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Bernero vs. Snyder, Little in common from 2 candidates for state governor

Date Posted: October 29 2010

(By Melissa Preddy, The Center for Michigan)

With the campaign entering the stretch run, gubernatorial candidates Virg Bernero and Rick Snyder are amping up their very different messages about how to return the state to economic prosperity.

Republican Snyder says he’ll use his own business experience to create the climate that helps companies thrive and Michiganians find work. Democrat Bernero, who is Lansing’s mayor, touts a pro-business record as his city’s CEO but also promises to knock heads when businesses behave badly, which he says some banks are doing in refusing to ease up on foreclosures.

Regardless of who is elected on Nov, 2, the economy will clearly be job one. Michigan’s 13.1 percent unemployment rate is second only to Nevada. About a third of residential housing sales this year are the result of foreclosures, according to latest figures, and by some accounts there may be a backlog of more than half a million foreclosures yet to hit the market.

The state’s poverty rate of 14 percent is the highest in 16 years, according to Census Bureau figures, meaning about 1.4 million Michiganians live on the equivalent of $22,000 a year for a family of four. Tens of thousands will max out of jobless benefits in coming months, and more people in the state are without health insurance compared to the years just before the recession hit.

Lawmakers can’t scrounge up the dollars to fully fund the successful “Pure Michigan” tourism campaign, which has cancelled fall and winter advertising. And the state’s most visible jobs creation initiative in recent years, a tax credit aimed at luring filmmakers, has been found to cost the state twice as much as it brings in, according to a recent Senate Fiscal Agency report.

Voters on Nov. 2 won’t be likely to confuse the two candidates’ strategies, analysts say.

“On one hand you have an individual who has never held elective office. But he has an extensive track record as a business person,” said Patrick Anderson, founder of the East Lansing consulting firm Anderson Economic Group.

“On the other hand you have a labor-oriented Democrat with elected office experience. People looking at a prospective governor will consider not just their position papers but their track record and campaign rhetoric.
And these are two starkly different choices.”

Different experience, differing strategies.

The candidates’ backgrounds and experience reflect their divergent approaches to stimulating growth in Michigan. As might be expected, Bernero, a former Democratic state senator in his second term as mayor of Lansing, espouses a more hands-on and targeted approach than his Republican rival, Rick Snyder.

Bernero is a staunch union advocate who’s made headlines – and a name for himself as “America’s angriest mayor” – for defending the state’s manufacturing workers on cable television after worker wages were slammed during industry bailout hearings. His position paper includes a bullet item, “stand up for Michigan manufacturing,” and he advocates tax incentives for export-oriented manufacturing.

He’s also homed in on ‘green’ advances as a way of reshaping the state’s manufacturing, keying off what he says is his previous success in obtaining federal funding to clean up defunct General Motors factories. Bernero says he’ll designate ‘Green Manufacturing Zones’ to create jobs in sectors like wind power, electric battery and new vehicle technology.

Bernero’s website also says he favors the International Business Zone concept already implemented in Lansing; it offers permanent U.S. residency to foreign nationals who invest at least $50,000 in a venture that creates 10 jobs; the candidate says he’d work to get the same incentives in place in all of Michigan’s major cities.

Snyder, on the other hand, has spoken out against industry-specific tax incentives like the film making credits, and also criticizes efforts to target “winners and losers” in attempts to lure business to the state.

His business development philosophy revolves around an overhaul of the Michigan Economic Development Corporation, which he initially chaired when it was formed in 1999. He claims that since his tenure, the MEDC has been politicized and has strayed from its original mission of encouraging long-term growth to a focus on quick hits using incentives and credits.

“The state currently gives out $6.3 billion more in tax credits, deductions and incentives than it takes in yearly in tax revenue – more than $30 billion a year in handouts that are supposed to be stimulating our economy,” Snyder told the Associated Press. “Economic development incentives should be used sparingly and measured against the actual number of targeted jobs created to make the data more reliable and less subjective. The results should be posted online for everyone to see. The MEDC should focus on economic ‘gardening’ (described on his website as policies to help existing small businesses and entrepreneurs) instead of ‘hunting.’”

Anderson, whose firm has authored studies critical of targeted tax breaks, said the gyrations can be just as much of a turnoff. In de-emphasizing incentives, “if you are a potential investor in the state. You know you are less likely to get a specific tax credit but you are likely to have a government that takes seriously the concerns of investors and entrepreneurs,” he said. “It does make the climate more predictable for businesses.”

Bill Ballenger, publisher of the Inside Michigan Politics newsletter, agreed that the incentives are a dual-edged sword. “Some Michigan businesses are very angry – they say, ‘we’ve been here for years and we got nothing,’” he noted. “But some Hollywood person comes here and you give him a handout.”

Taxing questions.

The candidates also seek to differentiate themselves on taxes; Snyder wants to eliminate the Michigan Business Tax – which taxes income and gross receipts – in favor of a flat 6 percent corporate income tax. He concedes, however, that the 6 percent figure is a goal and may not be enough to adequately support needed services.

Bernero claims the 6 percent tax will actually be a hike for some small businesses; he wants to roll back the 22 percent surcharge and says he will work to reform the MBT. “Yes we need to reform the tax system, but not with a regressive system,” he said in his Oct. 10 debate with Snyder. Bernero’s plan also relies on tax incentives for research and development in the state; he calls the incentives “important job creation tools.”

Neither campaign is too clear on the details of its tax plan; Snyder hasn’t said how he’d make up the shortfall created by his $1.5 billion “tax break for Michigan’s job providers.”

It’s the economy, stupid.

In many ways, almost all of each candidate’s campaign-trail rhetoric is connected one way or the other to jobs and the economy. Social issues like abortion and gay marriage are on the back burner this cycle and even quality-of-life issues like roads aren’t getting the attention they often do.

Bernero has garnered headlines calling for a moratorium on foreclosure sales and making a confrontational appearance at the Detroit Economic Club on Oct. 7, when he blasted banks that aren’t easing up on foreclosures and threatened to withdraw state money from such institutions.

“If you are part of the problem, if you are part of the Wall Street breed, then you will have a problem with Bernero,” the Detroit News quoted him as saying. “Consider yourself on notice.”

The aggressive anti-banking stance was in line with Bernero’s “Main Street” agenda and his proposal for a state-run bank that would remove the state’s funds from large for-profit institutions and also be more proactive in community and small-business lending.

The bank would “partner with local Michigan lenders – not compete with them – to help them make more private sector loans to Michigan businesses,” Bernero says on his website. “This single act will help break the credit crunch for businesses, allowing our entrepreneurs to create hundreds of thousands of Michigan jobs.”

Analysts have pretty much dismissed the idea of the state-run bank.

“It’s been a long-standing populist notion, but having the state invest in businesses is specifically prohibited by the state constitution,” said Anderson, who served as deputy budget director under Gov. John Engler.

Both men have said they hope the divisive right-to-work issue doesn’t come up if they’re elected. And when it comes to jobs, both have been flinging hyperbole. Democratic ads tout the mayor’s jobs creation and accuse Snyder of being an outsourcing jobs-cutter while GOP ads blame Bernero for double-digit unemployment.

The truth is somewhat murky on both sides.

Analysts say it’s absurd to blame Bernero for recession-driven jobless figures. But they also doubt the mayor’s claims – which his campaign failed to substantiate despite multiple requests – that he’s created or sustained as many as 6,000 jobs in Lansing.

August figures from the federal Bureau of Labor Statistics show Lansing’s unemployment rate is greater than 10 percent, higher than Ann Arbor’s 8.8 percent and about on par with Kalamazoo and Grand Rapids.

“The part of Bernero’s track record that establishes a small basis for arguing he has the experience and aptitude for growing business is his record as mayor of Lansing,” said Anderson. “He has been reasonably effective at engaging the business community, and also very effecting at arguing to political leaders nationally that maintaining a domestic auto industry is in everyone’s best interest.”

But Ballenger scoffs at the jobs-creation claims. “Maybe he used tax credits available to municipal governments to retain jobs at firms that may have left Lansing, or to lure a firm that might have located elsewhere,” said Ballenger. “I haven’t seen any details, and it’s about impossible to prove or disprove. But if you watched his ads you would think Lansing is this full-employment Mecca.”

Snyder, aside from his stint as chief executive of computer-maker Gateway Inc., runs the Ann Arbor-based venture capital firm Ardesta, raising $200 million in funding, and helped found SPARK, the area business development incubator. Snyder claims on his website that 33 companies nurtured by SPARK in 2009 plan to hire more than 2,100 workers.

Each candidate has a distinct skill set to offer citizens and the business community, if elected. Analysts say neither campaigner is likely to offer more details before the election. And even after Nov. 2, when the name of the next governor is known, voters should manage their expectations, Ballenger said. “Is there anything a governor can do single-handedly to turn things around?” asked Ballenger. “No, and the sooner we recognize that, the better off we will be. The best thing a governor can do is come in and create a different climate – and then catch a really big break.”