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Monday, February 28, 2011

Cut, cut, cut?

It has been a momentous month around the world, as activists are demonstrating the power of ordinary citizens and non-violence in cities from Cairo to Madison. The oligarchs who have long controlled much of the world and what happens in it are right to fear, but hopefully they are realizing that the status quo of the past decades is unsustainable and that everything comes to an end - money, power, dynasties...nothing is forever. That being said, despite the gains made by ordinary citizens, the situation can still go either way (up, Eastern Europe after the fall of communism, or down, like Iraq after the fall of Saddam).

In any case, it is the demonstrations closer to home that are more relevant for Detroit. The newly empowered Republicans in states across the country are starting to act upon what they view as their mandate - to balance budgets by cutting spending. Predictably, there is resistance and protests against these cuts. The most prominent example of the conflict is in Wisconsin. In a nutshell:
  • On one hand, you have a Republican governor and legislature succumbing to the same temptation that has stymied American politics and serious reform for the past few decades - overreach; The Republicans want to cut unionized government employee salaries and benefits, ostensibly to balance the budget, but more than that, they want to break unions, key supporter of Democrats, by stripping rights to collective bargaining
  • On the other hand, you have a mass of union-supporters protesting the Republican power-grab by demonstrating in Madison; Furthermore, Democratic state senators have fled the state to avoid quorum and prevent any unworthy legislation
  • I certainly am no advocate of unionized laziness, negligence and disrespect of the workplace (union's really need to take ownership of this issue to get rid of the stigma), but unions have played and continue to play an important role in our country (not the least to battle for the people against corporate, private interests)
  • The situation is ridiculous, especially when both sides agree on the need to downsize government employee benefits; Why is it that with our two party system, both parties seem to feel like they should squeeze out whatever political wins they can while they are in power, and complain, obfuscate, and wait while out of power?

Thankfully, the battle in Michigan is not so heated or divisive, but the outline is the same - we've elected a Republican governor and inherited a tremendous deficit, and given the visceral attitude against tax increases, we are left with more and more cutting. It is two of Governor Snyder's proposed cuts that caught my attention: cuts to education funding and phase out of film tax credits.

  • I must admit, I have never been quite clear on how the film tax credit math worked (the "Pure Michigan" investment was a lot clearer to me - for every dollar the state spent, it got more than a dollar back in tax revenues - but a 42% subsidy seemed too high); also, it does bother me a little when we take money from those already here to attract those who are not; that being said, I have been impressed with the effectiveness of the tax credits in building the local film industry and the positive buzz the films have lent the state; it is quite unfortunate to lose that support just as the first local studios are being launched; I hope some kind of compromise can be reached to continue state support for local film production, even if the % is lower, or a moderate cap is set
  • As for the education cuts, it certainly would be the last thing I would cut; Communities across the state will suffer from the proposal to reduce state funding by USD 470 per pupil; I'm not sure schools like UofM could still be considered public if these continuous funding cuts are not stopped; Michigan's talent pool has long been one of our strengths, but continued underinvestment in education is killing one of our last pillars; It is broken education systems that result in crime and prisons where over USD 50 k is spent yearly on each inmate; I would rather let all of the non-violent offenders be released with ankle monitors to probation or house arrest and use the savings on education; That being said, pushing for cost savings and concessions and efficiency across the value chain is certainly needed in times like these
  • The Detroit education cuts are most stark of course; In the past 10 years, Detroit Public Schools have lost half of its student population, and the deficit has grown under Robert Bobb, despite his heroic efforts to increase efficiency, improve quality and root out corruption; Barring additional funding or state loan guarantees, a bankruptcy-like situation is possible, and 100 of the 134 remaining schools could be closed, forcing 62 students into each classroom; the vicious cycle would continue in this case, as quality deteriorates further and more students are pulled out; Robert Bobb (whose contract was to expire today) has been asked by the Governor to stay on until June, and that will help, but the situation is very bleak

At the end of the day, no matter what protestors or propaganda say, reality rules and it comes down to dollars and sense. Michigan and Detroit are in a tough spot financially, and even more painful cuts are needed. As autoworkers have given painful concessions to help our auto companies survive, so too government employees and teachers may have to accept painful cuts for our state and cities to recover. It will not always be this bad and the generous systems of yesteryear may once again have a place in our state, but right now, we can't afford to be generous - we must be real. Cutting is necessary. But reality cuts the other way, and we need to ask ourselves, what can we not afford to cut.

"I like to pay taxes. With them, I buy civilization." Oliver Wendell Holmes, Supreme Court Justice