Central Michigan University

• Evaluating Michigan's 'one-state recession'

Topics in this story: Business, finance, jobs and the economy, College of Business Administration, Economics, News tips and sources

SOURCE:
Jason Taylor, associate professor of economics
Central Michigan University
Phone: 989-774-2578
E-mail: taylo2je@cmich.edu

Republican presidential hopeful Mitt Romney claims that Michigan is in a "one-state recession." Is this characterization accurate? Central Michigan University economist Jason Taylor is available to comment on this issue and what needs to be done to turn Michigan's economy around.

A few of Taylor's initial thoughts on the subject:

• "Recession means an economy is shrinking rather than expanding. It is true that we were the only state in the nation to post a decline in output during 2006, and when the data for 2007 comes out I am confident that this trend will continue. The only question now is whether the rest of the nation will join us in this recession."
• "One wonders whether the term 'recession' is not almost too hopeful. After all, recessions are typically followed relatively quickly by expansion. Michigan's woes are less about the short-term business cycle than they are long-term economic challenges."
• "The message that we have heard from politicians of all circles is that the state needs to diversify and that diversification is coming one way or the other. Perhaps more importantly, the state needs to create a good environment for business. If firms can't profit in Michigan, they won't locate in Michigan. They will instead choose to move to a state with lower taxes, cheaper labor and a better business climate."
• "The real problem in Michigan is that as businesses fail, tax revenues fall, and the initial reaction of government is that we must replenish those tax revenues by raising taxes. But raising taxes has two effects: more revenue from the work that goes on here, but also less work going on here as firms leave the state or fail. If the second effect outweighs the first, tax revenues will fall even further. If the root cause of our state's fiscal woes is that firms are cutting back or failing, raising taxes makes this problem worse rather than better; this is a vicious cycle we must avoid."

Jason Taylor is an authority on American economic history, particularly the Great Depression and New Deal. He also is knowledgeable about contemporary U.S. macroeconomic policy. He has studied the National Industrial Recovery Act of 1933, the economics of high wages and the government's response to high unemployment. He has published numerous scholarly articles on the economic policies during the Great Depression and World War II.

CMU Media Relations contact:
Heather Smith
989-774-1702
heather.smith@cmich.edu