Schafer: Minnesota offers economic lessons for struggling Michigan

  • Article by: LEE SCHAFER , Star Tribune
  • Updated: June 28, 2014 - 2:00 PM

Sometimes it’s helpful to be reminded of how good we have it here in Minnesota — and maybe why.

A think tank called Michigan Future just did us that favor in a report concluding that our tax and spending policies have helped make our state an economic star compared with Michigan and other Great Lakes states.

Minnesota, it noted, greatly outspends Michigan per capita on the kind of stuff that leads to economic growth, things like transportation and education.

Michigan outspends Minnesota on prisons, hardly a fact worth cele­brating.

All the spending in Minnesota takes a lot of tax revenue, of course, which is why state and local taxes per capita in Minnesota were over $5,000 in 2011, compared with $3,655 in Michigan.

The report acknowledges that big difference in tax burden, but just look at the results:

In 2012, Minnesota ranked 11th in the U.S. with per-capita income of $46,227, the highest in the Great Lakes region, while Michigan was 35th at $37,497. Up until 20 years ago, the living standards were pretty similar.

“Minnesota is more than a Great Lakes success story,” the Michigan Future report said. “On most economic measures, it is a national leader.”

Michigan Future, which calls itself nonpartisan and is based in the college town of Ann Arbor, has a bit of an obsession with the state of Minnesota. One reason is that pointing to Minnesota eliminates miserable winter weather in Michigan as an excuse for poor economic performance.

“For 30 years at least, really on a bipartisan basis, we’ve had policy­makers here that really held out Indiana as the state we have to compete with,” said Lou Glazer, the think tank’s president. “Why? The state that’s doing really well is Minnesota.”

And Michigan, clearly, is not.

In 1990, Michigan was ranked 20th among the states in per-capita income; by 2012 it had slipped 15 spots. Even more worrisome is that the growth in personal income that did occur in Michigan was almost entirely due to government payments.

Curiously, the new report doesn’t say a word about one big reason for a slip in economic health — the dramatic contraction of Detroit’s automobile industry.

After reaching the peak U.S. market share of 90.6 in 1965, the Big Three of General Motors, Ford and Chrysler pretty much only saw market share declines after that, bottoming out at 43.7 percent in 2009.

That mostly explains why from 1990 to 2011, the state of Michigan lost 318,000 manufacturing jobs, a decline of 37 percent. Minnesota lost, over the same period of time, about 11 percent of its manufacturing jobs.

Glazer acknowledged that seeing Michigan’s major industry driven into the ditch sure didn’t help. In fact, it proved that the state needed to move to a knowledge-based economy from a primarily manufacturing one. That has been obvious for decades.

Had Michigan been investing in things like education and transportation at the kind of levels Minnesota has, Glazer said, his state would be far better off today.

“Michigan has been systematically disinvesting in that stuff for decades,” he said.

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