Taking Care of Businessby
Deborah Kaplan and Amy Harmon
-- Governor
Engler
RELATED STORY: Analysis: The low road
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Michigan House Speaker Lewis Dodak declared Gov. John Engler's proposed $8.06 billion budget for fiscal 1992, presented last week to the Legislature, "dead on arrival." Rep. Morris Hood Jr., D-Detroit, deemed it "disastrous for Detroit." More than any of the Engler administration's previous moves, this budget shows what course the governor is charting for the state. Taxpayers would get a 5 percent rollback, the first phase of Engler's three-year plan to cut school property taxes by 20 percent. Education spending would increase 7 percent. But the arts in Michigan, and thousands of poor people, would pay. Engler incorporated into his budget his selective executive-order cuts that were rejected in late January by the House Appropriations Committee. These would cut off General Assistance for 92,500 single people and wipe out most of the state's $49.7 million equity package -- money the state pays cities to subsidize cultural institutions. Engler's proposed budget may be DOA in the Democrat-controlled House, but opposition is alive and kicking. Dodak's press secretary Stephen Serkaian says the debate in the House and Senate budget hearings will move beyond dollars to root issues of public policy: Does "downsizing" state government mean dismantling essential services? Is less government the surest path to economic growth? In a recent interview, Engler was asked as much. METRO TIMES: You seem to have a vision of what the state should be. ... GOV. JOHN ENGLER: Absolutely. I believe Michigan must become more competitive than it is today, that we don't have enough jobs for the men and women who live here, and that state government has a positive role to play in stimulating economic growth and development. Specifically, I think we have to invest in education. ... We're spending billions of dollars on our schools today, yet we still have a statewide dropout rate that sees one in four not even finishing high school. Over 60 percent drop out in the state's largest school district -- Detroit's -- and too many of the others are gaining diplomas for having no skills. ... It's a failure of such magnitude that it regrettably is a driving force behind the burgeoning welfare case loads and prison population. MT: You've said that your budget-cutting plan would spur investment and create jobs. Can you name specific companies that have pledged to invest in Michigan? ENGLER: That's one of Michigan's problems -- everyone tries to design special deals for companies. That's not the way to create jobs or opportunities. Ninety percent of the growth will come from small businesses. I mean, who's to say that tomorrow you won't decide to start a business if you view the tax climate and regulatory climate as favorable and (believe) you might make a profit? That has to be our goal -- to become much more entrepreneurial, and not have government involved in all these individual decisions. MT: How do you spur small business investment? ENGLER: By cutting taxes. Clearly, when you have the fourth highest property tax in America, you're talking about a situation where people have to look twice at whether they can make it ... if they can even cover their basic costs of doing business. When you compound that by wage costs, by regulatory costs ... by liability laws, which are unfair, then you create an environment where, I think in 1989, we had more bankruptcies than any state in the Midwest. MT: Democrats say that your property tax cuts are mostly going to benefit, not the small business owner, but the corporate oligarchy that is already benefiting from tax loopholes. ENGLER: I think that's a misunderstanding of basic economics. I fail to see how cutting 20 percent across the board doesn't give everyone the same tax advantage. And in fact in their (property tax) plan, not only do they propose nothing for the small commercial business that's trying to make it in a declining neighborhood, but they would also increase taxes on major employers in all communities. It's a remarkable economic and growth agenda they've put forward, which in effect argues that increasing taxes for job providers by some $500 million is somehow good for the creation of jobs. MT: Assuming your property tax cuts eventually create jobs, still thousands of people will be losing their government jobs, and many welfare recipients may go without food and shelter. ... ENGLER: We don't envision anyone going without food and shelter. But state government can't be immune to the same pressures (faced by businesses). ... We think there are ways, in terms of direct state employment, we can phase down the number of jobs. Clearly, state government costs too much. Too much money that ought to be going to help people in the way of services is now being consumed administratively. ... We have people coming forward now, saying, we work in the welfare system, there's tremendous fraud, it needs to be restructured and the money put back in greater services for those who really need the help. MT: If you take the money out of welfare, then it goes into what kind of services? ENGLER: If you take the money out of fraud, then presumably you can do more for the people who are in need of help. ... MT: Which would take a massive overhauling of the whole welfare system? ENGLER: It's clearly, after 30 years, a failed experiment. MT: Welfare is? ENGLER: Absolutely. It has not solved poverty, has it?
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