Tepid economic forecasts call for bold policy moves

Slight economic growth predicted by some for 2006

Michigan's sputtering economy will rebound slightly next year, say some experts. That's right: There will be growth in the local economy -- if the prognosticators are right.

Still, Michigan will lag most other states and remain far behind the national economy's growth. So it would be a mistake for policymakers to interpret a little good news as an excuse for not acting to address the structural problems in the state economy.

The slightly bullish scenario presented to business leaders Monday at the Detroit Economic Club's annual economic outlook meeting is far from guaranteed -- other forecasters say the state economy will be stagnant at best next year.

And that means policymakers must focus on radically changing the business climate to attract jobs and investment.

Despite the forecasters optimism, the University of Michigan expects the state to see a sixth straight year of job losses in 2006 with as many as 9,600 or more disappearing. Since 2000, more than 308,000 jobs have been lost in the state.

Metro Detroit's automotive industry will be hit the hardest as thousands of salaried and hourly workers will find themselves out of work or bringing home significantly less pay.

The economic club forecasters base their hope on Michigan getting some spin-off benefit from a much stronger national economy.

"Growth isn't expected to be strong, but it absolutely isn't going to be negative," said Sandra Pierce, chief executive of Charter One Bank.

Pierce said the bank's economists expect a 2.5 percent to 3 percent increase in the state economy. Her projections were modestly echoed by Odell Jones III, president of the Jomar Building Co. and 2006 chairman of the Associated General Contractors, Greater Detroit Chapter.

In fact, Michigan could find itself short of skilled construction workers to meet the demand for the commercial construction boom that's happening around southeast Michigan, Jones says. The three Detroit casinos alone, he says, will exceed $1 billion in new construction and require several thousand new jobs.

But that's not a long-term solution to the state's job woes. Michigan's best hope remains in attracting the knowledge industry jobs associated with the automotive industry, and there have been a couple of good announcements in that area this month.

The governor and Legislature must do their part to build on those successes, revamping the tax structure to benefit technology industries, even if it comes at the expense of manufacturing. It should not be lost on policymakers that Bosch Corp. agreed to move 475 research-and-development jobs to Plymouth Township after the state cut it a 17-year, $20.8 million break on the Single Business Tax.

That deal should set the standard for the entire tax code. Rather than give selective breaks, Michigan should restructure its business taxes to make them the most competitive in the Midwest, if not the nation.

Incremental changes will not send the message that Michigan is serious about attracting investment. Dramatic moves are needed.

Until it finds the courage to make those moves, a true economic recovery will avoid Michigan.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.