Michigan's Economy

The Michigan Economy.

Right now Michigan does not have a very good economy, and that affects me directly since I live and work here. The Economy as a whole in the good ol' USA isn't perfect but it's actually not that bad right now considering........ Well, considering a lot of things. (The war machine right now just might be propping up the economy right now.) The thing is though the the Michigan Economy is worst off than a lot of states. Michigan's unemployment rate went up, and we lost 17,000 pay roll jobs this year. Payroll jobs, we aren't even counting hourly jobs. The state's unemployment rate is seven percent, while the national unemployment rate is only at four point eight percent.

Detroit isn't called the motor city for nothin'. Michigan is heavily dependent on the auto industry. There are a lot of people in Michigan that directly work for one of the big three auto makers. As many people or more work for suppliers to the big 3, and even more that work in an industry that is somehow related to the auto industry in ways that most people wouldn't think have anything to do with cars. All in all if the bottom falls out of the big three even a little, Michigan suffers.

So I know what you are saying, this sounds like a Michigan problem and therefore the governor should handle it. Well unfortunately there is only so much the Governor can do. You see the auto industry is't just in the state that looks like a mitten, it's all over the country. So therefore even if Michigan was perfect, and it far from is, that wouldn't solve the whole problem. Therefore at least some of these issues need to be addressed nationally. Hmmm, that might be a problem. Even since the a certain fateful day in September 2001 the only thing that is discussed nationally is how we are going to get attacked again and that the Democrats are not able to stop it. Every time some one tries to talk about what is happening on the home front (there was one time the Executive Branch tried to talk about something that will happen here in the year 2018, but that didn't go to well), those in power somehow are able to steer the conversation back to how there are bad people trying to get us.

Well then, maybe someone in Detroit should ask the President to come on down and have a little chit chat to see if anything can be done. Hey, guess what someone did ask him. Well then this issue should be taken care of right away then. And guess what, we got a date to sit down and have talks, this is fantastic! Waite a minute just got a call. Well it seems like The President needs to postpone our meeting. Ok, no problem he said postpone not cancel and he set a new date, so this will get taken care of. Oh wait just a second, got another call. It seems he has to postpone again. Well, can we just set a time pretty soon? After the midterm elections? What should that matter? Let's just get this issue done and out of the way with; can't we?

"General Motors, Ford, Chrysler and other auto manufacturers were once the symbol of American prosperity; in recent years, they have become representative of the challenges posed by the global economy. It is in everyone's best interest to develop new partnerships and a strategy for success in the global economy. This must be a priority."

Holy crap that's interesting, I wonder where that came from? A Senator from Indiana? Damn this must be more important than just Michigan. Well those are the words that came from Senator Evan Bayh (D). He lost almost 100,000 manufacturing jobs in his home state over the past five years, and I don't even remember a motor city in Indiana. Crap! This sorta seems like a major issue.

I can't be the only one who has heard of these issues can I? Ah, thankfully no. But when Mr. President was asked about the issue he said the way to fix is was for American automakers to make “a product that's relevant.” What the hell does that mean? Is he putting down American cars? Well damn that sounds like a pretty bold statement if I've ever heard one. It also sounds like he is saying he doesn't really care about the automakers' problems, and if they do have a problem it's theirs and their's alone.

So what is the problem with the auto industry? Well to name one, health care. The cost of health care is over $1,500 per vehicle, GM spent an insanely high $5.6billion last year total! Five point six million dollars for only 1.1 million people? Good god, no wonder they are in trouble. Check this out GM's CEO, Rick Wagoner, said, "When I joined GM 28 years ago, I did it because I love cars and trucks. I had no idea I'd wind up working as a health care administrator." What does that tell you about GM's outrageous health care costs? So what does this mean then? Well it means that GM has some huge costs to cover before it can ever make a profit or even break even. That mean GM has to sell more cars to make up those costs. Ahh there in lies one of the great quagmires of this whole health care thing, since the costs per vehicle for just health care is so high, that means the cost of a new car has to be high. Since the cost of a car is so high fewer people are buying American cars. In Michigan, sales rates fell four point six percent so far this year.

You see other car manufacturers don't have this issue, workers that make cars in Japan get their health care paid for by the government. Even non Big 3 cars that are assembled in the US have large portions of them made in that company's country of origin, where again, the cost of health care is paid for by a party other than the company.

So this is just a GM thing right? WRONG! Ford has major health care issues as well, and to a lesser extent so does Chrysler (although it has the added befit of Daimler helping it to stay dry).

Ok, so health care is a big problem for American Automakers, what else? Well oddly enough, the high price of gas is causing people to buy fewer cars and the cars that they do by have a much lower profit margin then the cars the people were buying even a year ago. You see people are spending more and more on gas (even though right now gas prices are lower than they were a month ago don't be surprised if and when they go back up) and so they are spending less money and saving less money. I know what you are saying to yourself right now, if gas prices are so high people should buy more new fuel efficient cars not less. Well that would seem logical, but if some one is spending what it would cost for payment on a new car in gas to get to work, they don't have that money for a payment any more. It's not like they can drive less, they have to drive to get to work. Not to mention the cost of insuring a new car.

Well crap, right now the US Automakers have got a few pretty big hurtles in their way. But not every thing in Michigan has to do with the auto industry does it? Well, no not directly, but indirectly, that's a different story. Let me give you a few examples.

Let's take what I do for a living, I make commercials, promotional videos, all sorts of other random videos for companies. I work both for myself and as freelancer working for other production companies that need my help. Well the major company that I freelance for used to do a lot of work for GM dealerships, not any more. It used to do the Ford President's Awards every year, well guess what? Ford stopped doing that this year. It also used to do all the videos for the Ford 100, again another program axed.

What about a restaurant across for a Visteon plant that just cut back it's workforce. This little restaurant used to make a lot of money serving lunch to the workers of that plant. Now there is fewer workers, what does that mean for the restaurant? Now maybe you can see how this affects the whole state, and really the whole country.

Ok, so what else seems to be the problem in Michigan? Well this might sound familiar, but health care once again. One third of the money the state spends is on health care for state employees and Medicare. I wonder if there is a pattern here? I see another problem with this picture, remember how I said that unemployment went up in Michigan? Well that means the money coming in form income taxes went down. Hmm now let's think about this. My guess is that the cost of health care isn't going to be going down anytime soon, in fact it seems to go up every year. And if Michigan getting less money on income taxes, yet the state has to spend more money on health care....

So what the state has to pay health care how does that effect the economy? Well it's actually pretty simple economics, if the state has to spend more money on health care it is spending less money on something else. Right now I have a friend that is trying to get job as a teacher in Michigan, and guess what, it isn't easy. The roads in Michigan are notoriously bad, but since the state has to spend more money on health care, it doesn't have all the money it needs to keep the roads up. If it could spend more money on the roads it would mean more people would be needed, and there fore more jobs.

Now here is something else interesting I found out. More college-educated young adults are leaving the state each year than are coming in. So, even if Michigan's economy wasn't in the toilet the perception sure seems to be there.

There is a lot more that I could say about the Michigan economy, but quiet frankly it's all starting to depress me. I'm sorry I didn't back up all of my claims as well as I could/should have, but like I said this isn't the most happy subject to be writing about. Some day I will try to come back and revisit this topic.

Sources:
Michigan Department of Labor & Economy Growth
http://www.milmi.org/
University of Michigan
http://www.umich.edu/~urecord/0506/Mar20_06/01.shtml
Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2005/04/29/AR2005042901385.html
http://www.washingtonpost.com/wp-dyn/articles/A15828-2005Feb10.html
Michigan Economic Update
http://www.michigan.gov/documents/July_2006_171299_7.pdf#search=%22Michigan%202006%20Unemployment%22
Boston Globe
http://www.boston.com/business/articles/2005/06/16/gms_healthcare_dilemma/
Senator Evan Bayh Press Release
http://bayh.senate.gov/releases/2006/06/14SEPT06PR.htm