliable utilities. And it upsets nearly everyone to see America’s infrastructure falling apart.

The blame for the lack of infrastructure improvements is often laid at the feet of political gridlock, or misplaced priorities, or just plain government incompetence. But there’s more to it than that.

Since the U.S. built the Golden Gate Bridge, Hoover Dam, interstate highway system and most of our water and wastewater utilities, the country has changed dramatically, and these changes profoundly affect our ability to build or improve infrastructure and utilities, especially large projects.

The number of regulations that need to be met, the time it takes to comply with these regulations, and the ability of these regulations to stymie projects have all increased over time. Environmental reviews and activism can shut down projects or delay them interminably. A litigation culture jeopardizes any project that doesn’t yield high benefits and near-zero risks. Add to this city and state pension obligations that make financing large infrastructure investments out of reach for many governments.

These developments have dramatically increased the amount of money and time it takes to build infrastructure and utility projects. So much so that today we’d be unable to build the iconic projects that once defined the American can-do spirit.

The bemoaned political gridlock is a symptom of these changes rather than the cause of our infrastructure and utilities woes. Until we recognize this, it will be hard to make meaningful progress.

Many argue that strict regulations, public pensions and legal recourse make America healthier, safer, greener and more equitable, but there are tradeoffs to these perceived benefits. These factors contribute to our inability to build infrastructure and utilities like we used to.

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How Many People Should be in Prison?

No easy answer, but here’s how to think about the question

It’s common to have a conversation about criminal justice reform that includes an anxious reference to the “mass incarceration crisis.” But as legal academic John Pfaff points out in his new book “Locked In,” the phrase might actually be meaningless because we don’t know the right number of offenders to incarcerate. For instance, there are 43,000 people occupying Michigan prisons right now. Is that “mass incarceration?” If so, what is “normal incarceration” and how do we get there? There’s no clear answer to these questions, but here’s how to approach about the issue.

First, determining the “right number of people” metric is influenced by your point of view on more fundamental criminal justice questions. If you’re a prison abolitionist who believes prisons are innately corrupting and harmful to society, your “right number” metric is practically zero. But if you’re a “tough-on-crime” proponent who sees long sentences as an effective means to deter criminal activity, your “right number” would be much larger.

Second, while reformers across the spectrum tend to agree that the incarceration rate is too high, there is no consensus on how to scale it back. And here is where the complexities of the problem of calculating the right number of offenders to incarcerate start to appear. Dozens of variables contribute to the size of the prison population, and they are all quite difficult to measure.

Take the idea of justice, for example. The state punishes offenders on behalf of their victims, but it’s not always clear what sentence will produce the appropriate amount of justice. If a store is robbed, is justice served to the store owner if the offender is given a two-year sentence or five-year sentence? Compounding the problem is the fact that plea bargaining introduces even more uncertainty about how long — or even whether — any given offender will serve time. Is justice served when pleas are bargained down?

This uncertainty persists at every level of the criminal justice system. Once the offender enters prison, it is true that incarcerating him averts any crimes he might have otherwise committed, but we should always ask: Is this the most effective way to improve public safety or are there better alternatives? We have no way of counting the averted crimes, and some research suggests that incarcerating people for too long may induce them to commit crimes later that they otherwise might not have committed.

Decisions about when and how a person can be released from prison are also fraught with complexity. Michigan’s “truth-in-sentencing” policy means that a prisoner will serve every day of the minimum sentence imposed by the judge at trial. But, after that, it’s up to the parole board to decide whether and when to release a prisoner before he has served the maximum statutory punishment for his offense. What factors should the board take into account in making the release decision? Is there some point after which keeping a prisoner incarcerated will do more long-term harm than good? Should we expect imprisonment to reform convicts or just mete out punishment?

Finally, budgetary concerns often impact all of the issues raised above. If the price tag gets too high, the question must shift from the right number of offenders to incarcerate to the right type of offender to release, which is a different question that requires a different analysis. The state only has so much money and how much to spend on the criminal justice system is up to legislators who have competing priorities to consider.

All of these factors and more influence the size of the prison population and should be accounted for in discussions about how to determine the optimal number of prisoners. Questions about how well and when prison works and weighing that against other budget constraints is difficult. But understanding these and other factors at work in the criminal justice system is crucial to resolving not only our collective concern about the size of the prison population, but also every other perceived inefficiency or idea for improvement.

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On Cigarette Tax Evasion, I Told You So

Additional four million packs to be smuggled into Minnesota next year

In 2015 I was graciously invited to testify before a Minnesota state committee on taxes regarding an automatic tax inflator for cigarettes. The invitation was a result of my decade long investigation — in partnership with professor and economist Todd Nesbit — of cigarette excise taxes and their impact on illicit activity, most notably tax evasion. I told the committee what it apparently did not want to hear: that their recent tax increase and associated tax inflator would lead to rampant smuggling.

In my testimony I outlined the mountain of research showing a causal link between smuggling, high excise rates and tax differentials on cigarettes between states. At the time I could only report that the North Star State had the 16th highest smuggling rate in the nation. The data was not yet available to measure the impact of the 130 percent excise tax increase imposed in 2013. Using our statistical model we forecasted that smuggling would leap to 32.9 percent of the overall market from just 18 percent.

Most Minnesota lawmakers were completely dismissive of my concerns and perhaps even more so when I asserted that smuggling would only get worse as the state’s tax inflator raised the overall price of cigarettes. Since that February day the evidence has borne out my forecast and more. The implicit admission by the state of smuggling trouble came that same winter when the governor’s proposed budget said that 40 percent of inspections of Minnesota retailers “resulted in either a seizure or assessment related to the discovery of untaxed tobacco products.”

Using our statistical model with data from 2015, we estimate that Minnesota’s smuggling rate will increase to 37.4 percent of the total market over the next year, or almost 1.5 percent points above our last estimate.

This should surprise no one. The state currently imposes a combined excise and in lieu sales tax of $3.59 per pack. Its neighbor, North Dakota, charges just 44 cents per pack. One doesn’t need a doctorate in economics to recognize that both consumers and criminals are going to take advantage of the tax-induced price differentials to save a buck transiting state borders near and far.

Two men from Illinois recently pled guilty to charges in Minnesota for running a truckload of illegal smokes with a retail value of $78,000 over from Wisconsin last year. It was a record bust in the state but puny compared to those in other states. States with higher excise tax rates have seen arrests that discovered millions of dollars of smuggled cigarettes. On June 8, three Canadian citizens plead guilty to moving $17 million in illicit smokes from Kansas to New York, as one example.

Minnesota will probably see similar large-scale smuggling efforts in the near future, if they aren’t already. After all, the state has guaranteed smugglers a high pay out with its high excise tax rate and automatic (upward) adjustments. We estimate that four million cigarettes will be trafficked into the state by casual users and by organized crime in the next year. The sources will range from North Dakota to North Carolina and even overseas, via mail and shipping containers. Illicit smokes acquired in Virginia have been found as far away as California.

Regrettably, cigarette smuggling isn’t the only unintended consequence of the practice. Indeed, we’ve seen cigarette tax-related thefts of wholesalers and retailers, hijackings of cigarette laden trucks, counterfeiting of legitimate products (which are often adulterated like the Bath Tub Gin of the Prohibition Era), corruption of public officials and even murder-for-hire schemes. Most if not all of this behavior can be laid at the feet of high cigarette excise taxes.

The first step in addressing the problems I cite above is to repeal the automatic inflator on cigarette taxes. As I predicted years ago for Minnesota, automatic tax hikes will lead to automatic increases in tax-related lawlessness.

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‘Trough Truce’ on Display in Latest Debate on Corporate Welfare

Latest business subsidy gets bipartisan support and some opposition

Lawmakers agreed last Wednesday to deliver $200 million of taxpayer dollars to businesses selected by politicians and the governor is expected to sign the bills into law. This is a waste of money. Ostensibly this is to create jobs, but this plan won’t work and creates an unfair playing field.

It may seem strange that government spending interests were almost entirely silent on the issue. One might reasonably expect public school officials, university leaders, local government groups, hospitals and other recipients of government funding to oppose plans to hand over taxpayer money to select companies. Their silence is evidence of the “trough truce:” interest groups who rely on government money agree not to complain about other groups receiving government money. These same interest groups came out in full force opposing a modest decrease in the state income tax. So it seems they are fine with handing out select subsidies to certain businesses but against letting all taxpayers keep a slightly larger sliver of more of their own money.

Some of the state’s left-leaning organizations opposed the bills, though. The Michigan League for Public Policy, which advocates for progressive policies and a large government employee union, the American Federation of State, County and Municipal Employees Council 25, officially opposed the bill in committee, though they did not explain why. Progress Michigan put out a comment in June against it.

But skepticism from a wide array of organizations was not enough to convince lawmakers.

Some argued that the state needed more goodies to “compete” with favors offered by other states. Yet Michigan offers tons of incentives already. The latest budget contained $136 million in select subsidies. The state expects to transfer an additional $627 million from taxpayers to businesses from old deals in the upcoming year.

The question is what Michigan residents get for all of that spending. The answer is not very much. Economists have used sophisticated tools to tease out the effects and mostly find negative results.

That means the new spending won’t deliver the “the strongest possible future” for the state, as the governor stated. Nor will it result “in a stronger economy and more robust neighborhoods and communities,” as the president of Business Leaders for Michigan, Doug Rothwell, remarked.

Spending on these business subsidies is perhaps the most wasteful thing the state government does. Prison spending, for instance, pays to incarcerate people the justice system has determined need to be removed from society. Education spending, for all its inefficiencies, ensures nearly all kids are enrolled in a school from six to 18. Business subsidies given for economic development purposes, however, do not develop the economy.

But there’s another reasons to oppose these types of deals: they are unfair to the businesses that don’t get special treatment from the state. Businesses operate in a competitive environment and taxpayer cash can tip the scales in favor of one business over another. These deals create an environment where one business could be indirectly subsidizes its competitor.

Not all lawmakers bought into the program. There were 22 Republicans and 13 Democrats that opposed the bills in the House and five Republicans that opposed it in the Senate. That is an improvement from the Granholm years when opposition to taking money from everyone and delivering it to select business owners received only a handful of legislative naysayers.

The support for business subsidies is narrow: The people handing out the new deals and the people receiving them obviously like it. The opposition should be broad and it was good to see diverse groups opposing it. Perhaps if the trough truce was broken there would have been enough weight to oppose this latest waste of taxpayer money.

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July 14, 2017 MichiganVotes weekly roll call report

The Legislature met for one day this week, for the purpose of authorizing a new round of state subsidies for certain corporations. The next session day is scheduled for Aug. 16.

Senate Bill 242, Authorize giving state revenue to a few particular corporations: Passed 71 to 35 in the House

To authorize giving up to $200 million worth of state tax revenue to certain business owners, in particular a foreign company said to be involved in iPhone manufacture. Earlier this year the Legislature also authorized up to $1.8 billion in state payouts to companies owned by Detroit developer Dan Gilbert and possibly some others.

Who Voted "Yes" and Who Voted "No"

Senate Bill 244, Require state disclose which companies get of selective corporate subsidies: Passed 71 to 35 in the House

To require the state agency in charge of granting special corporate tax breaks and subsidies to disclose the companies that receive the cash payments authorized by Senate Bill 242 (previous bill).

The agency has claimed that some $9 billion in ongoing corporate handouts authorized by an earlier subsidy program called MEGA are exempt from disclosure, citing the same tax return confidentiality provisions that apply to regular taxpayers. (Around half of those payments are reportedly collected by the Big Three automakers.) An amendment to also disclose details of those handouts was defeated on a voice vote.

Who Voted "Yes" and Who Voted "No"

SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

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Special Needs Families Deserve Transparency

Posting ISD special education plans enables sound decisions

Great power and funding entail great responsibility. This principle needs broader application to Michigan’s 56 intermediate school districts, which wield big budgets but tend to operate outside the limelight.

ISDs have grown responsible for a steadily larger share of the state’s public school finances, though most are run by boards that aren’t democratically elected. These education agencies combined spent more than $1.6 billion in 2015-16, nearly 10 percent of all K-12 current operating expenditures. Yet these agencies serve less than 1 percent of the state’s public school students directly.

Though there is no cookie-cutter version of an ISD, each one typically provides some level of back-office support to school districts and runs programs for alternative and vocational education. One primary purpose of ISDs is to oversee the design and provision of special education services, according to what individual students may need. Most of the agencies directly serve students with certain types of disabilities. But they may also let local districts deliver certain services to their own students, or to a group of students within the ISD that has a specific special need.

As a result, ISDs typically produced special education plans that outline who is responsible for diagnosing students, educating them based on their diagnosis and transporting them to the sites where services are delivered. These documents provide a general overview of the available resources that caregivers need to select the correct educational track for children. They are updated periodically as changes occur in the ISDs, but rarely change on a yearly basis.

Each year ISDs collect nearly a billion dollars in local taxes that account for a significant share of Michigan special education funding. The ISD plans spell out the priorities for receiving local funding. Some even limit local dollars to financing services for students who live within ISD boundaries.

To help understand the diverse functions and intricacies, we set out to obtain copies of all 56 ISD special education plans. Many of the searches were unfruitful. Some ISDs post these plans on their websites for easy access, but nearly half did not post the documents. Instead, we had to turn to the Michigan Department of Education to find the missing plans. When all is completed, gathering these documents will have taken over a month.

Schools exist to educate children and give them the tools necessary to thrive as future adults. Many children require special education services, and the ISDs should work to make this as simple and transparent as possible. No parent should spend their valuable time digging for information when it can be easily provided. This problem has a simple, easy solution that would improve the planning experience for all involved.

With cheap and available web storage, every ISD should be able to post the current special education plan on its website. The alternative is filing Freedom of Information Act requests, which can take weeks to be filled. Busy parents need immediate access to plan and prepare for the school year.

ISDs should add special education plans to the important financial documents and information they and other districts already have to post online. Parents, teachers and support staff should also be able to easily locate these plans in order to inform important decisions that benefit the children and families involved.

Michigan’s ISDs have a lot of control over the educational opportunities available to students with special needs. Making special education plans easily accessible is a small, commonsense way to give parents more power and show greater openness and trust.

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‘But For’ Can’t Be Proved: Corporate Welfare is a Waste

New MEGA not costless, despite assurances

State lawmakers are considering a new package of legislation that would provide fiscal favors to companies selected by Lansing bureaucrats for special treatment. Among the arguments made in favor of the program is that it is costless because without the incentive the jobs wouldn’t be created in the first place. In other words, it’s performance-based.

This was the same argument sold to skeptical lawmakers and others for the failed Michigan Economic Growth Authority program. It was known as the “but for” argument: But for these incentives the company would not have located here, therefore, these deals are a net plus for Michigan. This is not exactly true and this is explained in the blog article, “MEGA Tax Credits Are Not Without Cost,” and elsewhere.

We have dubbed the proposed legislation “New MEGA” for the similarities it has with the original MEGA law.

The fact is apologists for these corporate welfare programs can’t prove a business moves to or expands in Michigan because of these incentives. They just rely on the assurances of executives in front of whom they have dangled millions of dollars.

At a June 14 hearing about the proposed New MEGA, the same “but for” arguments were made. Watch the video to see all of them or read the sample below:

State Sen. Jim Stamas, R-Midland: “This is not a MEGA. This does not take other taxpayer dollars and put it somewhere else. This is about collecting the dollars from the jobs that are actually created within it.”

He also said, “On top of that please write down, if there’s no jobs, there’s no money. No jobs equals no money for anybody making that investment.”

State Rep. Peter Lucido, R-Shelby Township: “The only money that’s gonna be out is only money that would come as a result of a new job. The job doesn’t fit the mold we didn’t lose anything did we?”

Derek Nofz, Southwest Michigan First: “It doesn’t take any current money. You have to create new jobs. It is only new revenue coming in.”

None of these men attempted to prove that incentives truly made the difference. By contrast, testimony from economist Tim Bartik of the Upjohn Institute suggested that by one measure, only 6 percent of “incented location decisions” are tipped by the incentive. Any money handed out to companies that would have expanded, relocated or invested in Michigan without the extra, special tax deals is likely just a waste of money, from the perspective of taxpayers.

One analysis of the old MEGA program found that deals from 2005 through 2011 only delivered about 2.3 percent of their promised job creation. Five studies of the MEGA program have been performed and four found a zero to negative impact. One found a positive effect, though a small one. A study from Kansas about a program in that state with close characteristics to the New MEGA proposal showed that the program also did not create jobs.

Not a single proponent of this legislation presented scholarly evidence that New MEGA would actually work or perform better than its failed predecessors. It is just assumed that it will despite much evidence to the contrary. The proposal should not be adopted until its champions can prove otherwise.

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'Good Jobs for Michigan' a repeat of failed MEGA program

Gov. Rick Snyder is hoping that a package of corporate handout bills already passed by the state Senate (Senate Bills 242-244) will likewise be adopted by the House as early as next week. The proposal reads a lot like the old, failed Michigan Economic Growth Authority that cost taxpayers billions of dollars with little to show, at the expense of perhaps more wisely funded programs.

The legislation represents another profoundly unfair attempt by Lansing politicians to transfer wealth from the many to a few elites. This philosophy that favors corporations over everything else is not only unfair, it is ineffective and should be rejected. We should return to a “fair field and no favors” approach to economic growth.

The legislation would give a few cherry-picked corporations a percentage of the tax revenue that new employees would normally pay to the government. This means tax dollars that might be used to benefit all Michigan residents will only benefit politically connected, large corporations.

While this funding mechanism is a relatively new way to give corporate handouts in Michigan and differs from the way favors were paid out via the old MEGA program — in that case, via tax credits — this so-called “Good Jobs for Michigan” is basically MEGA 2. The new bill’s text contains 12 instances of identical or near-identical language and concepts from its predecessor.

Regardless of the way favors are distributed, such bills represent a forced transfer of wealth from the many to a few. As the Mackinac Center has argued many times, government has nothing to give anyone it doesn’t first take from someone else. This program could in effect redistribute $200 million over ten years, though future lawmakers can always expand the handouts once the program is in place, just as they did with the original MEGA law.

Such transfers do more than provide special fiscal favors for the benefit of big businesses. They also place at a disadvantage potential competitors who were not fortunate enough to get government goodies. Imagine working day and night to grow your family business only to discover that Lansing bureaucrats have offered your tax dollars to a competitor. Few things seem more unfair.

Yet despite this, some still say this legislation is basically costless. They say that without this bill and its subsidies, the selected companies would not create jobs or create them here, so the diverted/gifted tax revenue wouldn’t be generated anyway. But they can’t prove this.

They are simply relying on the word of corporate executives in front of whom they have dangled millions of dollars in incentives and the development agencies interested in handing out the loot. This way of thinking is naïve and not backed by evidence.

In 1995, one of the first MEGA deals ever struck went to the Walden Book Company, Inc. Company executives were required by law to say that it was MEGA that made the difference in their decision to move to Michigan. Yet reporters learned that the company president had put down a deposit on a home in the Ann Arbor area before MEGA was ever approved. The company was likely coming here anyway and just went shopping for state favors, which lawmakers gave it. It went on to file for bankruptcy in 2011, ultimately erasing jobs allegedly created by MEGA. “Costless” indeed.

In addition to being unfair, these programs are ineffective. A 2014 analysis of a similar program in Kansas revealed that companies who received favors created no more employment than like companies who had not. The Michigan MEGA program has been analyzed five times by scholars and four of the studies showed the program has had zero positive impact, or even negative impact, on the economy. Only one study found a positive impact, but only a small one.

The absence of hard, empirical evidence proving programs such as MEGA 2 will be effective highlights a cold truth about those working to pass the legislation. Their worldview, or philosophy, seems to be a corporatist one, where politically favored companies matter most and they get to play by different rules than everyone else.

So, what is the alternative? Economies have been developing themselves for millennia, free of government intervention. The people of Michigan have been founding good businesses that create good jobs without government tax tomfoolery since before we were a state. If the government simply got out of the way and stopped taking money from some of us to give to a few politically-connected friends, we’d create even more and we’d all be better off for it.

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Paris Was a Bad Deal for the US

Greens agreed with Trump on Paris before he pulled out

After President Trump’s decision in June to withdraw the United States from the Paris climate agreement, various environmental groups, celebrities and politicians engaged in a string of hysterical condemnations. Former President Barack Obama characterized the decision as an “absence of American leadership,” while former Vice President Al Gore called it “reckless and indefensible.”

Billionaire activist Tom Steyer, who ironically made much of his money in international coal markets, referred to Mr. Trump’s decision as atraitorous act of war against the American people.” An environmental special interest group, Friends of the Earth U.S., demanded that all nations “assert heavy economic and diplomatic pressure to compel the Trump administration to take serious climate action.” Environmental activist and author Bill McKibben called the move a “repudiation of two of the civilizing forces on our planet: diplomacy and science.”

Media reports from the recent G-7 meeting of environmental ministers in Italy ladled it on further, worrying that in the wake of the Paris decision, the U.S. is becoming increasingly isolated in the world climate arena. This disturbing isolation was apparently confirmed when EPA Administrator Scott Pruitt declined to sign on to a string of 18 climate-focused paragraphs in the meeting report.

Of course, it isn’t surprising that other nations are upset with the United States for pulling out of the agreement, since U.S. taxpayers were expected to foot much of the bill. Furthermore, the more we hinder our economy with restrictive environmental rules, the better able other nations are to compete with us in international markets.

The Paris agreement, which was approved by the Obama administration in December 2015, committed the United States to a 28 percent reduction of greenhouse gas emissions by 2025, based on a 2005 benchmark. The agreement further committed the U.S. to pouring billions of dollars into a UN-administered Green Climate Fund. It also required us to submit new plans for increasingly strict reductions of greenhouse gas every five years.

But while we limit our ability to compete internationally and pour billions more into the UN’s coffers, our major competitors in world markets – China, India, and Russia – really only agreed to continue growing their economies, unencumbered by any need to cut energy use, for the foreseeable future.

Attacks from environmentalists and activist climate researchers are also confusing, given that so many of them also attacked the Paris agreement as a farce when it was signed in December 2015. Today they claim the agreement is practically essential for life on earth to continue, but in December 2015, the so-called father of global warming, James Hansen, described the agreement as a fraud.

McKibben panned the agreement as being 20 years out of date – better suited to 1995 than 2015. He also argued that the agreement fell short because it was designed to do only just “enough to keep both environmentalists and the fossil fuel industry from complaining too much,” as it agreed to unenforceable, modest and voluntary pledges instead of strict and mandatory cuts in greenhouse gas emissions.

In reality their initial critiques of the agreement were correct; Paris did fall short. But not necessarily in the way these green critics thought. If followed to the letter, the agreement would have only slowed predicted worldwide warming by a nearly imperceptible 0.2 degrees Celsius in 2100, according to researchers at the Massachusetts Institute of Technology.

Paris was a bad deal for our country. It would have had little to no real environmental impact, it would have soaked up billions in limited tax dollars, and it would have given our major economic competitors a substantial competitive advantage over us.

The United States has achieved greater cuts in greenhouse gas emissions than any other developed nation in recent history. We have better environmental performance and are economically better off without this unnecessary restraint.

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