Out of the Frying Pan…

July 7, 2010

Recently (as in last week), I moved back from the Bay Area of California to my hometown in Metro Detroit.  I spent about 4-1/2 years in CA, mainly around SF, and I’ve seen enough to recognize that the two states are running on parallel paths with respect to fiscal discipline.

The difference is that the demise of the Big Three hastened the general fiscal crisis/one-state depression that is Michigan.  Subsequently, housing prices dropped as foreclosures hit the market–much earlier than CA and many other states.  For example, I’m looking at houses right now, most of them ready-to-move-in and in good neighborhoods, with prices right around $30k, give or take a couple thousand.  Monthly payments would be around $180, and that’s on a 15-year mortgage!  The point is, the same thing is happening now to CA.  But they’re about 3 years behind where Michigan is at, in my estimation.

I believe MI could really experience a renaissance, an rapid influx of people and new businesses (and therefore, tax revenue), by doing a few simple things.  The number one factor already in place is what I already mentioned above: Cheap housing.  Houses are sitting empty, ready for people to move in, often with minimal fix-up work.

Second, make it easier for businesses to stay in Michigan.  Many manufacturing jobs have fled the state to the South (of the US) and also out of the US because of high costs of production in MI due to increasing regulations and influence of unions to increase pay.  Professional jobs run along the same lines, minus the union issue.  White collar jobs often follow the manufacturing base, or move because of the next reason, which is…

…hostile tax and regulatory policies at a state and local level.  Make it easier for companies to stay/enter the Michigan business landscape.  The feedback loop of increased costs from tax and regulation, businesses leaving the state for greener pastures, state/local gov’t raising taxes and fees to cover losses due to dwindling tax base, repeat, repeat, repeat–you get the picture.  Businesses, like just about everything else in life, take the path of least resistance.  You drop a basketball on the top of a hill, it will go downhill, not up.  Water looks for the cracks in a container and leaks out.  Not in.  Michigan–and California and a host of other more progressive states–are leaking vessels.

These states aren’t all bad.  Michigan has a booming west side in the Grand Rapids area.  Silicon Valley is still alive and kicking (although some of those tech jobs have moved to places like Salt Lake City).  But municipalities that are doing it the right way are increasingly at the mercy of poor fiscal discipline at the state level.

So why did I jump from the frying pan of CA into the fire of MI?  Family, the ties that bind.  That, and I can buy a house for $30, 000.  Just as long as I can find a job.

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