Michigan is no longer in a recession; it’s in a downward spiral,” says Littmann, from the neat-as-a-pin family room of his home on Braemer Lake near Holly. “The word recession no longer applies unless you think of it as a recession in perpetuity. This state is locked in a vicious downward cycle of bad policies that disenfranchise would-be entrepreneurs and make it much more advantageous for people to leave the state for jobs and startups elsewhere.”
As Littmann launches into an intense, and often sobering, discussion of why Michigan finds itself in this unenviable position, he pays little attention to the placid lake outside the white, gabled home he and his wife, Esther, moved to after he retired in 2005. His career included creating some of the best-known economic indexes, such as the auto-affordability index and the recession watch. Littmann, 66, has also won prestigious awards such as the 2003 Lawrence R. Klein Award for Blue Chip Forecast Accuracy, which he won for correctly forecasting the economy from 1998 to 2002 — four of the most volatile years of the past two decades — despite being just two years from retirement.
The intensity of thought and passion for economics that journalists, politicians, and everyday citizens remember from media interviews, editorials, and speeches remains as strong in Littmann as a retiree as when he was the man many depended on to take the temperature of Michigan’s economy — and take politicians to task for their fiscal policies.
“Gov. Granholm can throw another $2 billion into education here, but if the business climate isn’t competitive, our graduates are just going to be exports to the other states that are going to eat our lunch — and dinner — now,” he says, not laughing at his slight joke. “But that’s exactly what’s happening, and no matter what positive recommendations I might offer or others might offer, you have to have an educated populace that can vote for policies that are market-oriented and not simply vote for a high-profile politician.”
The conversation is pure Littmann, an MIT-trained economist who also holds a master’s degree in economics from the University of Michigan in Ann Arbor. A student of Adam Smith, he rarely misses an opportunity to express his frustration with politicians who don’t understand or even believe in free-market economics. But he and his wife, who often serves as a tempering force for his outspoken opinions, rarely miss a chance to talk about the potential of Michigan and its citizens.
“I understand from economics and philosophy that everyone has a comparative advantage,” he says. “To underestimate people’s abilities is to make them slaves to your own policies, which is what I see happening today in Michigan and the country. It’s not a way to bring out excellence or even the expectation of excellence.”
This focus on the individual is something many people who know Littmann point out when they describe what sets him apart from other economists.
“Some economists are mesmerized by numbers. But Dave looks behind the numbers and sees real people making real decisions based on the incentives and disincentives they face every day,” says Lawrence Reed, director of the Mackinac Center for Public Policy, based in Midland, Mich., where Littmann serves as senior economist. “He thinks about the long run, not just the moment or what strikes the eye. That makes him a great analyst who cuts right through the political snake oil that too often taints public policy discussion.”
Even people who have been on the receiving end of his pointed assessments of how government intrusion always messes up a free-market system admit that Littmann’s opinions are generally based in a deep knowledge of economics and a belief in the power of the individual, even if they don’t always agree with him. Moreover, those who know him consider him to be one of the most humble and compassionate people they know, despite the acerbic and sometimes tough talk that he uses to convey his thoughts on economics and politics.
Both Gov. Jennifer Granholm and former Gov. John Engler declined to comment for this story.
Littmann’s belief in the power of free markets — and the power of the individual — stretches back more than 40 years to when he took part in a co-op program at Antioch College in Yellow Springs, Ohio, that gave him the opportunity to study at and sit for exams at the London School of Economics in the 1960s.
“I saw it every time I walked down to the Strand,” he says. “I’ll never forget the headlines: ‘Brain Drain Continues.’ So what’s the government reaction? In places like France, they said no one will work more than 35 hours a week. They take all these socialist and Marxist type theories that have no examples of working for anyone’s prosperity or security, and they superimpose policy that’s top-heavy and experience-light on what had worked, which was a market system.”
Those walks and classes in economics led and taught by the major economic theorists of the day were a world away from America’s Midwest, where Littmann grew up after World War II. Born in Clayton, Missouri (or ‘Missour-ah’ as Littmann calls it, with a touch of a mid-Southern accent), Littmann grew up in a family of five in the St. Louis suburb. His father was a physician and his mother a stay-at-home mom.
At 18, he and his twin brother went to Antioch, where Littmann chose economics — not out of a love for the science, but because it was the thing he knew least about, he says.
“I had a sense that economics was perhaps the single-most important driver in understanding the world about us,” he says. “It was the avenue that all of commerce and all of culture comes through.”
He says all of these were vague notions until, as a college freshman, he began reading Adam Smith and the French sociologist Emile Durkheim, whose readings gave him insight into individuality and humanity. Antioch’s co-op program with the London School of Economics also came with the promise of expanding Littmann’s understanding of economics beyond the small liberal arts college, which had just two economics professors. “London was a smorgasbord,” he says, after Antioch, where one of the economics professors was on sabbatical and the other was, as Littmann calls him, “an old-time labor economist.”
He spent a year in London, with part of the time spent on a farm in French-speaking Switzerland polishing his language skills, and the other sitting in classes that remain powerful influences on him even now. He returned to the United States and received an S.M. in economics from MIT. But he moved to the University of Michigan in search of something beyond what was expected of MIT economics grads — teaching.
“I think 80 percent of economists see economics as an end in itself,” Littmann says. “But I saw it as a means to an end, as something very practical that you could use in the business sphere.”
While Michigan didn’t quite live up to all those professional expectations, it did introduce him to Esther Gorny, a German immigrant who was teaching German and English at the university. They married in 1967. They have three children, Ruth, Dan, and Alan, and five grandchildren, with another on the way.
The decision to move to Michigan would also take him into Detroit in the summer of 1967 — and begin his long education in what can happen to a city amid tumultuous times.
Like many Detroiters, Littmann remembers that summer with vivid clarity.
His first job in Detroit was at Burroughs Corp., one of the early leaders in computing technology. (In 1986, Burroughs merged with Sperry Corp. to become Unisys.) His first day on the job, in late July, no one showed up to work because the National Guard had been deployed into the neighborhood surrounding Burroughs’ headquarters north of Wayne State University. But the second day, worried about the perfect attendance record that was required by all new hires at Burroughs, Littmann headed to his office. “I regret I did it,” he says. “There were tanks and jeeps and soldiers with machine guns. Burroughs … lost a contract employee when she was shot in her hotel room by a sniper.”
After motoring south on the Lodge Freeway, Littmann recalls he unbuckled his seat belt, which snapped back and clanged loudly against the car door. “My windows were open, it was hot like it had been for much of the summer. People jumped in their seats at the sound. They were that scared,” he says.
That history has left huge impressions on Littmann and deeply informed his economic research. In August 1970, he left Burroughs to join Manufacturers National Bank, which in 1992 would become part of Comerica Bank. For the next 35 years, he worked in the heart of downtown Detroit. “I’ve seen a lot of deterioration in this city,” he says. “It’s not really the thing you want to see, but it inspired me.”
In the mid-1970s, Detroit’s downward cycle inspired him to create the first of several economic indexes that he would become known for during the course of his career. The business-activity index has tracked the cycles of the city since the 1950s and continues today. Littmann expanded it out to the Michigan business-activity index in 1978. He also created the auto-affordability index and a recession-watch index for the national economy.
Those indexes put him in front of the public through speeches and increasing conversations with the media, including frequent appearances on WJR over the years, as his boss and mentor Paul Martzkova, executive vice president and chief financial officer, gave him more and more responsibility. “Paul stressed the value of monetary policy, which had been downgraded and derided,” Littmann says. “At the time, all [that] economists seemed to think about was Keynesian fiscal policy. But to forecast properly, you need to look at both or you have a tremendous gap in the analysis.”
His work also gave him a body of research to call on as he tried to educate people — politicians, mostly — about his position on why government intervention into markets often ended badly. “Michigan was once the epitome of innovation and entrepreneurship,” he says. “We had a lot of self-sufficiency, and it wasn’t only in automotive, but agriculture and entertainment.” But unlike others who would like Michigan to go back to the past and bet heavily on old industries — and even subsidize them — Littmann thinks that Michigan needs to remember “why” it was great in those days — not the “how,” as he puts it.
“Politicians are always thinking of the ‘how’ of economic development,” he says, such as building a light-rail system or subsidizing certain industries with tax rebates. “They’re rarely thinking of the why.” The “why” is the drive for creativity, innovation, and entrepreneurship that Littmann believes has been eroded by too much emphasis on government involvement and redistributive politics — in plain-speak, taxation and government spending — and not enough on the free market that he puts so much faith in.
But if Littmann preached the ideas of a free market and individualism, he also practiced it, say people who had him as a boss throughout the years.
Tom Shull worked with Littmann when Shull was serving as executive director of the Detroit office of the Heartland Institute, a free-market think tank based in Chicago. Littmann was on the institute’s board of advisers and oversaw Shull’s work.
“Dave’s primary theme in teaching was always positive and motivating,” says Shull, who is now the senior editor at the Mackinac Center for Public Policy. “He addressed my weaknesses, but he also helped me learn from them. In the end, I wanted to do well for him. Here was a guy who knew how the world worked, and I wanted to match him.” Shull says Littmann also never believed that just because he had degrees from MIT and U-M, it made him any better or more capable than the next person. “Dave likes to make his own decisions,” Shull says. “He thinks that other people should have that same right. He believes in the freedom of action for people themselves.”
Shull and Littmann may have seemed like an odd team. Shull was a young man in his 20s, fresh from the Peace Corps in Tanzania. Littmann was the older guy settling down with children and a vice president’s title. But Shull says the lessons — far beyond the economic ones — have stayed with him for decades.
Shull says he remembers Littmann telling him to “keep 10 percent of the work week for yourself.” He says Littmann believes that people needed time when there wasn’t a deadline to meet or a client to see to think and understand the world. “You’d never look at Dave and say he was sandbagging or biding his time,” Shull says. “But he knew that he needed time to recharge his batteries. He said that’s when he had his best ideas. He knew that he needed time to think big thoughts.”
Such recharging may be why Littmann is a leader in his field, despite never accepting notable invitations to serve on the nation’s council of economic advisers or work for a larger bank.
“It was amazing to retire as an economist from the same company,” Littmann says. “I got to be a person who practices the laws of economics and tries to pass them along for 35 years. I was given other opportunities, but I thought it was better to remain here. I had the indices and they were extremely transferable. I was doing research and applying it, and that gave me a tremendous amount of flexibility.”
Despite how much Littmann obviously loved his job — and still loves economics — his career has come with frustrations. Shull says that while Littmann is always a gentleman to everyone — even politicians who he has taken to task for their policies — he has no doubt that there are times when “I’m sure he lets his hair down and there’s kvetching and griping.”
Littmann will own up to that. Indeed, he worries that his wife has gotten tired of listening to his often-pessimistic views of Michigan’s economy. And, he says with a sigh, “sometimes I get tired of talking about it, as well.”
Mrs. Littmann, who holds a doctorate in German, says that over the years she has learned more and more from her husband’s passion for economics. “First, I learned from reading his writings. I had taught English so he asked me to proofread them,” she says. But once their children were old enough to afford time for longer conversations, she came to understand her husband’s work even more, and offered her insights as a consumer and served as a moderating force. “I do try to see if he can be more optimistic sometimes,” she says. “But David never wants to offer a panacea. David’s appeals are passionate, and he has strong convictions.”
Those convictions have often led people to believe that Littmann has well-defined political leanings — toward the right, in general. But most people who know him, Mrs. Littmann included, know that he’ll take on any politician if he believes their fiscal policies run counter to free-market economics. “People say he’s political, but it doesn’t really matter whether it’s Republicans or Democrats,” Mrs. Littmann says. “Republicans were supposedly more free-market, but they’re doing the same things as Democrats. What David has been espousing is a libertarian or a free-market outlet that’s about creating and maintaining wealth.”
Shull says that he always remembers Littmann carrying around a “Cassandra” file, named for the Greek goddess whose predictions were not believed. Shull says the file helped prove Littmann’s predictions about policies. “He could show people the adverse effects of policies that he had predicted wouldn’t turn out well,” Shull explains. He remembers once when Littmann called a tax change by former Gov. John Engler a “wretched reneging,” and his words turned up on the front page of The Detroit News. “I wondered what people at the bank thought of [that],” Shull says. But Littmann was never one for pulling punches.
Most times, his problems with policies came from politicians’ intrusion into economic issues they don’t understand. “There isn’t anything that the government makes better,” Littmann says with his signature clarity, noting that politicians get involved in economic policies that are bad primarily because of hubris. “They want to look like heroes,” he says. “They think they know more than the market, even though they don’t have the education in markets or finance to understand what they’re doing.”
For example, he says that the Bush administration and Federal Reserve chairman Ben Bernanke are presently working at cross-purposes to each other. “You have a Federal Reserve that has brought interest rates below inflation, which is at 4.3 percent and moving up faster. [Bernanke is] doing exactly what Greenspan did to get us into the bubble. He’s trying to flood the system with capital before the elections.”
And that’s just on the monetary policy side, he explains. On the fiscal policy side, Littmann berates the Bush administration for sending out this year’s tax-rebate checks. “Nobody’s asking how this is going to help by redistributing some tax to others and, in effect, offsetting what the Fed is trying to do,” he says, and then finishes with what has made Littmann eminently quotable — the ability to shift quickly from economic-speak to tough, clear statements. “The left hand doesn’t know what the right hand is doing,” he says. “And both sides are vying to be popular with the politicians who want to be re-elected or elected.”
Despite remaining fascinated and frustrated by economics, politics, and the electorate three years into his retirement, Littmann says he’s finding time to fulfill his retirement “list” — the things he wanted to do when he left the bank. He’s explored his interest in handwriting analysis, which has mesmerized him since he saw it done at a party several years back. He also has flying lessons, painting, and gardening on his list of things yet to do.
Still, it’s obvious that what still makes Littmann tick is a good, tough discussion of fiscal policy.