George Will: "Michigan Has A Problem"

Writing in Townhall today, George Will talks about that rusting giant of a state, Michigan.

Ford's announcement that it is cutting at least 25,000 jobs and closing 14 manufacturing plants in North America was preceded by GM's announcement that it is cutting 30,000 jobs and closing 12 plants. Soon the largest North American maker of auto parts -- Delphi, based in Troy, Mich. -- might ask a bankruptcy judge to shred labor contracts covering 33,000 workers. This would trigger a showdown with the United Auto Workers union. The UAW cannot strike Delphi without causing ripple effects that could inundate GM, which used to own Delphi and might, under the terms of the spin-off agreement, be responsible for anywhere from $3.5 billion to $12 billion of Delphi's ``legacy'' costs -- pensions, medical care -- for retirees.

Last year, Michigan was the only state other than Mississippi and Louisiana -- that is, the only state not hit by Hurricane Katrina -- that had a net job loss. It has lost one in four auto manufacturing jobs since 2001. Republicans have paid for billboards proclaiming that Michigan has lost one job for every 10 minutes Granholm has been governor. Understandably, the percentage of voters disposed to re-elect Granholm is 35 percent.

Michigan's corporate income-tax burden will be ranked the second heaviest in the Tax Foundation's forthcoming State Business Tax Climate Index. DeVos especially objects, as almost any conservative would, to heavy reliance on the Single Business Tax -- basically, a payroll tax -- particularly as applied to service industries that can, and do, leave the state.

The auto industry's problems bode ill against our state, but it isn't our free trade policy that has caused the problems. Ford and GM (and their major suppliers) suffer today because the auto giants are monolithic behemoths in an age that requires agility and because Michigan's labor unions are arguably the most antagonistic on Earth. Americans want to buy attractive, dependable cars of value, and most would buy American if they felt they could receive the same quality for the money in an American version. Given Detroit's history of quality issues and slow to respond market desires, many consumers opt for foreign cars.

However, let us not forget that the automobile industy has had its bright spots of expansions in the U.S. in recent years. New factories have been built and Toyota and Ford are each currently looking at building new North American assembly plants. While the recently built plants went elsewhere, where the new plants get built is anyone's guess (although Toyota is hinting that it will likely not be in Michigan.)

Given the state's high tax rates and the union's "we'll fight you on anything" attitude, I'm not holding my breath for a Michigan groundbreaking any time soon.