May 24, 2010
Bad news for Republicans: the economy is improving on both the state and the national levels
LANSING -- Republicans on the House and Senate Appropriations Committees appeared angry that economists at the Consensus Revenue Estimating Conference on Friday were saying the economy is improving on both the state and the national level.
All the agencies at the conference - the Department of Treasury, the nonpartisan Senate Fiscal Agency and the House Fiscal Agency, as well as the outside economists who testified at the conference - all agreed that the economy had improved and the national economy was slowly coming out of the worst recession since the Great Depression. But it will be a slow recovery, and Michigan has traditionally felt any recession first and is the last state to recover.
“We are in a self-sustaining recovery,” said Lyle Gramley, an economist of the Potomac Research Group. “ We will see much more handsome job increases, but we will have some assets idle for a while.”
But Michigan will continue to have budget troubles for the next couple of years as the recovery from the Bush recession gets going. The general fund deficit for the current fiscal year is estimated at $340 million.
Treasurer Robert Kleine speaking at his last revenue estimating conference as Treasurer said corporate profits for the top corporations are up 56 percent, according to Standard & Poor's.
“Contrary to what you read in the newspapers, Michigan is participating in the economic recovery,” he said. “The last time we had job growth like this was in 2000.”
Obviously, Michigan is not out of the woods and happy days are not yet here, but this is the first good news at a Revenue Estimating Conference in some time. Kleine said much of the revenue shortfall, and all the economists agreed, that the decreased collections, along with substantially increased refunds from the Michigan Business Tax, were driving down the total of general fund revenues the state could collect for the current year. The state is struggling with a revenue problem, not a spending problem,
“What this means is people are paying less of their income to support state services,” Kleine said. “What that means is we have a revenue problem, not a spending problem.”
George Fulton, Director of the Research Seminar in Quantative Economics at the University of Michigan, said the 286,00 jobs lost in Michigan in 2009 were the most since the 1930s, and one in five auto related jobs were lost.
But he also said the Big 3 is showing the largest increase in sales since 1995, and the job growth the state has seen in the last several months has been quite dramatic. All that good news is bad news for Republicans for the November election, and they did their best to try to cast gloom and doom on the good news.
But all the economists present anticipated that Michigan will finally see job growth in 2011 after a full decade of job losses. In Michigan, after averages of 14.4 percent unemployment in 2009, the unemployment rate should drop to 13.8 percent on average in 2010 and to 12.9 percent in 2011, according to Fulton. The national unemployment rate, which stood at 9.9 percent in April and averaged more than 9 percent in 2009, will stay at roughly that level for 2010 and 2011.
“The economy has stabilized over the last couple of months,” Fulton said. “Where we go from here depends on the strength of the U.S. recovery and the success of the Big 3.