September – October 2014 Commentary

Republican vs. Democrat boxing match cartoon
Illustration by Gary Hovland

Government – Path to Prosperity

The nation’s economy is in its sixth year of expansion, yet consumer spending remains tepid and the unemployment rate is lower than it should be because fewer people are actively looking for work. That could spell trouble for next year, when the more than 30 provisions of the Affordable Care Act that President Obama has altered or delayed begin to take effect.

Inside The NumbersOur political leaders were elected to move the country forward on a path of ever-greater prosperity, but the distrustful relationship between the White House and the Republican Party is hurting the economy. It’s one reason why job gains have puttered along since the 2008 global financial crisis. In fact, the participation rate of the labor force was at 62.8 percent at the end of June — the lowest in 30 years.

Notwithstanding a sudden bond between the political parties, it’s clear the last two years of the Obama administration won’t be productive. Already, House Speaker John Boehner has filed a lawsuit to reinstate Congress’s role in the Constitution’s separation of powers; as the Constitution states: “All legislative powers herein granted shall be vested in the Congress of the United States, which shall consist of a Senate and a House of Representatives.”

The lawsuit represents yet another distraction in the political process, and firth serves to draw attention away from economic expansion. In fact, there are myriad avenues of growth the White House and Congress should be working on in earnest, including immigration reform, lowering tax rates that keep American corporations from moving their headquarters overseas, eliminating the tax on medical devices, and approval of the Keystone pipeline, to name a few.

Imagine if Obama’s early campaign promise had held true: that he would work with the Republican Party to effect “hope and change” for the betterment of citizens. (And he’s not alone; nearly every other presidential candidate has proclaimed the same thing, yet no one has been able to bring such a promise to fruition.)

The problem in Washington today — in fact, it’s also a problem in many states — is that there is a lack of respect for divergent opinions, and the politicians seem to be un- able to work together for the common good.

Everyone has given up on Detroit, but that’s what’s galvanizing — not because it’s easy, but because it’s hard.

— Steve Case, co-founder, former chairman, and CEO, AOL*

*Case visited Detroit in June for the Rise of the Rest competition.

There is, however, an elected leader in Michigan who has shown that one can lead and effect positive economic change without succumbing to political bickering. Gov. Rick Snyder may lack the charisma of Obama, but he doesn’t attack the other side when he doesn’t get his way. No other state in the last four years has undergone a greater fiscal rebound than Michigan. The president and Congress should take note.

Utilities – Protect the Grid

As the Federal Energy Regulatory Commission studies new safety regulations to protect the nation’s electrical grid, it must move quickly to call on utilities to better fortify vulnerable substations and other high-voltage transmission equipment. One analysis shows that taking out nine key substations could result in a nationwide blackout.

In metro Detroit, shutting down three or four substations could result in a blackout lasting three months or more. The biggest challenge: Protecting large transformers, which cost millions of dollars, weigh hundreds of tons, and are difficult to transport. Utilities have few, if any, transformers in storage.

One defense against a terrorist attack is the installation of ballistic shields around trans- formers. Another is the installment of cameras both inside and outside a substation. The cameras, along with infrared sensors and motion-detection devices, can be moni- tored remotely. If something looks suspicious, security personnel can alert the nearest first responders.

Other key infrastructure should be monitored, as well. If the Soo Locks, for example, were shut down for more than 30 days, the manufacturing industry in Michigan and surrounding states would be crippled. The same goes for major crossings like the Ambassador Bridge, and Michigan’s border at large. It’s better to spend the money to protect the grid and other key assets rather than run the risk of destabilizing large areas of the population.

Economic Growth – Pedal to the Medal

To be among the top 10 states for economic growth, Michigan must continue to reduce taxes, eliminate more out-of-date or onerous regulations, open up additional energy sources like oil and natural gas, and reduce its debt load. By most measures, Texas is the fast-growing state due to a mixture of low taxes, limited regulations, and a growing energy market.

To be sure, Texas has no income tax and offers low electrical and gas prices relative to other states, while its debt load is among the lowest in the country. Michigan should follow Texas’ lead and support lower tax measures like the recent elimination of the personal property tax, which annually assessed businesses for equipment including computers, machinery, and furniture.

In addition, the federal government could help every state by reducing the U.S. tax rate of 35 percent — the highest among developed nations. Regulations, meanwhile, are out of control. There are more than 3,300 laws in the works, and the 2013 Federal Register offered 80,000 pages of new regulations, rules, and notices. That’s not a recipe for growth.

Michigan also must invest more in infrastructure, including roads, bridges, ports, and a proposed rail tunnel between Detroit and Windsor. Combined with more than $600 million in improvements at Junction Yard in southwest Detroit, the state’s main rail transfer facility, a new rail tunnel would draw more cargo from Europe and Asia. What’s more, the state could create hundreds of jobs by preparing that freight for final shipment throughout the Midwest.