The following is a lightly edited excerpt from an e-mail recently sent to the Mackinac Center for Public Policy by a front-line worker in the state's welfare department:

"As a state employee for over 20 years, I would challenge you to come to the Department of Human Services and walk one day in our shoes. It is like a hospital with 400-500 patients for each doctor: Desperate people coming in with gaping wounds of addiction, spousal abuse, poverty, child neglect, terminal illnesses, hunger, homelessness or mental retardation. ...

"... [Meanwhile,] we employees have sacrificed pensions, furlough days, raises, health benefit deductibles, layoffs, early retirements and mental health for sake of the State, but the hole just gets bigger. Now they want to cut the retiree benefits? ... This should be the time when the Baby Boomers are uniting to heal the nation; instead, we are a flood of forgotten voices who have allowed our generation to be passed over."

The Mackinac Center's Jack McHugh responds:

Dear Front Liner:

I sincerely sympathize with you and others on the DHS front line. I believe that your characterization of the mission you been asked to accomplish and the reality that confronts you are completely accurate.

Where I disagree is about the ability of the enterprise itself to accomplish much of that mission under any conditions.

Let me be specific: I don't oppose welfare and related government social service programs because I'm against wealth redistribution per se, or even necessarily because they "cost too much."

I oppose them as currently constituted because government bureaucracies themselves are inherently incapable of dealing with many of the problems that the welfare state has undertaken to "fix." Let me explain.

Government programs consist of bureaucracies. Bureaucracies are very good at doing some kinds of things, like collecting taxes, running license bureaus, and even adjudicating justice, where clearly defined "if-then" rules and procedures can be established. However, our society has applied this same tool to addressing complex human needs and problems with which it cannot possibly cope. The outcome is the situation you have described.

Here's the key point: Because of this core limitation of bureaucracies, no amount of money funneled into this system can "fix" or even substantively affect most of these conditions.

Making the problem even more intractable is the enterprise's interaction with a political system that must extract the wealth it redistributes, and which establishes the conditions by which that wealth will be doled out. What this means is that the system inevitably will be crippled with conflicting missions, policies and procedures. I have little doubt that you yourself could cite any number of examples.

In addition, baked into much (but not all) of the enterprise is the real issue of "moral hazard," which is the potentially corrosive effect of unearned entitlements on individuals and cultures. Also inescapable is the ultimate constraint represented by scarcity: Demand for goods and services is by definition unlimited, while supply is always limited, and subject to many competing demands. Rationing is inevitable, and in a welfare state it is accomplished by political and bureaucratic processes, with all the dysfunctions and skewed incentives associated with those institutions.

Most of us at the Mackinac Center have thought long and deeply upon these matters, and concluded that because of its inherent contradictions the welfare state as currently constituted is not capable of fulfilling the functions our society has asked it to accomplish. Further, that because of those contradictions no "reforms" can make it capable, nor can dedicating more of the society's wealth to it.

This conclusion is separate from whether one believes that wealth redistribution is inherently right or wrong: Like me, many (but not all) who share our conclusions about the efficacy of the current welfare state do not believe that some wealth redistribution is necessarily wrong. Some have proposed alternatives that avoid our current system's inherent contradictions but still involve wealth redistribution. (At the top of my list is Charles Murray's "A Plan to Replace the Welfare State.")

I personally am very willing to explore such alternatives, but have no interest in evading reality by discussing imaginary proposals to "square the circle" of the current welfare system's contradictions. Circles don't square, and conceptually flawed systems can't be "reformed."

Sincerely,

Jack McHugh

Is Detroit’s economic plight a bellwether for the nation? “Detroitification,” a phrase coined by my colleague, Jack McHugh, is defined as the hollowing out of the private economy to prop up unsustainable (and often unresponsive) government establishments. Is this an apt description of Washington’s policies?

The comparison seems unavoidable with the federal government spending at a frenetic pace and racking up record debt, while adding to the numbers and cost of government employment. According to USA Today, during the period of the current recession, “The number of federal workers earning six-figure salaries has exploded.” While Americans struggle with unemployment, falling wages, failing businesses and housing foreclosures, federal employees are flourishing on the taxpayer dole. Josh Barro, senior fellow with the Manhattan Institute, refers to this trend as "Two Americas."

One example from USA Today: “When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.” In just one federal agency, the top echelon bureaucrats have padded their generous government packages to the tune of $287,300,000. So much for shared sacrifice.

The decades-long policies that fattened the public sector at the expense of the private have produced tragic results in Detroit. Only if our elected officials realize that the private economy does not exist to provide for the political class, can the nation avoid Detroit’s fate.

And this will only happen if voters bring it to their attention.

The president of the Michigan Education Association stated on the radio recently that school employees have "given and given and given and given." Comparing teacher salaries to personal income demonstrates that the taxpayers who pay for teacher salaries have "given" a lot more.

The National Education Association just released its annual report that compares average teacher salaries throughout the country. For 2009-2010, Michigan ranks 8th. Here's the list:

There's nothing necessarily wrong with Michigan teachers earning high salaries. In fact, even if they took home less pay, benefit packages for public employees are still on average much more generous than those in the private sector. Public school teachers are government employees and are paid with tax dollars, and therefore their wages are inextricably linked to the economic well-being of the state and the wealth of its citizens.

A standard measure of state wealth is per capita personal income. Here's a list from the Bureau of Economic Analysis of the same states above and their per capita personal income rank for 2008.

Michigan has many difficult decisions ahead, especially if Lansing continues its failed economic policies. Based on the numbers above, one issue that must be addressed is whether Michigan can continue to pay teachers "rich state" wages while the taxpayers footing the bill have "poor state" incomes.

Lou Schimmel, a Mackinac Center adjunct scholar, has been appointed to a committee that will investigate whether the city of Pontiac should contract with the Oakland County Sheriff's Office for police services or maintain its own department.

The Oakland Press in this editorial said "We are confident he will keep an open yet fair mind in evaluating the data."

Schimmel has written previously about Pontiac's financial woes, and this issue of Michigan Privatization Report focused exclusively on the city, including this commentary about the Pontiac Police Department.

Even though the state Legislature voted to defund the Michigan Home Based Child Care Council in the current budget, the agency is still operating, and the Department of Human Services, which oversees the MHBCCC, won't tell the Legislature where the money is coming from.

DHS cites a lawsuit filed by the Mackinac Center Legal Foundation as its defense for remaining tight lipped.

One state legislator, however, isn't happy with the "non-answer" answer.

The same forced unionization problem the Mackinac Center Legal Foundation is battling on behalf of home-based day care owners is now stirring up controversy in the in-home health care provider field.

MCLF Director Patrick J. Wright told the Livingston Daily that allowing state agencies to dictate who is or isn't a public-sector union member is bad precedent.

"What is the extent of indirect government money going to a business owner that turns them into a government employee?" Wright asked. He also noted that if these decisions are allowed to stand, there could be nothing to stop the forced unionization of any profession whose clients receive government assistance, such as doctors and landlords.

Jack McHugh, senior legislative analyst, has addressed the in-home health care situation previously.

Even when Gov. Jennifer Granholm picks winners and losers, the winners get knifed in the back.

In her State of the State address Wednesday night, the governor divined six business sectors she says will "transition us to a new economy that's only beginning to emerge." One of those sectors is biotech, which the governor has targeted with state subsidies that, she says, will give Michigan a "competitive advantage" by "diversifying our economy." And she crowed about "33 new life sciences companies" in Kalamazoo created with state assistance.

But what the governor didn't tell her audience is that her budget draws a big fat target on these very pharmaceutical firms by repealing state immunity for drug companies whose products have already been approved by the FDA.

The 1996 drug law was written precisely to help diversify Michigan's economy. That's right - the current administration wasn't the first to understand that autos may not drive Michigan forever. So the FDA pre-emption law was intended to give Michigan a comparative advantage and attract biotech jobs.

"One of the things we foresaw at the time was the need to diversify Michigan's economy," Dick Posthumus, Senate majority leader when the law passed, told Michigan Forward magazine in 2006. "We saw coming what eventually happened, that is the globalization of the auto industry. What we wanted to do was encourage the expansion of the life sciences industry (and to) ensure that a pharmaceutical company working on a life-saving drug wouldn't have to worry about frivolous lawsuits."

The legislation worked. Biotech companies have since invested $355 million and created 12,000 jobs in Michigan with an average yearly wage of more than $60,000. This is precisely the kind of economic diversification Granholm claims she supports - yet she has thrown it overboard to Democrat-friendly trial lawyers.

Apparently the idea is economic diversification for lawyers.

Regardless of whether Michigan receives a share of federal education money under the "Race to the Top" program, new legislation in Michigan could help improve education by opening the door for more charter public schools and using student achievement as a starting point for teacher merit pay.

But Michigan's Public Employment Relations Act could stand in the way. Paul Kersey, director of labor policy, explains why in this Detroit News Op-Ed and how the Legislature can avoid that.

Controversy continues to swirl around the application for tax subsidies associated with a film by Michael Moore that attacks banks for taking bailout money.

The Flint Journal and Detroit News are covering the issue, as is CNSNews.

Tom Gantert, senior correspondent for Capitol Confidential Daily, provides the most up-to-date analysis here. CapCon Daily's coverage also was cited on the The Huffington Post.

Incessant poor-mouthing is a staple of the public school establishment's perennial effort to extract more revenue from taxpayers. However, as described in a previous post, total state funding for Michigan public schools has actually increased by 14 percent this decade in real, inflation-adjusted terms. When combined with a 50,000-student decline in school enrollment, it adds up to our schools spending $2,000 more per pupil in 2008 than at the start of the decade.

From the AnnArbor.com news site comes additional evidence that our schools very well funded indeed:

Nine southeast Michigan school districts paid $25,000 each to a Detroit-area public relations firm to be 'named,' a top school district. That firm, in turn, bought airtime on a Detroit-area television station to broadcast a feature on the state's best schools. A website — bestschoolsinmichigan.com — also features the nine schools.

More indications of how richly this state endows its public school establishment are found in employee compensation figures and comparisons:

• On average, teachers contribute 4 percent to the cost of family health insurance premiums, while the state average is 22 percent.
• Teacher salaries in Michigan averaged $4,079 above the national average (2006-2007 figures); that's the nation's 11th highest, while the state's per-capita personal income has fallen to 37th place and is currently $5,259 below the national average (2008 figures).
• Only Vermont spends a larger portion of its local and state tax revenue on public schools than Michigan.

Beyond suggesting the magnitudes of money sloshing around in this system, the "best schools" pay-to-play scheme illustrates shortcomings in the information we have available on school performance. The education establishment produces an abundance of data in the form of test scores, assessments, etc. — but data is not necessarily useful information. Parents are thus stuck choosing schools based on slick slogans.

We’ve noticed an odd and disturbing trend recently — novel interpretations of labor law being used to thwart the privatization of non-educational services by school districts. State law prohibits collective bargaining over the privatization of non-instructional services (such as transportation, lunch programs or janitorial services), but school districts are getting mixed messages about union authority in this area.

At least two districts in northern Michigan have been advised by the MEA that the recent “Race to the Top” legislative package effectively removed the ban on bargaining over privatization. Based on some admittedly rather turgid language in one of the bills (intended to ensure that unionized employees could submit bids but not to give unions a veto over privatization), the union apparently is taking the position that districts must get union approval on the details of the bidding process.

Officials from at least two school districts in western Michigan refused to accept information on possible savings from privatization that was offered to them by a local company because district officials were operating under the belief that to accept this information prior to soliciting bids would open them up to an unfair labor practice charge.

School districts throughout the state have turned more and more to outsourcing and often found substantial savings. To give just one example, Troy public schools saved $2.7 million by contracting out for custodial services. But privatization often means teachers unions lose members and the dues that go with them. The teachers unions have a lot at stake, and it is in their best interests to prevent privatization wherever they can.

Confusion over state law can serve their purposes when it discourages school districts from taking steps that allow them to save taxpayer funds. While labor law can be complicated and intimidating, school districts and the public should take a union’s claims about its own authority with a proverbial grain of salt.

How does Michigan Capitol Confidential Daily describe itself?

As news coverage in our state capital dwindles, it will become increasingly important to have outside scrutiny of our elected officials and government bureaucracies. We have the team in place to help fill that void. Readers can expect balanced, substantive reporting, aided by insightful analysis, hard data and legal expertise.

Hundreds of thousands of subscribers and readers have embraced the bimonthly print edition of Capitol Confidential over the past two years. Now, that same in-depth analysis of legislative action the conventional media cannot or will not cover is available online, with new content posted every day.

And what better time to unveil this new feature than right after Gov. Jennifer Granholm's final State of the State address? Video of the "State of the Citizen" rally outside the capitol, analysis of the governor's speech and coverage of other policy issues that impact you await.

Last week Oregon voters approved a ballot initiative imposing a $700 million hike in business and personal income taxes. The Wall Street Journal reports that the government employee unions which funded the effort spent some $6.5 million, or $2 million more than business and taxpayer advocates raised to oppose it. 

Here's how the Journal described the outcome:

The teachers unions exulted yesterday that Oregonians voted to "protect our schools and vital public services." What was really protected was the $83,402 a year average in pay and benefits to Oregon state workers, 30% higher than what private workers receive

Expect the success of Oregon's public employee unions to embolden similar groups in other states, including Michigan. Indeed, the campaign here is already underway. MIRS News reported Tuesday on a state Capitol press conference organized by a group calling itself A Better Michigan Future (BMF), in which spokespersons and members of the coalition behind it made their case for a graduated income tax, and for imposing the state sales tax on services.

Many in the press, the political class, government spending interests and even some business interests have been claiming that Michigan's tax system is "out of sync" with the 21st century economy and needs to be "restructured." However, the Mackinac Center's James Hohman has disproven the assertion that this state's tax system is "underperforming," showing that it is actually extracting a greater amount of revenue per unit of economic activity than other states, even as the level of economic activity here declines.

Nevertheless, the claim has provided a rhetorical "hook" on which this entity's coalition of government employee unions and special interest groups (see list below) - all or most of which support a higher level of overall taxation in this state - is hanging some of it's arguments.

From A Better Michigan Future Web site:

Organizations that support A Better Michigan Future's plan:

AFL-CIO

America Federation of Teachers/Michigan Federation of Teachers

The Arc Michigan

Citizens for Better Care

Common Cause

Global Behavior Education

Michigan AFSCME Council 25

Michigan Association of Pupil Transportation

Michigan Citizen Action

Michigan Council on Crime and Delinquency

Michigan Education Association

Michigan Environmental Council

Michigan League for Human Services

Michigan Nurses Association

Michigan Primary Care Association

Michigan Professional Firefighters Association

Michigan State Employees Association-AFSCME Local 5

Middle Cities Education Association

PHI of Michigan

Planned Parenthood

Pride at Work-Michigan

Progress Michigan

School Community Health Alliance

Small and Rural Schools

United Auto Workers Michigan CAP

Unitarian Universalist Social Justice Network

Van Buren Legislative Consortium

News Advisory
Wednesday, Feb. 3, 2010
Contact: Michael D. Jahr
Senior Director of Communications
989-631-0900

Tally of Proposed Government Expansions and Limitations in State of the State Address Available Wednesday Night

Mackinac Center experts available before and after for analysis of economic development, budget, education and other proposals

 MIDLAND - Mackinac Center Fiscal Policy Director Michael D. LaFaive on Wednesday will continue his tradition of counting and categorizing new initiatives offered by Michigan governors in their annual State of the State addresses. Mackinac Center analysts will compare the total number of proposed government expansions and limitations in this year's address to gubernatorial speeches dating to 1969.

"As Gov. Granholm begins her year-long political goodbye, she should stop tilting at economic development windmills - government programs designed to 'create' jobs - and work on lowering the cost of living, working and investing in Michigan for everyone," said LaFaive.

According to news reports, the governor will once again make jobs the focus of her address. She has done this in the past, most famously four years ago when she predicted we would be "blown away" by all of the jobs that would be created in five years, if only the state would embrace her newest economic development program. LaFaive points out that these incentive programs haven't worked.

"Gov. Granholm has presided over one of the most significant declines in the fortunes of Michigan and its residents in state history," said LaFaive. "No amount of state tax subsidies for green jobs, filmmaking or Cool Cities programs will reverse the damage done by the $1.4 billion tax hike, fee hikes, new licensing regimes and regulations imposed on our economy during her tenure."

LaFaive has authored a detailed essay about the State of the State address, which can be found at www.mackinac.org/12043.

The 2010 "scorecard" will be posted on the Center's Web site shortly after the completion of Gov. Granholm's speech. LaFaiveand other analysts will also be available for comment, including Mackinac Center Senior Legislative Analyst Jack McHugh and Education Policy Director Michael Van Beek.

#####

Gov. Jennifer Granholm gives her last State of the State speech tonight.

Mackinac Center analysts have reviewed each State of the State speech dating back to 1969 and tallied the number of proposed expansions and limitations of government that each governor has offered. The "scorecard" of proposals below provides some insight into each administration's desire to see government solve perceived public policy problems.

These counts are not an exact science, but determining whether a proposal expands or limits state government is usually not too difficult.

Below is a set of historical averages covering the administrations of Governors William Milliken, James Blanchard, John Engler and Jennifer Granholm.

Expansions and Limitations by Administration
since 1969

The "proposed expansions" average for Gov. Granholm changes to 17.4 if one adopts the written text of her State of the State addresses as posted on the governor's Web site for the official tally. Also, portions of this blog post were excerpted from a commentary posted last year after the 2009 State of the State speech.

By this measure, Gov. Granholm's legacy will include an obvious desire to expand the depth and breadth of state involvement in our life - and comparatively, by a wide margin.

A new study published in Environment Science and Technology analyzes the environmental impact of school choice policies in St. Paul, Minn. The authors found that eliminating school choice would lower emissions rates 3 to 8 times and curb the "significant environmental consequences" of providing more educational opportunities for children.

The authors arrive at their conclusion by analyzing the travel patterns for 803 survey respondents and then applied those findings to the entire St. Paul school district. Students attending the school assigned to them by the state were more likely to walk or have a short commute to school. Students participating in schools of choice programs, however, traveled on average a longer distance to school and thus contributed to the emission of more pollutants into the atmosphere.

Fortunately, school choice programs can offset these "significant environmental consequences" with significant educational consequences. Nine out of 10 scientific studies link school choice programs to higher student achievement. In fact, a brand new study of the Milwaukee voucher system, which operates on less than half the per-pupil funding of Milwaukee Public Schools, found that participating students are 12 percent more likely to graduate than nonparticipating ones.

The study of St. Paul did not analyze the environmental impact of homeschoolers.

David Littmann, senior economist for the Mackinac Center, was a guest on "The Frank Beckmann Show" on WJR AM760 Monday morning. He discussed Michigan's economic woes and proposed spending cuts Gov. Jennifer Granholm is said to recommend in her "State of the State" address Wednesday night.

Michael LaFaive, director of the Morey Fiscal Policy Initiative, told The Detroit News that he is impressed by Gov. Granholm's calls to offer retirements incentives for state employees and restructure parts of their benefits. "It appears she wants to make the tough calls that will reduce the cost of government."

It may be too little, too late, however. LaFaive explained in a different Detroit News story that Granholm overall has relied on "symbolism over substantive policy," whose focus was on "job announcements, not real jobs."

Media interest continues to abound over the story Mackinac Center analysts broke Thursday about filmmaker Michael Moore's latest movie being approved for a taxpayer-funded subsidy under the Michigan Film Incentive.

Fox News, The Hawaii Reporter, Detroit Examiner and The Calgary Beacon covered the story, while The Detroit News included it in Saturday's "Editorial Quick Hits." Financial News Watch included a post Sunday. The Nashville Tennessean and The Dallas Morning News also linked to other coverage.

Popular political blogs, such as Hot Air and The American Spectator, have also picked up on the issue, as has a famous Hollywood columnist.

Read about other Michael Moore coverage by Mackinac Center scholars here and here.

Michael Van Beek, director of education funding, writes in an Op-Ed in Sunday's Lansing State Journal that "Proposal A is a marked improvement over the previous method of financing public education, and Michigan schools, students and taxpayers have all benefited from it."

Van Beek also has assembled several resources to help address the question, "Are schools underfunded?"

Writing for the MSU Capital News Service, Chenqi Guo reports the following:

"Several thousand physicians have left the state after their residency programs or during their practices, according to Gregory Forzley, board chair of the Michigan State Medical Society (MSMS). The situation could be worse since an 8 percent cut in Medicaid and Medicare reimbursement rates was approved on Sept. 30, 2009. The total number of physicians licensed in Michigan is 42,960 and about 27 percent of them work outside Michigan, according to the state's 2009 physician licensure report."

One of the realities driving the push for a government takeover of the American health care market is the unsustainability of current government health care programs, including Medicaid, which provides coverage for low-income persons. (In Michigan, spending on this and related health programs for the poor has skyrocketed from $8.2 billion in 2000 to nearly $13 billion this year.)

Medicaid is a good example of how "coverage" does not equal "care." In addition to a declining number of doctors, the number of those who report that they accept Medicaid patients is also down, according to the annual survey cited above, from 89 percent in 2006 to 85 percent in the 2009 report. And that was before the last year's compensation cuts kicked in. Also, many of these doctors report that their practice is "full" or "nearly full," and the number of Medicaid patients they actually accept is not reported, so challenges for a person seeking care under this government program (even though he or she has "coverage") are greater than even these figures suggest.

Medicare (the government health program for the elderly) also pays below-market compensation rates to providers, but not as low as Medicaid. The government health care takeover pending in Congress would essentially convert the entire system into a version of Medicare/Medicaid, subject to all the same perverse incentives and dysfunctions.

Single-payer fans always seem to ignore what happens when the forgotten man of socialized medicine — the doctor — just "shrugs" and walks off the job.

(Last fall the Mackinac Center documented the painful consequences suffered by some individuals currently living under such system.)

H/T: John Graham, Pacific Research Institute