Tuesday, May 24, 2011

Michigan Budget Problems


According to Michigan's debt clock, Michigan's debt is currently over 21% of its annual gross domestic product, amounting to almost $87 billion of total debt. This means that for every Michigan citizen, the state owes $8,316. What's more is that over 1.8 million Michigan citizens are on food stamps, which is close to one fifth of its population. In other words, not good economic numbers that reveal a state that is no where near being self sufficient.

Michigan's budget for 2011 is $1.58 billion, which will do nothing to ease the situation. This year, 2010, marked the 10th straight year in which Michigan had a budget deficit. This goes hand in had with the collapse of the states manufacturing base, notably the automobile industry, during the past decade. In total, automotive employment declined by two thirds, down to only 100,000 jobs today

What do you think must be done to slow down this economic depression in Michigan?


  1. That's a multi-billion dollar question. There seem to be two conflicting goals here: the first is to balance the state budget and the second is to encourage business. Many people assume that balancing the budget (through cuts) will restore confidence and thusly stimulate business. However, that is the exact assumption the European Union has been making for several years now, yet austerity measures there have not restored confidence and have, in fact, taken several countries back into recession. Balancing the state budget may be a worthy goal, but politicians should not pretend that it is for the sake of business confidence.

  2. As for a way to actually improve the economy, we should focus as much resources as possible on education. As last weeks readings helpfully explained, the developed world is moving towards a more knowledge based economy. Therefore, to become competitive, Michigan needs to ensure that kids get the best education possible (Both K-12 and college) through higher funding and reform.

  3. Read this a few days ago: http://www.nytimes.com/2011/05/23/opinion/23krugman.html

    Krugman on why austerity measures sound good on surface but are the exact WRONG thing and are spiraling Europe further.

  4. What Martin said. It comes down to long-term investment at this point. Balancing the budget is incredibly important though, as otherwise debt service eats up a larger and larger portion of state budget and raises our interest rates. Unless the borrowed money is being spent somewhere we can reasonably expect it to pay for itself plus interest, its irresponsible to deficit spend as a long term strategy.

  5. Based on this and our discussions in class, it has made me realize that thinking long-term is important for our economy. Most politicians focus on short term accomplishments such as budget cuts that can be realized during their term. However, short-term goals only offer small changes. Michigan needs to focus more on long-term investments to turn our economy around.