Coyote Blog

I am still reading through the Detroit Free Press report on Detroit's financial history and it is really amazing.  All the stuff you expect to see is there -- over taxation, over regulation, crony gifts, huge government pay and pensions, etc.  But this was new to me, and even worse than I expected:

Gifting a billion in bonuses: Pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money — mostly in the form of so-called 13th checks — could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.

Outright gifts of taxpayer money to government workers, even beyond their already rich salary and pensions!  Folks on the Left from Paul Krugman to Obama are trying to portray Detroit as the innocent victim of economic and demographic exogenous forces beyond their control.  Don't let them.  The exodus from Detroit and the destruction of its economy were not random events the city had to endure, but self-inflicted wounds.

I wrote about Michigan governor Granholm's taxpayer-funded initiative to make Michigan energy independent of, uh, Kentucky

Governor Granholm and Gov. James Doyle of Wisconsin seem to be tormented by the fact that the Midwest industrial engine imports much of its energy needs from coal states in the east and west. "Doyle has estimated that $226 billion leaves the region each year in energy costs that could be saved with alternative-energy installations and support jobs here," reported the Detroit Free Press.

I pointed out the absurdity of drawing every smaller circles on maps and claiming that wealth depended on that circle being self-sufficient.

But the pithy comeback would have been to ask how Ms. Granholm would react if, say, the the governors of California or Texas announced that were upset that billions of dollars leave their state every year to buy cars and that they were suggesting taxpayer-funded initiatives to free themselves of dependence on Rust Belt states for their transportation.

There has always been a slippery slope to trade protectionism -- if it makes us all richer to draw a line around the United States and prevent more goods from crossing that line one way vs. the other, shouldn't it make us even richer to draw that line even smaller?  What about around a state?  If the US is better self-sufficient, shouldn't the same thing apply to Missouri? Or St. Louis?  Or University City?  Or the Delmar Loop?  Or just the house on corner of Waterman and Kingsland?

We see this idea in full flower here, from Michigan's Governor Granholm (via my Princeton classmate Henry Payne):

At its conference here last week, the Midwest Governor's Association (MGA) -- chaired by green queen Jennifer Granholm of Michigan -- said it wants to claim the future by transforming the Rust Belt into the Green Belt. But in calling for energy independence from other U.S. states and embracing a 30 percent renewable energy standard by 2030 (up from 2 percent today), the MGA's prescription is a giant leap backwards.Governor Granholm and Gov. James Doyle of Wisconsin seem to be tormented by the fact that the Midwest industrial engine imports much of its energy needs from coal states in the east and west. "Doyle has estimated that $226 billion leaves the region each year in energy costs that could be saved with alternative-energy installations and support jobs here," reported the Detroit Free Press.

My personal view is that Granholm actually hates Michigan.  How else to explain why she keeps doing things like raising the minimum wage and keeping taxes high to fund goofy energy schemes in a state with the highest unemployment in the country.

In some sort of synergistic relationship I haven't fully figured out, local newspapers love to cheerlead the expansion of government programs.  Here is a great example, via Rick Perry.  The headline in the Detroit Free Press web site reads:

State venture capital funds starting to pay off

But then we go on to read:

Michigan's two venture capital investment funds are starting to generate results, state economic  officials said Monday.

Since their formation in 2006, the $95-million Venture Michigan Fund
and the $109-million Michigan 21st Century Investment Fund have
invested in six venture capital firms with either a headquarters or an office
in the state. These firms have used the money and other capital to
invest in 11 fledgling Michigan companies that have added 40 workers in
recent years.

The two funds have made investment commitments of $116.3 million, or slightly more than half of their total capital.

So out of $204 million in taxpayer funds (why the state has entered the venture capital business with state funds is anybody's guess) the state has invested $116 million to create 40 jobs.  Given that the notion of the government venture fund was to create state jobs, its not clear how $3 million per job is a really good return.  Further, there is no mention of the government has gotten any kind of financial return from this investment, so I will presume it has not. So how can the paper possibly with a straight face say that the funds are "starting to pay off?" 

Eleven companies with an average of 3 employees each somehow each got $10 million in state funds.  I bet it would be fascinating to see just who these 11 companies are, and how their owners are connected into the political power structure.