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MIGG Stories When a Crisis of Michigan Government Demanded Political Courage

When a Crisis of Michigan Government Demanded Political Courage

Leadership sometimes requires hard and unpopular decisions – particularly when the state is at a crossroads.

Political courage: If those two words, together, sound strangely unfamiliar it’s because they are so rarely exercised. Still, examples of Michigan elected leaders taking bold, courageous actions in times of crisis are notable.

Being bold and exercising courage carries risks for politicians, especially in this age of term limits, dark-money primaries, and rampant misinformation on social media platforms. But courage is precisely what certain circumstances and crises demand of the men and women we elect to manage our public policies and institutions. Can political courage result in rewards too? Absolutely. Often it carries risks and rewards.

The early 1980s were difficult for the nation and devastating for Michigan. A recession battered the country, peaking in November and December 1982 when unemployment nationwide hit 10.8%, highest since the Great Depression. Michigan’s auto-dependent manufacturing economy, driven by big-ticket exports such as cars and trucks, was crippled.

By December 1982—one month after voters elected Pleasant Ridge Democrat James J. Blanchard to his first term as Michigan governor—the state’s unemployment rate soared to 16.8%, highest in the nation. Inflation was running near 11%, and the average interest rate for a 30-year mortgage topped 13%. More than 750,000 Michiganders were out of work in a state with a population of about nine million.

As the most devastated state in the nation’s most economically depressed region, Michigan became the buckle of the Rust Belt. For state government, the economic collapse opened a gaping $900 million deficit in the state budget. Making fiscal matters worse, the state also owed the federal government $2.1 billion for payments to unemployed workers.

Shortly after Blanchard was elected governor in November 1982, I was fortunate to land a coveted reporting job covering government and politics in The Detroit News Lansing Bureau, whose staff of veteran journalists was smart, aggressive, relentless and exceptional.

Though I had “covered” (that’s a stretch) state government while a student reporter at Michigan State University’s State News, I was a lost puppy in the Capitol. I had few sources, knew nothing about the operations of the state House and Senate, couldn’t name but a handful of elected leaders and their staff members, and had no clue how politics actually “worked.” On the other hand, I was a strong writer (thanks to my mother and one special Melvindale High School English teacher). I was assertive and aggressive (thanks to athletics and my childhood in Downriver Detroit), hyper curious, and never shy to ask questions about things I did not understand.

A member of the U.S. House from 1974 to 1982, Blanchard gained national acclaim for leading the effort to win congressional passage in 1979 of a controversial $1.5 billion federal loan and other payments that saved Chrysler Corp. from bankruptcy. The “auto bailout” rescued a major Michigan employer and thousands of jobs in many states.

So when he landed in the Michigan Capitol in January 1983, Blanchard was no stranger to tough issues and rough and tumble politics. Still, a $900-million state budget deficit (equal to roughly $2.9 billion today) amounted to a bona fide fiscal crisis. It’s important to understand that most states including Michigan are required by law to pass balanced budgets every year. Democrat Blanchard and the Democrat-led legislature had no choice: They had to pass a balanced budget.

It’s also important to remember that the political climate of the early 1980s was being shaped by “Reaganomics,” the new neoliberal economic policies of President Ronald Reagan. The policies hold that taxes are evil, and cutting taxes will incentivize business to invest while keeping more money in the hands of workers and consumers, who will then spend their “trickle-down” bounty. The results, supporters argue, will be business and job growth that will raise the economic tides of all workers and even boost tax revenues to fund government.

The degree to which Reaganomics worked is debatable. However, a clear outcome of Reaganomics and the anti-tax fervor of the 1980s is a firmly held belief, or at least populist perception, that lingers still today: Taxes are bad and must only be cut and never raised. For state and federal elected officials, the 1980s made tax-increase votes forever harder – even political suicide.

Blanchard and his cabinet, many of whom were smart and experienced political and policy operatives, weighed their options for addressing Michigan’s fiscal crisis and balancing the budget. Broadly, they had three choices:

• Raise taxes to cover the entire shortfall.
• Make massive cuts to cover the entire shortfall. This would include reducing or eliminating some of the most expensive state budget line items – state police, K-12 education, colleges and universities, Medicaid and other human services, environmental protection, revenue sharing for county and local governments, and more.
• Raise taxes to erase some of the red ink and make up the rest with cuts to state programs and services.

As I was learning my new beat, and literally just trying to find the bathrooms in the Capitol, details of Blanchard’s plan were trickling out: He would propose option 3: a tax increase and state budget cuts. Specifically: Raise the state income tax rate from 4.6% to 6.35% and slash state spending by $225 million (equal to about $707 million in 2024).

Political discussions were being held to win passage of Democrat Blanchard’s “38% income tax increase” in a state House with a comfortable 63-47 Democrat majority and a state Senate with a razor-thin 20-18 Democrat advantage. While debate over the plan was fierce, eventual passage was nearly certain. But for sound political reasons (top among them Democrats’ concerns about the 1984 general elections), Blanchard and the majority leaders in both chambers did not want the plan to pass with only Democrat votes. With tax increases being framed as the devil’s work by Reagan and a growing legion of believers, Republicans were more than willing to let Democrats go it alone.

One afternoon in early 1983, after the plan was public, we learned that Blanchard had invited Republican legislators to the governor’s residence near downtown Lansing for an evening reception. The veteran reporters in The News Lansing Bureau surmised that Blanchard was going to use the event to lobby GOP lawmakers for votes for the income tax increase.

Detroit News Lansing Bureau Chief Pat Shellenbarger, a terrific reporter and savvy journalist, looked at me and said (this is not verbatim but close): “Roger, you are going to attend the reception at the governor’s mansion tonight. The governor’s staff won’t know you, and the lawmakers won’t know you, and the governor’s staff won’t ask for ID at the door because they won’t want to offend the legislators. Go to the door, check in using your real name, mingle and then let us know what happened. If they don’t let you in, well, you tried.”

My reaction: “Say what?”

I was scared s—less, but I had an assignment and knew every reporter and editor at The News was watching to see what happened to the rookie hack. After approaching the front door, I introduced myself as “Roger Martin from Allen Park.” Sure enough, I was motioned inside. It did not take long for Blanchard to call his Republican guests together for remarks and make his pitch for their votes.

I immediately left, wrote down notes in my car, and returned to the Lansing Bureau to brief Shellenbarger and the editors in Detroit. I was then directed to write a column about the event, which was published in the next day’s paper. Needless to say, Blanchard and his communications staff were livid. Me? In retrospect, it was the best introduction to the Lansing “beltway” any reporter could have imagined.

Eventually, the tax increase passed – with just one Republican vote. Years later, after learning more about government, politics, and the Sophie’s choices that chief executives like governors and presidents must sometimes make, I came to respect the plan proposed by Blanchard and passed almost entirely on the votes of one party. It can certainly be argued that Michigan’s fiscal crisis could have been addressed entirely with spending cuts and no tax increase. Perhaps. But how many Michigan state troopers would have been furloughed? How many Michigan school districts would have been eviscerated? How many Michigan hospitals might have closed? How much higher would tuition have to rise at our universities and community colleges? How many low-income rural and urban Michigan families might have lost health care? Quite literally, the state could have faced bankruptcy.

That Blanchard proposed a tax increase against the gale-force winds of Reaganomics as his first major policy proposal as a first-term governor took political courage. I did not recognize it at the time. Shame on me. What were the results – the risks and rewards? Well …

A few months later, another brilliant politician named John Engler, then the Republican minority leader of the Michigan Senate, hatched a plot to use the tax increase against Blanchard and Democrats in the legislature. Engler and the GOP launched recall campaigns against three Democratic state senators from competitive districts who voted for the plan.

In November 1983, the Republican strategy resulted in the recalls of two of the targeted Democrats: Sens. Phil Mastin of Pontiac and David Serotkin of Macomb Township. Republicans went on to win both seats in special elections held on Jan. 31, 1984, flipping majority control of the state Senate to the GOP, 20-18. The move injected rocket fuel into Engler’s political brand. He was elected Senate majority leader and went on to win three terms as Michigan governor. Just as important to Michigan politics in the long term, Republicans would hold majority control of the state Senate from then until 2022 – some 38 years.

As for Blanchard: After proposing a 38%-income tax increase and massive cuts to the state budget, he won a second term as governor in a massive landslide, capturing 82 of 83 Michigan counties and 68.1% of the vote.

As for the state: Republicans opposed the 38% income tax predicting “economic ruin” for Michigan. Reaganomics held that states with low taxes would prosper, while tax increases would kill jobs and prosperity. In 2012, Lou Glazer, the highly respected founder of the non-profit Michigan Future, examined the state’s economic performance during Blanchard’s eight years as governor. Glazer was an official in the Blanchard administration and is recognized for credible research and analyses. Here’s what Glazer wrote in his Michigan Future blog:

“Economic ruin? Hardly! During the eight years of the Blanchard administration employment in Michigan went from 3,193,000 in 1982 (the year before he took office) to 3,946,000 in 1990 (the year he left office). An increase of 753,000 jobs. The biggest annual job gains occurred in the three years when the higher income tax rates were in full effect: 1983-1985. Job growth in those three years was from 3,193,000 to 3,561,000. An increase of 368,000, an average of almost 123,00 per year. Over the eight years the state’s annual average unemployment rate went from 15.6% in 1982 to 7.7% in 1990.”

While Blanchard’s plan absolutely resulted in a balanced state budget, Glazer said he would not attribute Michigan’s strong economic recovery and performance in the mid to late 1980s to the income tax increase. At the same time, the Michigan lesson demonstrates that tax increases are sometimes necessary, despite the potential political fallout.

“What the Blanchard years demonstrate is that you can raise taxes and have strong growth … (and) when you both raise taxes and control spending you can improve the standard of living and quality of life of Michiganders by having adequate funds for a decent safety net and public investments in education, quality of place and infrastructure,” Glazer wrote.

In times of crisis especially, elected leaders must ask themselves and their team: “What’s the right thing to do?” The answers—the policy solutions—might demand political courage with all its risks and rewards.

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