LANSING – An economist told a Michigan Chamber of Commerce Future Forum on Tuesday that the U.S. economy, rocked most recently by the collapse of two of the top five financial firms, is going through a change of historic proportions, but also expressed optimism that the country contains strong “silver bullets” that will lead it out of the current crisis. Another expert who annually surveys CEOs on the best and worst states in which to do business said Michigan needs a “major call to arms” to make itself attractive again.
Jeff Thredgold, a Salt Lake City economist and futurist, said the mortgage and credit crisis is affecting economies worldwide – with losses expected to hit $1 trillion – but will not be long lasting though employment growth is projected at a slow average annual rate of 1 percent over the next four years.
He painted an optimistic picture overall of the U.S. economy, even though he assesses the current condition as being in a recession that began in the last quarter of 2007 and that the economy will be slowing down after solid growth in the second quarter of 2008.
“The stuff that is happening right now is what you’ll read in the history books,” he said of the shake-up on Wall Street that is striking hard at some of the nation’s best-known firms. “We’re dealing with a cleansing process. We will get through this.”
But he added, “An incredible future awaits.” Tight labor markets will make current workers more valuable, leaders will slow the growth of Social Security, Medicaid and Medicare because they will have no alternative, inflation will stay low and the stock market will perform well, he said.
Thredgold said the American economy will be based around seven key industries, none of them manufacturing, which has been the underpinning of the Michigan economy. And, he said it will become more important than ever for individuals to go beyond a high school education.
The business sectors of the future will be technology, transportation, telecommunications, financial services, energy, entertainment and biomedical, he said.
While inflation numbers are “ugly,” Thredgold said the pressures will continue to keep them under control because of competition in major industries which all have excess capacity, consumer behavior, technology investments and use of the internet to seek the lowest prices. “Over the next three years, companies will save $1.25 billion by using the Internet,” he said, adding that society has tapped about 10 percent of the Internet’s potential.
Ed Kopko, CEO of Butler International as well as of Chief Executive magazine, said Michigan needs a “significant overhaul” of its tax structure and regulatory environment if it is to raise its profile among business leaders looking for states in which to invest.
Annual surveys of CEOs put Michigan third from the bottom as a place to do business, Kopko said, far behind perennial leader Texas with its right-to-work laws and high rating on taxes and regulations. The magazine’s fourth annual survey asked the CEOs to grade each state on taxation and regulation, workforce quality and living environment.
Kopko, who said Michigan is now competing with locations around the world, instead of just other states, and dramatic change is needed to get the attention of CEOs.
“You need to do a major call to arms,” he said. “You need to change the tax structure, change right to work laws, change regulations, get excessive costs out of the system and select good political leadership or you will stay at the bottom of the list.”
Michigan gets a failing grade by CEOs on taxes and regulation and earns just a C-plus on quality of workforce; the living environment gets a C.
Michigan is below average in taxes, Kopko noted, but costs related to unionized workers and regulation remain high, at about $5,000 per worker higher than in Texas. He noted all five of the states rated as the best to do business have right to work laws which CEOs regularly cited as important.
The decision of Volkswagen to locate its new U.S. plant in Tennessee rather than in Michigan with its automotive heritage “was a clear, clear message to the state of Michigan,” Kopko said. “I believe that one should have been a major wake-up call.”
In a later session, Democratic Party Chair Mark Brewer said an attempt to instill a right to work law in Michigan would prove to be deeply divisive and damage the economy for years.
“Workers already have choice,” he said. “If this gets on the ballot, we will have the most divisive fight in Michigan that we have seen in decades and it will poison labor-business relationships for decades.”
Republican Party Chair Saul Anuzis called it a tough issue, that at some point has to be put before voters. “Unions have served a role and have been important, but workers ought to have a choice,” he said. He added the issues are far less about wages, but work rules sought by unions in labor negotiations.
This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com
>
