MICHIGAN'S FUTURE - BEYOND BLEAK
November 26, 2008
Michigan citizens are still waiting for Gov. Granholm to make good on
her promise to blow them away by pulling the state’s economy out
of the sewer, it appears that the only thing waving in the wind is her
Over the past eight years and as of Sept. 28, 2008, Michigan has lost at least 315,000 manufacturing jobs, a reduction of 35.5 percent since the year 2000. Since it seems that, daily, the state’s newspapers carry more and more stories about failing businesses, job losses, or employee layoffs while at risk companies restructure, God only knows how many more non-manufacturing jobs were lost during that time, as well as from both job sectors in October ‘08 and during the first weeks of November.
Figures toted in a recent New York Times article, ‘Economy Is Only Issue for Michigan Governor’ written by Monica Davey and Susan Saulney, indicate that the net job loss since Granholm took office stands at 281,500, a figure that’s likely escalated already. According to that article, however, and to her credit, a spokesperson from her office claims that since taking the helm, Granholm has brought 120,800 new jobs to Michigan.
However, let’s consider a few things before an atta-girl is extended to the current captain of Michigan’s floundering Ship of State. Granholm took office in 2003 when the state unemployment rate was 6.2% and the national average was 5.7%. By the end of 2003, Michigan’s jobless rate had climbed to 7.2% while the national average remained steady. At the end of Granholm’s first year in office, there had been a one-year job loss of 35,000, but the unemployment numbers only reflected an additional 4,000 people out of work because 31,000 folks left the state.
During 2004, 35,000 more people moved out and the state’s jobless rate stood at 7.3% compared to the national average of 5.5%. Although people continued to flee the state, things improved a tad in 2005, as Michigan’s jobless rate dipped to 6.1% and the national rate fell to 4.2 percent. However, by the end of 2006, Michigan had again lost over 150,000 people and was showing a jobless rate of 7.2% while the national average increased slightly to 5.0 percent. During 2007, Michigan lost another 120,000 jobs, and at the end of the year the state’s jobless rate was 7.6% compared to a national average of 4.9%.
Things do not bode well for Michigan this year, either. Even though the state’s jobless rate for September briefly fell to second place nationally with 8.7% behind Rhode Island’s 8.8%, the glory was short lived. Headlines on Nov. 19th indicated that the state’s jobless rate for Oct. ‘08 stood at 9.3% compared to the national rate of 6.5%, and some economists are projecting that the figure will climb into the double digits within months.
Today, Nov. 19th, as this article is being written and as Congress is debating the merits of bailing out the state’s automakers, Ms. Granholm, accompanied by some of her ‘economic team’ toadies, is on an ‘investment mission’ in the Middle East, purportedly romancing more foreign companies to set up shop in the Great Take State. Her seven-day jaunt, which began on Nov. 14th, was her seventh such overseas trip since 2004. Her SEVENTH trip in four years to bring industry to Michigan, and the state is still hemorrhaging jobs and people!
According to a recent press release from the Gov’s office, little Miss Blow You Away planned to meet with alternative energy companies in Israel and Jordan to discuss such things as wireless energy and water re-use. She also planned to call on venture capital firms and business leaders in Dubai, as well as pharmaceutical companies that apparently already ‘invest’ in Michigan companies.
One such pharmaceutical company mentioned in one of her press releases was Perrigo, which is based in downstate Allegan. Perrigo bills itself as the nation’s largest manufacturer of store brand over-the-counter pharmaceuticals, as well as nutritional products sold by supermarkets and drug and mass-merchandise chains such as WalMart, Walgreens and Target. In 2004, Perrigo acquired Agis Industries, the second largest pharmaceutical company in Israel. Why the Governor and her entourage called on Perrigo in Israel rather than in Allegan. Michigan wasn’t disclosed.
PowerMat is an Israeli wireless energy company that so interests the guv that she planned to stop by on her Middle East junket to promote Michigan. The company claims it can turn any surface into a power source, be it table, wall, floor, or even sheetrock. However, it seems that PowerMat, which was founded in 2007, has already entered into a deal with Michigan’s Commerce Township-based HoMedics to form another entity, HoMedics PowerMat North America, to market and distribute products equipped with PowerMat’s technology.
it should be apparent that these overseas trips have done little to
staunch job losses in Michigan or alleviate another financial problem
the state has been facing, but only now is coming to light in big city
Michigan workers who lose their jobs usually can count on 26 weeks of unemployment compensation, generally a paltry maximum of $362 per week, providing they meet eligibility requirements. However, news making the headlines in some downstate papers last week is that Michigan’s Unemployment Compensation Fund has been depleted for a couple of years and the state has already had to borrow from the federal government to pay unemployment benefits to an estimated 650,000 people this year.
As of Oct. 2nd, the outstanding balance on this year’s loan was at least $376 million, but more recent reports put that sum at around $473 million, which will start accruing interest in January of 2009. Michigan, of course, has no way to repay that loan, though the powers that be have somehow managed to do so in the past. For instance, in 2007 Michigan borrowed $637 million from the feds even though the state’s budget was in total disarray and government lay-offs and shutdowns were threatened.
Perhaps this year, Peter’s coffer is so thin that there’s nothing left to rob in order to pay Paul, although some legislators may be eyeballing treasure chests, such as the state’s Natural Resource Trust Fund, that could possibly be pilfered so as to meet the State’s financial obligations, namely the outstanding federal loan needed for unemployed workers.
Interestingly, as of 2001, the state’s Unemployment Compensation Fund showed a positive balance of $3 billion and a balance of a little over $1.7 billion two years later. However, in 2003 Granholm signed legislation that temporarily extended unemployment benefits from 26 weeks to 39 weeks, further depleting the fund by an additional $206 million. Perhaps that maneuver bought enough votes for her to get reelected, but certainly it must be a bitter pill to swallow now considering that Mother Hubbard’s cupboard is filled with cobwebs rather than juicy bones for the unemployed.
Interestingly, there was a bill pending in the Michigan Senate that would have again extended unemployment bennies for 39 weeks, rather than the standard 26 weeks. It was introduced on Jan. 25, 2007 by Ray Basham (D-Taylor) and referred to the Committee on Commerce and Tourism on the same day. As the State couldn’t foot the bill for unemployment bennies without borrowing in ‘07, how ever would the legislators have rationalized passing a bill that would have increased the onus?
Over the past week or so, approximately 40,000 Michigan employers have been given notice that they will be dunned an extra $67.50 per employee as of Jan. 2009 to help repay the federal loan and interest it generates. As best as can be understood from the politically correct, fair and balanced reports written with a lot of flowery mumbo-jumbo words and published in the Lame Street Media press, this so called ‘solvency tax’ will affect businesses whose laid-off workers have collected more in unemployment benefits than their employers paid into the state’s unemployment fund. What isn’t being written, however, is that Michigan has managed to deplete the cushion provided by those many employers who pay into the fund, but whose workers have drawn nothing from it.
If the state has to borrow more money, the ‘solvency tax’ will be increased, and the more employees that are laid off, the worse the business owners’ tax onus will be. This is definitely not one of Granholm’s ‘win-win’ situations to be in, especially when the state’s already tanked economy is tanking even more.
Additionally, in 2010 most Michigan employers, not just those whose workers have drawn from the unemployment fund, will be forced to ante up a surcharge of $21 per employee to pay off Michigan’s debt to the federal unemployment system. This will be in addition to each business owner’s unemployment taxes that are applied to the first $9,000 of each of their employee’s wages. The unemployment tax rate ranges between 0.06% and 10.3% per employee. Ironically, while long term Michigan businesses have been taxed to death for years, Ms. Blow You Away continues to romance foreigners and start-up companies in other states to invest in Michigan by promising those businessmen all sorts of tax breaks.
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Care to venture a bet on how many more businesses will fail in the Great Take State during 2009 and how many more people will join the unemployment line, making the situation even bleaker?
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