Granholm versus economics

Governor Jennifer Granholm has a plan for Michigan. At least, that's what she calls it.

According to the Detroit News, Granholm announced the details of her "plan" at the "Detroit Regional Chamber of Commerce's annual policy conference on Mackinac Island." From the article:

"She went over highlights of her economic revival plan for the state, including a $2 billion investment in diversifying the economy, speeding up road construction to create short-term jobs, doubling the number of college graduates over 10 years and cutting taxes for manufacturers by $600 million."

Let's go through these one by one.

First, the good news. Tax cuts are definitely a good idea. The article doesn't make it clear what sort of tax cuts she's talking about. Let's hope they're real, across the board tax cuts. Let's hope they're not "targeted" tax cuts, where government picks winners and losers. Those are practically worthless for improving an economy.

How about "a $2 billion investment in diversifying the economy?" Isn't it great how politicians talk about "investment," instead of what it really is--spending. Unlike a real investment, government does not suffer the consequences if it goes bad. That means it has much less of an incentive to use money effectively.

Government can only "invest" money that it takes from the taxpayers. That means that they can't do whatever they would have done with it. People can spend their own money more effectively than government can. But Granholm doesn't seem to agree.

Then there's "diversifying the economy." Liberals just love diversity! Seriously, though, I can only assume that this means that government would subsidize some politically fashionable industry. There always seems to be some magical industry that we need to attract. A few years back, it was internet technology. Then the dot-com bubble burst. Now, it seems to be biotechnology. I wonder how Americans managed to invent cars and computers without government subsidies. It must have been a fluke.

What about "speeding up road construction to create short-term jobs?" Short-term jobs, huh? I wonder how short-term these jobs will be. Somehow I can't help thinking that these jobs will wrap up around the middle of November. Short-term jobs won't help Michigan in the long run.

More, or speeded-up road construction may or may not be a good thing. But road construction exists to create roads, not to create jobs. Government does not exist to provide jobs. Government can only hire someone by taking money from someone else. Once again, need we remember that capitalism works better than socialism?

Finally, there's "doubling the number of college graduates over 10 years." I get the feeling that Granholm just picked that goal out of the air.

The impetus for this initiative seems to be the observation that college graduates make more money than non-graduates. But as any college graduate ought to know, correlation does not imply causation. It could be that more intelligent and motivated people are both more likely to graduate from college and to make more money.

Not everyone should go the college. Many jobs don't require a college degree. For some people, college would just be a huge waste of money. Subsidizing college more would inevitably lead to filling colleges with more people who party and don't take college seriously. Raising taxes to pay for all these subsidies would just lead more of our college graduates to leave the state.

Maybe Granholm should go back to college and learn some economics.