Granholm action admits state policy can affect Big 3, manufacturing jobs

Cross-posted on Right Michigan at www.RightMichigan.com.

The next time a lefty tells you that tax breaks don’t work or that there is nothing state government can do to help fix the domestic automobile industry, kindly suggest they open mouth and insert sock.  Then show them today’s newspaper.  (Or your friendly, neighborhood, RightMichigan.com.)

Tuesday the Michigan Economic Growth Authority Board approved a fresh set of what they call “targeted” tax breaks and tax incentives to help make up for the fact that the state’s business climate is otherwise generally and consistently at the bottom of the barrel.  And we’re not talking chump change.  MEGA approved $120 million in tax breaks for ONE company… General Motors.  

The fact that it took a king’s ransom to get anything done speaks volumes about the overall job creation environment the Democrats in Lansing have created over the last six years. But today we can point to the fact that even Jennifer Granholm understands, fundamentally, that lower taxes create jobs.  Period.  (Aside, when she and her cronies in the legislature ignore this easily understood, fundamental economic principle it isn’t because they’re ignorant, it’s because they’re making value judgments… they favor big government programs and intrusion into your life over your ability, that of your husband, your wife or your neighbor to find and keep a decent job.  But that’s a post for another day and time.  Today is sunshine and roses.)

No sooner does the Granholm administration admit their basic understanding of economic reality than the market responds and job announcements start popping into the news.  The fact that they’re coming out of the automobile industry shines a spotlight on the lie that state policy has no affect on Michigan’s largest manufacturers.  

Read on…

The Associated Press reports:

Less than 48 hours after getting lucrative state tax incentives for five Michigan projects, including the Flint plant, GM announced it was dispatching Chairman and Chief Executive Officer Rick Wagoner here to make an “important economic development announcement” Thursday.

Until now, GM has maintained that the engine plant, expected to supply assembly lines with engines for the Chevrolet Fuze and Volt, was in its tentative plans but not 100-percent certain.

Tuesday’s approval of more than $120 million in GM incentives by the Michigan Economic Growth Authority Board has apparently put the Flint plant on very sure footing…

The state tax incentives apparently solidified GM’s decision to push ahead quickly with the engine plant.

Rick Zablocki, GM’s general director of tax operations, said the incentives were “critical to building a credible business case” within the company and for moving ahead with the projects.

Fancy that.  $120 million makes an engine plant in FLINT possible.  Wonders never cease.  To steal a line from John Lennon, “imagine” if Lansing applied their obvious understanding of tax and job creation policy across industries and all over the state instead of raising taxes on job makers and moms and dads by $1.5 billion!  

And while we’re daydreaming, imagine, too, if they believed in competition.  Last week’s move to monopolize electricity production, dramatically raising home heating rates just before winter, and to kill competition for the next couple of decades looks even worse this morning when we look at the wonders of competition in gas alternatives.  And in the beleaguered domestic automobile industry.

A week ago today we talked about GM’s thrilling introduction of the electric powered Chevy Volt (the same day, coincidentally, that Barack Obama proposed a $5 billion tax increase on the electricity drivers will need to “refuel” the thing).

This morning we get to talk about an equally exciting announcement out of cross-region rival, Chrysler.  The Ivory Tower reports that the same basic electric system (with back-up gas generator) that powers the Volt is being carried over into the Town and Country minivan and the Jeep Wrangler.  An entirely different, 100 percent electric system is being completed to power an as-yet-unnamed Dodge sports car :

Today’s announcement will immediately propel Chrysler into competition with General Motors Corp.’s highly publicized Chevrolet Volt, an extended-range electric vehicle that’s slated to hit the market in late 2010, if GM and its partners can develop needed battery technology.

Ahh, competition!

LaSorda said the Dodge sports car, which hasn’t been named yet, runs only on electricity from advanced battery technology and has a range from 150 to 200 miles. It will go from zero to 60 in under five seconds, he added. “It’s a great tribute to Chrysler engineers.”

The vehicle would plug into a typical 110-volt electric outlet and its lithium-ion batteries would be recharged within six to eights hours, Frank Klegon, Chrysler executive vice president for product development, said. A 220-volt outlet could be used to cut the charging time in half.

And the thing looks pretty mean, too.  Gotta love that sporty Dodge flair.

Now we just have to hope Lansing and all of those candidates currently running to get there are paying attention, because these sorts of economic lessons are priceless.

Consumers demand an alternative to gasoline.

The market responds via General Motors with a brilliantly conceived electric car.

Competition flourishes without governmental interference and Chrysler says `anything you can do I can do better.’  Competition necessarily keeps prices low.

Oh, and when you cut taxes on companies, even on all-but-extinct giants of industry like GM, they will respond.  In Michigan.  Because here in Michigan we can STILL dominate the global economy.  This is the state that put the world on wheels and it can be the state that got the world off gasoline, too, if we let it.

Michigan economics 101.  Have we all learned our lesson this morning?  Fair warning… there will be a test on November 4.

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