REINVENTING MICHIGAN: GOVERNOR RICK SNYDER’S … · REINVENTING MICHIGAN: GOVERNOR RICK ... so...

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AMERICAN ENTERPRISE INSTITUTE REINVENTING MICHIGAN: GOVERNOR RICK SNYDER’S MODEL FOR GROWING THE GREAT LAKES STATE’S ECONOMY KEYNOTE ADDRESS: RICK SNYDER, GOVERNOR OF MICHIGAN MODERATOR: TIMOTHY P. CARNEY, AEI PANELISTS: HALEY R. BARBOUR, COFOUNDER OF BGR GROUP, FORMER GOVERNOR OF MISSISSIPPI MICHAEL D. LAFAIVE, MACKINAC CENTER GROVER G. NORQUIST, AMERICANS FOR TAX REFORM 1:15 PM 3:30 PM THURSDAY, SEPTEMBER 26, 2013 EVENT PAGE: http://www.aei.org/events/2013/09/26/reinventing-michigan- governor-rick-snyders-model-for-growing-the-great-lakes-states-economy/ TRANSCRIPT PROVIDED BY: DC Transcription www.dctmr.com

Transcript of REINVENTING MICHIGAN: GOVERNOR RICK SNYDER’S … · REINVENTING MICHIGAN: GOVERNOR RICK ... so...

AMERICAN ENTERPRISE INSTITUTE

REINVENTING MICHIGAN: GOVERNOR RICK

SNYDER’S MODEL FOR GROWING THE

GREAT LAKES STATE’S ECONOMY

KEYNOTE ADDRESS:

RICK SNYDER, GOVERNOR OF MICHIGAN

MODERATOR:

TIMOTHY P. CARNEY, AEI

PANELISTS:

HALEY R. BARBOUR, COFOUNDER OF BGR GROUP,

FORMER GOVERNOR OF MISSISSIPPI

MICHAEL D. LAFAIVE, MACKINAC CENTER

GROVER G. NORQUIST, AMERICANS FOR TAX REFORM

1:15 PM – 3:30 PM

THURSDAY, SEPTEMBER 26, 2013

EVENT PAGE: http://www.aei.org/events/2013/09/26/reinventing-michigan-

governor-rick-snyders-model-for-growing-the-great-lakes-states-economy/

TRANSCRIPT PROVIDED BY:

DC Transcription – www.dctmr.com

ARTHUR BROOKS: Gentlemen, can you take your seats? Let’s get started.

Good afternoon, ladies and gentlemen. I’m Arthur Brooks, president of the American

Enterprise Institute and I’m delighted to welcome you to this event entitled “Reinventing

Michigan,” featuring the governor of that great state, Rick Snyder.

We’ll follow Governor Snyder’s address with a panel on this topic and I’m going

to let the convener of that panel introduce the panelists, but I advise – I will ask you all to

stick around. You’re going to enjoy it and you’ll – you know who is being featured on

that panel, so you’ll know that it’s going to be – have a high entertainment caution.

In the meantime, we’re looking forward to hearing from Governor Snyder, who

was elected in 2010. Governor Snyder had an interesting background. He was never

elected – was never an elected official before he came from the back of the pack and won

the election. And his pitch to becoming governor was a little like offering spinach over

dessert to your kids. He said basically, look, the state is hurting. We have to do some

tough things. I’m not going to give you handouts. This is not going to be just a bunch of

favors and fun. We have to do hard things to make the state come back. And his citizens

voted for him – now, his campaign slogan was a little unconventional. He’s the only

serving – or he’s the only CPA who was currently serving as a governor. And he called

himself one tough nerd in the election and that sold. The citizens of Michigan elected one

tough nerd.

Anybody who’s had an opportunity to hear Governor Snyder knows that he’s

passionate about the problems facing the state and how to fix them. He values fairness.

He cares about compassion for poor people. He’s relentlessly positive. He’s looking for

common ground with everybody. And as such, I dare say, he serves as a model for what

we could be doing right here in Washington, D.C. As I said before, please stick around

for the panel on reinventing Michigan.

And with that, Governor Snyder, welcome to AEI. (Applause.)

GOVERNOR RICK SNYDER: Thank you. Thank you, Arthur. Well, thanks. It’s

great to be with you today and I’m glad to be having an opportunity. I’ve been looking

forward to this.

Let me set the stage on Michigan to sort of set the groundwork. Michigan, in our

history, was that one point, if you go back – you’ve got to go back about 100 years, but if

you go back to the first half of the last century, Michigan was the innovation, the

entrepreneurship, and manufacturing center of the United States and the world – not just

our country, but we dominated the world in innovation and entrepreneurship.

Think about that: it was bigger than Silicon Valley by far in terms of the things

that went on.

During that same time period, there’s a period where Detroit was the wealthiest

city in the United States in terms of per capita wealth. What a success. You wonder how

we got where we’re at. Well, the issue was is we were too successful. We built huge

corporations that went on to global success in many areas in our state. It wasn’t just the

auto industry. We did it in serial furniture, chemicals, the list went on.

We’re so successful we got complacent and content. We spent time fighting with

one another, being divisive among ourselves, to say how do we keep this good thing

going? And what was the net result? We ended up at the bottom of the United States. To

the degree 2008-2009 was bad for the country, that whole decade is where Michigan was

at.

We led the country in unemployment. In 2009, we were over 14 percent. We had

that title for a number of years. In terms of personal income and wealth, in 1999, we were

17th

in per capita income. By 2009 we were 40th

. It’s probably one of the largest drops in

wealth of any instance in the history of the United States.

We’re the only state in the nation that lost population in the census for 2010. We

went backwards. That’s ugly, folks. We were a broken state. We had a broken

government.

To give you an idea about how people looked at our future, one of the things that

got my attention, I got elected as governor. And they have this thing called “New

Governor School,” believe it or not. At the NGA – Haley knows about this, he helped

teach us these things. So they had New Governor School. I come back from a break one

time. There’s a folder on my chair. And so I sort of watch the other new governors open

their folders, wondering what’s going on. So I say, OK, I’m going to open mine because I

saw some smiles. I saw some grins, stuff like that. So I picked up my folder and what it

was was from Moody Analytics. It was an analysis of your state. And then, the upper left

hand corner, in reverse colorization, because they want to make sure you’re literate or

you at least see this one number, so it was white on black background, it was a forecast

for your expected job growth from 2009 through 2014, and how you’d rank of the states.

Guess what my number was – 50.

I have to be honest. There’re a couple of territories and a couple of other groups,

so there were – there was a lower number, but my number was 50. And when I saw that, I

didn’t get upset. I didn’t get mad. I just said this is not going to happen. This is just

unacceptable.

And I only have two charts I keep up on my wall. I have a corkboard in my office.

That’s one of them. So every day I go to work, I can look at that report and swear that’s

not going to happen. And it’s not happening.

So the question is what do you do. I ran against a lot of well-meaning, actually

very competent career politicians in the political world. But they wanted to fix Michigan.

That wasn’t good enough. It’s time to reinvent Michigan; again, start a new era where we

can build on the strengths that we historically had, that entrepreneurial passion, that

ability to make products, to innovate, and get back to those fundamentals, and to do it

again. That’s why I ran for office – to build a place for the future.

And I defined my legacy right at the start. I said, I want to be measured on two

things. One, did I do what I said I was going to do. And two, did I build a long-term

foundation for success. That had nothing to do with Rick Snyder ever being governor, but

something better, smarter people could come and build on and keep going for a long

time.

In terms of what I ran on, I ran on two premises. One, better jobs and a future for

our kids because we’ve had way too many kids grow up in Michigan that had to leave

because there wasn’t opportunity.

Now, this is where it starts getting a little different because you might have

expected a lot of those. One of the things I thought really needed to happen is we had to

redefine the role of the public sector. Because when you talk about more and better jobs,

the first thing I always start with is – is it’s not government’s job to hire people. That’s

actually something we need to be concerned about. I’d be terrified if everybody in the

state of Michigan worked for the state of Michigan. That would be truly scary. So our

role is to create that environment for success to happen, to create the environment to let

job creation happen through free enterprise, and to really work.

The other part that went with it, though, is to define why government exists in the

context compared to “too often in the political world.” “Too often in the political world”

is still going on way too much. People view government as a place that takes money and

spends money. I learned that first-person when I first got elected because I had a lot of

people come up to me during those first few weeks, and after the first words out of their

mouth were “hi, how are you,” they’d say “we need money” or we “want money.”

I never said it because I’m a very positive person, but I looked at them and I say,

what do I look like, an ATM machine here? (Laughter.)

So I defined government. And it’s about being a customer service organization.

Our customers are the citizens and organizations in our state. And we’re here to give

them efficient, effective, and accountable government – customer service.

One of the big picture ways, and I know this is an aspiration, but I believe it,

longer term, I would really like people to step back and say they felt they bought the right

amount of government. It’s not about no government. It’s about we’re a unique provider

of education, public safety – again, there are some choices, but we’re a big provider of

those things. And shouldn’t it be a case where you feel good that compared to all your

other shopping choices, you bought the right amount of government? So that’s how we

approach things about delivering a service like that.

The other thing that I do that I think is relatively unique is an attitude, an

approach to how we do things. It’s called relentless positive action, which means no

blame, no credit, no fighting. I don’t fight with anyone. I haven’t fought with anyone

since I’ve been in office because fighting, blame has no value.

Have you ever seen blaming someone solve a problem? It doesn’t. It’s a singular

focus, much like an entrepreneur, on solutions to say here’s a problem. Here’s a solution.

And most of the time I ran as a nerd, it’s common sense. There are common sense

solutions and pursue those one after another in a relentless fashion. So that’s the

operating philosophy. That’s how we operate. And it works.

To give you some illustration, I’m going to do some of these fairly quickly. We

had a broken tax system because you were interested to, say, how we’re creating a

business environment for – (inaudible) – fast. We had the dumbest tax in the United

States, the Michigan Business Tax. And I think you can – you’ve got some Michiganders

here. You can ask them. And when I ran, I had some of the great people say they wanted

a cut. We had a surcharge. They said we’ll cut the surcharge or we’ll cut it half. And my

view was – my public answer is if you take dumb and divide it by two, it’s still dumb.

We eliminated the Michigan Business Tax. And this is why we had $1.5 billion

deficit, got rid of the Michigan Business Tax. Since then, we’re eliminating personal

property tax in our state. We’re going systematically through our taxes saying how can

we make them simple, fair, and efficient.

I did put in a corporate income tax to replace the MBT. How did I view it? What

was my instruction to our team? Is to take federal taxable income time 6 percent, write a

check, go run your business. Now, it wasn’t quite that easy because of the federal

government, all the goofy depreciation rules. But we simplified the system by 70 percent

in terms of the paperwork and got rid of pretty much most of the credits, the deductions,

just made it absolutely as simple as possible.

And one other thing that was really important to me is we got rid of most of the

business incentives, the business credits in our tax. This tax was like Swiss cheese. It was

fundamentally unfair. And so sometimes I get a look to say we were trying to buy

businesses into our state by giving out these big tax credit programs to get people to come

to Michigan. I don’t think that’s right because that’s not fair. You’re not creating a level

playing field, the fair competitive playing field. And in fact, you’re disadvantaging

people that have been in your state doing business for how many years.

I think too often in our country, states and places have gotten too dependent on

that. I’ve actually joked – and it’s not a joke – I call it the heroin drip of government is

giving out tax credits. And we needed to get away from that.

So we haven’t been able to make the whole transition because, again, we need to

be competitive, but we’ve done it a whole different way. So instead of using tax credits

that are hidden that you didn’t know what they were, we now appropriate dollars. We

actually will do grants or loans so it’s transparent. Everyone can see. And we’re only

giving out a fraction of what we did in tax credits. Big improvement. Because one thing I

was interested in, when I came into office and I told you about I had $1.5 billion deficit,

that didn’t include the impact of tax credits that I was going to have to pay that had been

given out in how many years before. I started in the hole, minus $500 million every year

on the first four years in office with my budget because of tax cuts. That’s not a great

way to operate. So we’ve cleaned all that up.

Now, we’ve gone through systematically and done unemployment insurance

reform. We were in a penalty because we owed lots of money. We’re going to save

Michigan businesses over $1 billion over the next few years by reforms that we’ve done

there.

Workers compensation, we’ve come down 7 percent each of the three years I’ve

been in office in terms of our premiums. Regulatory environment, we went out and got

industries involved. We actually got people that were on the other side of the issue –

consumer groups, all kinds of groups, environmental groups – to be part of this in

different areas to say let’s do regulatory reform.

We’ve gotten rid of over 1,300 rules and regulations, dramatic changes there. And

more important than just getting rid of the regulations is the attitude because the real

issue is too often people will be treated as someone to be penalized instead of as a

customer. So the goal is to say we need you to comply because it’s important, but how do

we help you be successful at the same time? And so we’re making that transition.

So we’re going through a whole list of different things like that in so many

different areas. A couple of other business areas I’ll mention to you, though, they get

overlooked, not enough focus, that I view as a huge priority now and I hope for quite a

few more years in terms of what we need to do in Michigan that I want to work on is

talent. We’ve got a broken talent system in our country about connecting people from the

private sector with where the jobs are and the educational sector. And we’re going to lead

the country in what I call talent in the three Cs: collaborating with the private sector,

creating with the education sector, and connecting those worlds. And we’ve got great

programs to do that.

We just launched a program called MAT2, Michigan Advanced Technician

Training because of huge opportunities in the skilled trades. So this is a program.

Someone will apply. They’ll get admitted to. They’ll be paid while they’re working.

They’ll work. They’ll get a community college degree after three years. They’ve got a

guaranteed job when they complete the program and they have a work commitment for

two years. It’s a cool opportunity.

Basically, what we did is we went to Germany, stole their apprenticeship

program, and brought it back to Michigan and modified it. So talent is a huge

opportunity.

One other way we’re doing economic development to, again, get away from the

old ways of sort of trying to buy people in our state rather than recognizing the answers

to have Michigan companies grow and flourish, I want to focus on gardening instead of

hunting. So how do you help people garden in our state? We call it Pure Michigan

Business Connect. We started two years ago with two companies, two of our big utilities.

We talked to them to say don’t give any special deals. We’ll help administer the program.

We’ll help coordinate the program, but it’s up to you to make sound business decisions

about what you do. But we ask them to buy more from Michigan suppliers. And they’re

big buyers. So they said – they each made a commitment year one to say together they

would buy a half of billion dollars more from Michigan after a five-year period. So their

annual buy-in would go up by a half of billion dollars after five years.

You know what happened when we kicked off the program? It worked. I knew it

would work. So just two years later, this May, we had a new announcement from those

two companies. You know what they came out and said? Their goal now is $2 billion. It’s

gone up by four X, just good old-fashioned good neighbor policy. That’s cool in terms of

showing results. And for every $200,000, there’s a job. So we’re talking tens of

thousands of jobs. That’s how you bring things back.

So we’re doing all these things. And in terms of said it, did it, just in terms of

quick results in terms of Michigan, we’ve – our employment rate’s down 5 percentage

points, more than that. Our personal income, we’ve come up five states. We’re growing

again in population. You might see it in terms of housing. Housing market’s hot in a lot

of places in Michigan.

Now, we have one big area we’re working on and I’m going to make a quick

comment or two, is Detroit. And two things I want to take – have you take with you about

Detroit. First of all, when you hear about the bankruptcy in Detroit, it’s not a new

problem. It’s a solution to 60 years of problems. This is saying enough is enough. It’s

going to get turned around with respect to the government of the city of Detroit.

The second thing to take with you is the comeback of Detroit has already been

going on for several years. Most people don’t know that in terms of the midtown,

downtown excitement. There’s been over $10 billion invested in downtown Detroit.

There’s been over 12,000 jobs they have moved into downtown Detroit. We have a

housing shortage in downtown and midtown Detroit because so many young people are

moving there. There’s no more places for them to live. The problem has been the city

government and the lack of provision of adequate services.

These were all done while Detroit’s all messed up in terms of city government.

Think about the opportunity as we turn this around. Detroit is going to become one of the

great value places in the United States and in the world in the next few years.

So don’t get depressed about it. Look at it as an opportunity. So that’s exciting.

And then, finally, to put it in perspective, besides all that, I’m proud to be saying what

we’re doing. We put together a list, when I said did we say we’re going to do something

and did we do it. This is 2011 and 2012. That’s not a bad list of the kinds of things we’ve

been doing. So I gave you just a small snapshot, less than 10 percent, less than 5 percent

of a lot of the major accomplishments in our state in the last two and a half years.

So I’m proud to say Michigan is the comeback state. It’s not about me. This is

about going back to how I started. We had a state of the most creative people you could

find that were too successful and they fought too much with one another.

Our state became too negative. It spent too much time looking in the rearview

mirror and was too divisive. So I view my biggest role as not changing a lot of regulation,

which we’ve done a lot of, but to bring back a new culture, bring back that old culture.

It’s about being positive. It’s about being forward-looking, believing our best days are

ahead of us, and they are. And about being inclusive; again, not fighting, but embracing

one another, recognizing we don’t agree necessarily in a lot of things, like one big family.

I use the analogy. I feel I operate as if I’m sitting at a kitchen table with 10 million people

around it.

So we may have a lot of differences, but we find ways to work together and win

together.

So thank you for the opportunity to share that and I’d love to take some questions.

(Applause.)

MR. BROOKS: Ladies and gentlemen, we have time for some questions for the

governor. If you’d like to ask your question, please put your hand up. Someone with the

microphone will come to you. The only ground rules are, please stand up when you’re

going to speak, say who you are and what organizations you’re with, and ask the

governor your question.

So we have a microphone right here. Why don’t you go right to the back, this

gentleman on the side had his hand up first?

Q: Hi, my name is Michael Steger. I’m originally from Kalamazoo, Michigan.

I’m also with the LaRouchePAC Policy Committee.

I applaud your efforts because I think a lot of them, the German apprentice

program, have been very – are worthwhile endeavors. However, I think the practical

approach that you’re taking will ultimately fail. I think the reason why is because what’s

not addressed is the paradigm change away from an industrial orientation of production

throughout the entire country, which Michigan led, as you referenced, oriented towards a

financial kind of scheme, financial emphasis without the entire national economy. And

because of that, you see the bankruptcy of Detroit reflects that specifically, the derivative

swaps, all of these characteristics, and the debt services we pay are probably the biggest

tax burden in this country to actual industrial growth seconded probably by the

environmental regulations.

So how are you going to address and why don’t you address more of the question

of why aren’t we as a nation committed to the industrial production – nuclear power

plants, high speed rail systems, these have proven effective. Even the “New York Times”

had to admit that the high-speed rail in China is creating huge expansive growth in China.

We’re not doing that here. Michigan plants could be retooled, producing those today, and

that would be an effective growth policy to take Michigan back to the highest per capita

income in physical terms that we used – once used to have.

GOV. SNYDER: I appreciate the question. You had two or three pieces of that, so

I’m going to grab one piece and I’ll come back to the bigger point you made here. You

talked about debt in particular.

We’re managing our debt the way it should be managed, like a family, in

Michigan. When I took office – again, you have the bankruptcy question of the city of

Detroit. Well, I’m the token CPA governor in the United States. So hopefully, you can

see this is in my DNA. There’s only been three in the history of the United States, by the

way. We need more CPA governors, when you go back to your respective states or

voting places. One of the first things we did is the political world gets too focused on the

short-term. So we’ve been forecasting out 30 and 40 years since the time I took office.

And we’ve done liability reforms. We’ve taken $20 billion of about $60 billion off the

books between either forward-looking reforms or payment plans in place.

And we’ve put payment plans in place to pay down our long-term debt and in a

very responsible fashion. We have rock solid budgeting to the point where I’ve made the

joke and it’s not a joke that if you want a really sweet job, you should run for governor of

Michigan in 2038. (Laughter.) The past would have been dealt with. You got a bright

future. You can just move forward. So that’s on the debt side.

With respect to industrial policy and such, I very much am proactive on

manufacturing and the automotive industry in Michigan. I’m a huge advocate of it. I just

gave a major speech to the auto industry saying I’m rooting for you and I’m pushing

policies to help you. What I would say is – is we need to be really careful. They are not

separate worlds. When you look at where the world’s going and where the world’s been,

there’s a lot of coalescence and interaction that you shouldn’t underestimate. Why do I

say that? I’ll give you one illustration of what we’re going to keep seeing in the future.

If you go to a car today, a car is not nearly – not merely a mechanical collection.

The IT in a car today can match almost anything you can think of in terms of

sophistication requirements. So the IT world, the auto world are the same world in terms

of many cases. And if you want to be at the forefront of these things, you need to be

there. In fact, I’m proud to say Michigan is leading the world in the connected vehicle

project, which is basically someday we’re going to have smart cars. You can see already

the intelligence in your car in terms of lane avoidance issues, you know, all the safety

features you have, that’s only going to keep getting more and more prevalent.

We’re going to have cars talking to one another to deal with traffic issues. That’s

the kind of long-term issues we need to be thinking about, and that’s not separating the

manufacturing world from information technology or even the finance world. There’s a

tremendous amount of convergence and we need to be smart about not walking away

from one or the other, but understanding how to balance those and to say in the context of

a global economy my goal is to make Michigan – the made in Michigan a special

moniker for anything in North America, whether it’s manufactured, grown, thought up, or

invented.

MR. BROOKS: Right here. Michael Barone from AEI. Another Michigander

displaced in Washington, D.C.

Q: Yeah. And I grew up north of Canada. Michael Barone of AEI and the

“Washington Examiner.” Governor, you made some controversial decisions on a couple

of issues, which got different sets of people around your 10 million-person kitchen table

angry on right-to-work law and Medicaid. Could you give us your thinking on those

issues? What led you to make the decisions you did?

GOV. SNYDER: Sure. Right-to-work, I prefer freedom to work, was relatively

straightforward. I knew it’d be a big controversy, but it was about worker freedom. It’s

about standing up for hardworking Michigan people to say they should have a choice.

To be blunt, I never viewed it as an anti-union item because I view it as is people

should be free to join a union. I think unions could provide a great thing. The question is

do the workers see value in what the services are being offered, and if they do, they

should join.

And so I really put it in that context, one. And secondly, I believe it will create

jobs in our state. I looked at the experience of Indiana and we’ve seen it. We haven’t seen

it in terms of specific projects fully developed yet, but the pipeline of people looking at

Michigan has dramatically increased because we’re a freedom to work state now. So it

will bring jobs.

On the second one, on Healthy Michigan, because it’s not the generic Medicaid

expansion. I would not have supported that. We made a Michigan version that

emphasizes things that I think are critically important, such as personal responsibility and

wellness to get people involved in their health care and giving them incentives to

participate in the process.

The reason I did support it a couplefold. One is – is I don’t think it’s right. We’ve

had a system for a long time, where we have lower income, but hardworking people that

were having to go to the ER for their health care. There’re people literally dying from

that. And we have an opportunity to have a better life because they can get primary care.

I’ll give you one illustration. There’s a gentleman I met in Grand Rapids. This is a

hardworking guy. He kept on holding a job. He would go out and get a job. He would

work. And he’d get sick. And he’d lose his job. He’d have to quit or just lose his job.

Well, he’d recover to some degree after resting and stuff, and then he’d go get another

job. Well, it happened again. And he’d gone through this cycle how many times? Until he

finally got so sick he ended up in the ER because he refused to go to the ER because he

knew he couldn’t pay. What happened? He was an undiagnosed diabetic. All he needed

was some insulin, basic treatment. This guy could have held one job then entire period.

He could have had a family. He could have had a life. He didn’t have that opportunity

because of the system.

The second thing is – is I believe it’s a question of who writes the checks, but in

my view, there’s an opportunity to save money if the program was run right. And we’ve

got a good track record in Michigan and you add Healthy Michigan on top because we

pay for the uncompensated care through our insurance premiums. And let me ask you

this. What’s cheaper or what’s more expensive, going to an ER and all the aftercare of

that, or going to a physician and getting treated in a preventative fashion? This is

fundamentally lots of money if it’s done right.

So my view is instead of getting caught up in all the Affordable Care Act, which I

don’t like – I don’t like the Affordable Care Act. I had a situation where I’ve got a bunch

of lemons, I’m going to make lemonade. Put it in a simple sense. There’s an opportunity

to do something good here.

MR. BROOKS: We’re going over to this side, then we’re going to come back

over here. OK. So why don’t we take – right at your table, governor.

GOV. SNYDER: Yeah. Hi.

Q: I’m David Fenstermaker –

MR. BROOKS: One second, we got a microphone coming.

Q: David Fenstermaker. I’m a new resident of Petoskey.

GOV. SNYDER: Oh, great.

Q: But I still have a house here. But I want to say, first of all, it’s been refreshing

having you changing the rules and the laws. I would ask you two questions. One, do you

have further tax laws that you plan on modifying, reforming, and specifically looking at

the state property tax and how it’s structured?

And then, secondly, is there a way for people to volunteer in terms of your

looking for innovation and things like that, for people who have businesses that can get

involved? Is there any sort of outlet for that kind of thing in your plans?

GOV. SNYDER: Yeah – no, I appreciate those and it’s great to have you be one

of my customers. I like that. Thank you. (Laughter.) Petoskey is one of the most beautiful

areas. If you’re in Michigan, you should go look it up. (Laughter.) You’d be very

impressed.

In terms of your question, in terms of tax reform, we’re always looking at

different ideas on tax reform. To put it in context, property tax reform, we’re really doing

the personal property tax piece for industrial equipment right now. So that’s the project

over the next year or so. So to the degree I would continue in office, which I haven’t

formally announced, but I have a high degree of interest in – (laughter) – including –

there are even ads up this week on that topic. You can see that there could be things we

need to look at because there’re some fundamental challenges with how our property

taxes are done in the state of Michigan and the areas of reform.

On the second piece, in terms of innovators volunteering, absolutely. We’re

excited for that in terms of people getting involved. And what we’ve done is the

Michigan Economic Development Corporation is a great place to go. But in your area,

you’ve got great things up in the whole bay area there that I would recommend, would be

happy to connect you at the local level because I think that’s where you could find some

really cool opportunities for innovation.

And one of the nice things is – is for quality of life, the part of Michigan he’s

talking about, he’s up in the Lower Peninsula, in the northwestern quadrant. The lakes

there are incredible. The one line I will give you for all the people on the coast, my

favorite T-shirt this summer was – you could go on a shop and see – you could buy a T-

shirt that said “Great Lakes – Unsalted and Shark-Free.” (Laughter.) It’s a wonderful

place for quality of life and with broadband and connectivity, you could run any business

there.

MR. BROOKS: We come to learn that the innovative part of Michigan is also

called the “Bay Area.” (Laughter.) Yes, sir.

Q: Thank you. Barry Wood, an economics columnist. I heard you last week speak

about your trip to China in which people ask you about Detroit. So many people here

have read the “New York Times” this morning about Detroit. I want to ask you in that

context of the pensions that was on page one of the “Times.” How long is this process

going to drag on, do you think? And what are the big financial issues that you as a CPA

see ahead that are going to be really tough getting through this bankruptcy?

GOV. SNYDER: Yeah, there’re a number of issues in terms of the whole process.

The process is actually going fairly quickly, very fast for traditional bankruptcies. Our

goal is to be done by next fall in terms of timetable. And the judge actually came up and

is going faster than our proposed timetable.

So this is something that there will be major resolution, I would hope, within a

year to this situation. So that’s lightning fast compared to the other bankruptcies.

Because, again, I think we have the best people involved in the process in terms of Kevin

Orr and the people participating.

This is going through – and this is something I wish we could have avoided. But

it’s something now there – we’re going to do it well and we’re going to do it right.

In terms of major issues, I didn’t happen to see the article because I was flying

here, yet. So I haven’t had a chance to see that particular one today. But the big issues are

pension liability. And one thing I’ll mention to you. To the degree the pensions were

funded, they’re not part of the bankruptcy. And there is significant funding in the pension

plans for police and fire in particular, less or so for general retirees.

It’s really the unfunded piece of the obligation that’s in bankruptcy. So when you

hear about cents on the dollar, that’s only with respect to that other piece. There’ll be – I

can’t tell you it’s a great number, but there will be significant payments made to retirees,

period, because there’s a big funded piece.

Post-retiree medical is the difficult issue. Again, that’s one question of are there

alternatives and options for health care for them to look at and be part of that process, and

then general obligation bonds are part of this process, along with unsecured creditors.

So that’s why I would have preferred to stay out of bankruptcy in many respects

is there was more flexibility to work with people and negotiate things. What I found,

though, is we’re just getting sued by everybody. I mean, we’re getting sued a lot.

So it really became a case that we tried to work in good faith and the answer in a

number of cases were lawsuits. So that’s – in many respects, that’s what helped put us in

the bankruptcy courts because now it’s in a federally structured process that we don’t

have as much say in, in terms of following through.

So you’ll have major issues like pension retiree, the DIA is a big issue. Again, the

intention isn’t to sell our – but again, that’s going to be a big topic that people are talking

about already.

MR. BROOKS: We have time for one more question. So we’re going to go to this

side of the room. Ma’am. Right here at this table.

Q: Kate Zickel, Voice of Russia. Thank you so much for speaking today. I

actually graduated from Hillsdale College in your state, so thank you. I just wanted to

know briefly if you could speak to how you plan on addressing the housing issues in

Detroit.

GOV. SNYDER: Yeah, which housing issue? (Laughter.)

Q: Specifically the issue of homelessness and how so many people are losing their

homes over the last year or so.

GOV. SNYDER: Yeah, one of the big issues is some of that stabilized –

(inaudible). It’s really a huge blight issue in terms of turning neighborhoods around. We

have a lot of housing stock that’s available. So one of the things we’re doing is trying to

follow a rational plan to say how do we, you know, take down structures that are

inappropriate? How do we make sure we have opportunities for people looking for

housing because you can find very affordable housing to a degree you’ve never seen? I

mean, literally where you can buy a house for hundreds of dollars, a nice house. It would

amaze you.

So we’re working through that process now. The good part is, as a governor of the

state of Michigan, I view it as not my role to figure out every answer, but to follow a plan

that was done by the city. And the city, to their credit, with the Kresge Foundation’s

support, had done kind of a master plan for the future of the city of Detroit called the

Detroit City Future Plan. So that’s a big piece of it, that there’s a roadmap that’s really

well thought out, that had broad community support to say this neighborhood can be

mainly turned back to green space. This neighborhood can be really supported and be

higher density. This is lower density. And then we’re overlaying the blight efforts and the

other efforts to help with housing, all in the context of saying how do we support a plan

that was supported by Detroiters that makes a lot of common sense.

And I’ll just go back to the last one, because we’re still on Detroit in some ways,

the overriding issue in Detroit is not dealing with the debt. We want to deal with the debt

and that will get dealt with. But one positive of Chapter 9 versus Chapter 11 in particular

is the key focus is on better services to citizens. And so that’s my primary guide going to

either – whether it’d be housing or these financial questions is what’s in the best interest

of the 700,000 people of the city of Detroit now and for the long-term to make sure they

get better service. Because the key answer in Detroit is growing Detroit. That’s the

solution. We have to grow the city in a positive, constructive way. And these other things

are issues that need to be dealt with, but that’s the most important topic.

MR. BROOKS: We’re going to take a five-minute break before we convene our

all-star panel with Halley Barbour, Grover Norquist, Michael D. LaFaive, and Tim

Carney. But please join me in thanking Governor Snyder.

(Applause.)

TIMOTHY CARNEY: Thank you everybody for coming and thank you for

sticking around. I think this panel promises to be exciting. I’m Tim Carney. I am a

visiting fellow here at the American Enterprise Institute and a senior political columnist

at the “Washington Examiner.” So I’m a double colleague of Michael Barone in that

regard.

What I do here at AEI is run the Culture of Competition initiative. We have a

series of panels, mostly, some other events and writings, talking about how the pursuit of

profit, which is something a lot of, you know, free-market conservatives, Republicans,

centrists, all applaud that. Pursuit of profit is a different thing when done in the context of

free and open competition as opposed to when done in the context of government

intervention, lobbying, and cronyism. And we’ve had a series of panels discussing that.

Here we’re talking about competition on two levels: businesses competing inside

states and states competing for businesses. The term “pro-business” and “free market,”

people used to think they meant the same thing. I think it’s pretty clear they don’t right

now.

So what are the differences? How are states to go for business? Governor Snyder

discussed a little bit how he’s trying to chase after businesses and be more pro-business,

sometimes more pro-free market, sometimes not.

We – what we’ve got here to discuss this, I think, is a – an excellent panel. You

guys, if you picked up the paper, you have extended biographies of them, but I’ll just sort

of briefly tell you who they are in case you forgot some of the details.

We’re very proud to have the cofounder of the Caucus Room restaurant here,

Haley Barbour, who also is a former two-term governor of Mississippi and a founder of

BGR, formerly Barbour Griffith & Rogers, lobbying firm, communications firm, and an

investment firm, too. He was Ronald Reagan’s political director among a bunch of other

things, including the chairman of the Republican National Committee.

We have from Michigan Mike LaFaive, who’s the director – who directs fiscal

policy at the Mackinac Center, which is a free market think tank in Michigan.

And we also have Washington’s funniest celebrity Grover Norquist, who last

night, pulled in that title at the improv – he did not win the headlines, the headlines went

to the guy getting punched in the face by a different comedian. You should check it out.

Who did not win. Grover, in addition to being funny, is the founder and president of ATR

and the co-author of three books.

So the way I’d like to do things at the Culture of Competition events is rather than

have speeches and then some Q&A, is try to engage in conversation. So since we have a

Michigander up here to directly follow Governor Snyder, I’d like to ask you, Mike, what

else do the people in this room – what should they know about the governor’s business

policy.

MICHAEL LAFAIVE: Well, I think they should know that a fair field and no

favors can work as a broad economic development tool. When the governor took over

and eliminated the complicated and hated Michigan Business Tax, he eliminated about 50

credits, exemptions, and deductions along with it, in the hope of creating a fair field for

businesses to compete in. And he briefly touched upon that fact.

Then he went further and changed the regulatory structure, including passing a

right-to-work law, and in ways that he had – did not have a chance to detail. These

changes, I viewed as being positively Hayekian, really. He’s devolving the decision

making power, empowering individuals to maximize their own self-interest in – and then

over time they would benefit the state of Michigan as a whole.

MR. CARNEY: Grover, more generally, what is the right way for states to be pro-

business? What mistakes do you see them making?

GROVER NORQUIST: Look, I passed out this chart, which explains the next 10

years of American politics. But what it is, it’s the red states – 25 red states have

Republican governor, Republican House and Senate. There’re 165 million people living

in them. So half the country lives in states with complete Republican control shortly after

the “New York Times” announced the Republican Party had ceased to exist in the

country. And 13 blue states, run by Democrats completely, have 81 million people. So

half as many live in blue states.

I think when you look at what’s – and then there’s a divide. They’re going in very

different directions. The red states tend to cut taxes. The blue states are raising taxes,

rather than reforming pension systems. You’re seeing North Carolina just began to move

stating the policy to abolish their state income tax. Louisiana is – keeps trying – keeps

announcing their plan is to abolish the state income tax, arguing about how to do it.

Oklahoma’s reducing their income taxes. Kansas is on a stated path of abolition of the

state income tax.

So I think probably the most important thing you can do in your state is get rid of

the income tax. But all the steps in that direction are helpful. But what some sides had

said states that cut taxes are actually better off than states that have lower taxes that are

raising them because people looking to move to your state are planning to be there for

five, 10, 20 years, and they look at awful lot at the direction that the state is moving at,

not just where it is right now.

So North Carolina says we’re going to get rid of our income tax. They didn’t do it

this year. They got 25 percent of it. But they’ve made the case we’re actually going to do

this over time.

I think getting rid of the state income tax is probably the most important thing you

can do. Moving in that direction is the second most important thing you can do. All taxes

are raised to the breaking point, to where politicians’ careers are broken. So if you have

three taxes – property taxes, sales, and income taxes – all three will be raised to the

breaking point. If you only have two, those two are raised to the breaking point. So the

number of broad based taxes also tells you how heavily the state’s going to be taxed.

MR. CARNEY: Governor Barbour, in Mississippi, you use things like the

Mississippi Development Authority, incentives, tax credits for businesses to bring them

in. Is this – does this violate the sort of Republican teachings of free enterprise, limited

government?

GOVERNOR HALEY BARBOUR: We don’t have these at the Caucus Room.

The – we’re in a part of the country where there’s tremendous amount of competition for

economic development projects. And we’d love to not ever have to give anybody any

incentives, but we set out the goal nine years ago of replacing lower skilled, lower paying

jobs with higher skilled, higher paying jobs.

When I was some of these young people’s age, people came to Mississippi

looking for strong backs and low wages. And in the post-war era, that was – we made

apparel. Textiles was high-end manufacturing in Mississippi in those days, and then after

that, furniture. And so we’ve tried to replace those with higher skilled, higher paying jobs

– automotive, aerospace, energy. And often in those kind of projects, incentives are part

of what is being considered.

Sometimes, we’ll have a project that’s got 300 sites that they’re looking at, 30

states sometimes, many states almost every time. So one thing you do learn, first of all,

quality of your workforce has more to do with whether or not you could land a project

that you want than incentives.

Secondly, logistics matters more than incentives. The ability to move and the cost

of moving, both your feedstock and your finished products, as well as to some degree

workforce, by the way. And maybe incentives would be third or fourth. But that’s the

way we look at it. We’re a state that we did the first industrial revenue bonds in the

United States in the mid-1930s. We have been in the business of incenting businesses to

come to Mississippi for 15 years before I was born. And we have continued to do that.

We try to do it in a reasonable way. We try to do it in a fair way. We’re not investment

bankers. Sometimes, we made bad choices. But generally, it has helped us do what we

tried to do.

I’ll just give you one little statistic that I think is important. When I went out of

office, we were at the tail end of a recession. You know, Wall Street may think this

recession’s over; on Main Street it’s very hard to tell the difference between the recession

and the recovery. In fact, for the middle class, they have lost more income during the

recovery than they lost during the recession, which is true in my state.

I made that point for this. Although were about 2 percent fewer people employed

in Mississippi at the end of the last year than when I became governor, per capita income

went up 34.2 percent. And that is because we had some success replacing lower skilled,

lower paying jobs with higher skilled, higher paying jobs. And part of it – incentives play

a role there.

MR. CARNEY: Do either of you have a response? I mean, if – did Governor

Barbour succeed by, you know, bringing in businesses with tax credits and incentives?

And if he did, then maybe that’s a right thing for every state.

MR. NORQUIST: If that worked, Detroit could do it. If that worked, New York

could do it. I think that people moving to Mississippi are probably more interested in

improvements on tort law and the sense that other places they could invest have labor

laws that – Mississippi is a right-to-work state – other states have worse labor laws,

worse regulatory regimes and will make you power your plant with windmills.

MS. LAFAIVE: The economic development literature that’s been produced over

decades on incentives say at best it’s a zero sum game and probably negative in some

cases. In Michigan, we’ve done two statistical studies on our state’s primary business

incentive program and found actually an association between the program and losses of

manufacturing jobs.

I don’t think that that’s – the evidence that’s been produced by scholars over the

decades should just be set aside. I think these ultimately amount to political development

programs, not economic ones. They give the political class the opportunity to host

ribbon-cutting ceremonies and say, see what we’ve done to save your job or create your

job, when in fact on net balance it’s a zero-sum game or a net loser.

GOV. BARBOUR: I’d just make the comment for – I really enjoyed Governor

Snyder, what he said, and he’s smart. He is one tough nerd. But he made a point. Detroit

was the richest city in the United States in the 20th

century. Jackson, Mississippi wasn’t.

Mississippi has been the poorest state in the United States since 1870. In every census

since the end of the Civil War, it had the lowest per capita income in the United States.

So that’s why during the depths of the Depression there were no Republicans, or all the

Republicans would fit the trunk of a car, which is where they would have been put if

they’d been discovered. (Laughter.) That’s why we did industrial revenue bonds. We’ve

been a capital poor state forever.

But Grover makes a very powerful point. Rational, predictable regulation. Our

environment – our economic – I mean, our environmental people are not trying to figure

out how to say no. They want to create jobs in environmentally appropriate way. And

they’ll work with Toyota. They’ll work with GE or they’ll work with Severstal to try to

get their program where it is environmentally responsible.

But at the end of the day, as I say, somewhere in the pecking order, incentives can

be the difference in competing with Alabama or Tennessee or Arkansas or Georgia by

our experience. May not – Michigan – as the governor said, all states are different.

Michigan’s idea of health care reform and Mississippi’s idea of health care reform would

also be different.

MR. CARNEY: Grover.

MR. NORQUIST: You can change the laws in the state or you can change the

lawmakers. It is in terms of encouraging people to come to state, invest, create jobs. You

can either change the laws. You can change the lawmakers, which helps change the laws.

Or you can change the electorate. And that’s one of the things the governor was talking

about is changing the actual electorate. Bertolt Brecht, the leftist-center playwright, who,

when he looked at the East German workers’ revolt in 1953 against the Communist Party,

said what we need to do is elect a new people because he wasn’t willing to suggest that

communist government had failed. They needed a new people.

The red states and the blue states are busy electing new people by their policies.

California is convincing a million people in the last decade to leave. The kinds of people

that they’re high tax rates get to leave, changes the electorate in the state – one that’s

more amenable to Governor Brown.

And the states that are passing significant school choice measures are actually

changing the nature of the electorate; 200,000-300,000 people in Arizona now have an

opportunity for a school voucher or scholarship, OK? Single-mother with $5,000 for each

of her four kids in her pocket is a different human being than the one who gets a note

from the school superintendent telling her which public school she’s going to go to. It’s

just a different person.

And so the red states and the blue states can actually write laws to change the

nature of the people that are in those states. So 9.3 million Americans with concealed

carry permits, it’s a different person than the guy who says, well, you know, if there’s a

problem, the government will come and draw a chalk line around me, and that will be

very helpful. (Laughter.) It’s just not the same person, OK? It’s a different person. The 2

million home schoolers are different voters, different people. You will never take that

away from them.

And when you make it easier for people to be entrepreneurs and start business,

you change the nature of who’s in the state and what they’re doing. So the states are

actually – you can change the electorate. You can change the lawmakers. You can change

the laws. The long-term thing, to change the electorate, gives you different lawmakers,

gives you different laws.

Right now, we’re in the middle. We’ve changed the lawmakers, not yet the

electorate.

MR. CARNEY: So that’s where the home schooling, gun owning, self-employed

person is going to go, so one of those states you’re describing. But where did Boeing go?

Boeing chose Illinois over Rick Perry’s Texas. And Rick Perry’s Texas had lower taxes

and lower regulation. And as you know, GreenTech Automotive chose Mississippi over

Virginia. And now the chamber of commerce in Fairfax just endorsed Terry McAuliffe

today over Ken Cuccinelli.

So if we’re saying, you know, listen to the people. If we listen to the businesses,

they sound like they want the handouts and the incentives.

MS. LAFAIVE: But at what cost to those individuals who have to pay full freight

to ensure that there’s tax dollars available to refund a refundable tax credit system or give

cash credits. If you rob a lot of Peters to pay one corporate Paul, you’re just moving

resources that they could use to create jobs as well.

GOV. BARBOUR: Reagan used to say it was like sitting around the dinner table

and everybody put up $20 and gave it to the guy at the head of the table and he’d turn

around and gave one of them – all but one of the $20 bills. He kept the $20, go around the

table about four or five times, and got to head of the table. The government’s doing pretty

good. You’d think that’s the theory that we’re talking about here, but it’s really not.

I have to just say as an aside because of GreenTech. They’ve not received any

incentives from Mississippi. They have an agreement to receive incentives, but they

haven’t raised the money to build the plant for which the incentive would be. The county

has, but not much reported, the county is building a 2,500-acre industrial park. And

GreenTech will be on 100 acres of it, 4 percent. And so the county has gone ahead and

started putting in infrastructure and – but it’s – but you know, they got to get ready to sell

the other 96 percent of the park. And none of that – that would all happen if there were no

GreenTech.

I just don’t want you all to think we’re – to get incentives in my state, there are

requirements and people have to meet the requirements beforehand, if that’s the way it’s

set up, and that one was in that regard. But I couldn’t – couldn’t help but you’re right. If

you run your incentive program like you’re just handing out money in the car game.

MR. CARNEY: We’re going to – in a minute, I want questions from the

audience, so take a second to think about it. But just one last question for everybody up

here for now, which is this. The – a few different things we haven’t talked about yet. One

is what a lot of liberal or center-left or center people would talk about for pro basis, more

money on public education, more money on higher education, more money on

infrastructure and public transit. The other is tort reform or right-to-work. So each of you,

you know, one or all of those, I’d like to hear your comments and your experiences and

your thoughts with that.

GOV. BARBOUR: Well, first of all, my first year we passed what the “Wall

Street Journal” called the most comprehensive tort reform any state passed in one year.

And it has made a big difference. Toyota said publicly they would have not considered

Mississippi if we had not passed tort reform. And some other companies say that

privately. So it really does matter.

Right-to-work matters. And I like, again, Governor Snyder. It’s the freedom to

choose whether you want to belong to a union or not. We have unions. And they’re legal

and people are perfectly – it’s up to them and the company. But we have a very, very tiny

union workforce private sector and government employees. So those things do – those

things do make a difference. And I said earlier, logistics is one of the real drivers of site

selection. So if – you know, we’re blessed. We’ve got a great location. We’ve got two

ports on the Gulf of Mexico. We got two huge waterways – the Mississippi River and the

Tennessee Tombigbee Valley. We’ve got a gigantic railhead at Memphis, which is

capped on North Mississippi. And so that’s – that makes a big difference.

So I’m not – we ought not to ever have a transportation infrastructure program

like in the first year of this administration, where the money was essentially wasted on

the idea that the economic benefit was building the roads. Well, the economic benefit is

having the infrastructure that you need 30, 40, 50 years down the road, so you can build

an economy around it. So it was just backwards. But don’t underestimate the importance

of infrastructure for being able to be a profitable county.

MR. CARNEY: Grover.

MR. NORQUIST: One does often get, when you’re talking about let’s reduce

taxes or do tort reform to encourage job growth, advocates of larger governments say, no,

no, we’ll take same resources and put them into public education. And I didn’t ask –

mention to the governor of Michigan, but both my parents and my brother were

beneficiaries of the University of Michigan. They went to the University of Michigan and

Michigan taxpayers were kind enough to massively subsidize their education. And then,

they left. They went somewhere else.

We used to get this from – before North Dakota decided to become Kuwait, they

used to spend – (laughter) – a lot of time, then they poured money into the – into North

Dakota’s university and everybody left because there weren’t any jobs because at 8

percent income tax, next to South Dakota, with the much nicer weather and no income

tax at all. And they couldn’t figure out why creating all these guys with Ph.D.s in North

Dakota wasn’t creating Silicon Valley.

So it is fascinating to see people argue that if you pay the teachers more there’d be

jobs. And it’s not necessarily what happens. There may be jobs somewhere else for them.

MS. LAFAIVE: Passage of the right-to-work law in Michigan might be one of the

most consequential policies adopted in the state. It might rival the governor’s recent tax

reforms. As luck would have it, just last month, my colleague Michael Hicks and I

published a study on right-to-work and economic development. We created this big

statistical model and swept in about 64 years’ worth of data and tried to measure the

impact that right-to-work has on economic wellbeing in the states that adopt it. And over

that big sweep, we found that it adds about 0.8 percentage points in terms of personal

income growth that is permanent and average going forward. That may not sound like

much, but if your state was going to have a 2 percentage point growth rate, that makes it

2.8 percentage points. So 40 percent change in the rate of growth simply from adopting a

right-to-work law.

We also broke the data down into three sets and we found in the latter 20-23 years

or so that the impact of a right-to-work law does lessen. It moderates a bit. But it’s still

significant and valuable.

One of the metrics we tried to measure was population changes. In the latter

years, we found that it can add about 0.5 percentage point growth to a state’s growth rate

in terms of its population. For a state like Michigan, that’s very valuable. In the (odds ?),

we were the only state in the union to lose population on net balance. So we think that the

governor’s passage of right-to-work is going to have a fairly profound impact on the

state’s economic wellbeing over time.

MR. CARNEY: All right. From the audience, what – I’m looking for any

questions we have out there. Yes.

Q: Hi, Peter McCaffrey from the Frontier Center in Western Canada. Right-to-

work’s come up quite a lot today and in general I think it’s fantastic and much better than

what a lot of states have had before those laws have been passed. But there’s one hiccup

which I have an issue in if I understand it correctly applies in most right-to-work states

now. And that is that a private business owner cannot choose to only hire union

employees if he wishes to. Am I correct in that? And that to me seems like a bit of a – bit

of an odd situation. I can understand, for say, a federal or a state employer, they should

be neutral and allow anyone to join. But it seems to me, if a private employer wants to

only hire union workers because he finds it easier to deal with the union and he thinks

they provide good sources for – (inaudible) – and he actually believes that his members

are better off with that, then he should be free to do that as well.

So do you have any thoughts on that?

GOV. BARBOUR: Right-to-work is in our constitution in Mississippi, so it’s

more than the law. But that is not the case in Mississippi. For instance, when Toyota built

their new plant there, they had an agreement with the unions, a project labor agreement.

The problem they had is they couldn’t find enough union labor. But any one of those

companies was welcome to hire all union workers if they could find them. So I’m – I

don’t believe in my state that that is the law. Perhaps other states have right-to-work laws

that prohibit the employer voluntarily hiring all union labor, but I’m not aware of.

MR. CARNEY: And I understand the question, in some ways a limit on private

right to contract – that if you wanted to make it a condition of employment, you know,

conservatives often end up saying, well, if, you know, if you want to make it a condition

of employment that somebody do X and it’s your property, you should be allowed to do

that. In this case, for whatever reason – and I have the same concerns. And the answer I

was given when I talked to Mitch Daniels’ people about this was, well, if it weren’t for

the federal laws – I guess it’s the Wagner Act – that basically force you to accept

unionization, then maybe that would be a more valid argument.

MR. NORQUIST: When, I was younger I remember libertarians staying up late at

night having this argument. And –

MR. CARNEY: They still do.

MR. NORQUIST: Yes. OK. (Laughs.) I’m not staying up at night with them

anymore actually. But look, you’re trying to dismantle the Wagner Act. If you abolish the

Wagner Act and the federal government said we’re not in the business of managing other

people’s contracts at all, that solves the problem. Do you roll back part of the abuses of

the Wagner Act, even though it doesn’t solve all the world’s problems and all violation of

freedom of contract or do you fail to do that, so is it perfect? No. Is it better than living

under the Wagner Act unamended? Yes.

Q: Hi, Will Freeland, I’m with American Legislative Exchange Council, also a

Michigan citizen. I had a quick question mostly for former Governor Barbour. My

question – I was thinking about these tax incentives, one way of thinking about it. If

you’re going to say as a state we need to raise X amount of revenue. This is our budget

for the coming year. If you’re looping some groups out for some firms, then you got to

raise the average rate on every other business up to raise that same level of revenue. So it

seems like, you know, to give raise – a given number – if you accept that dynamics that if

we’re going to raise X and then we’re going to loop some people out, that means the rate

has to go up on everyone that we don’t, given exemption from the code, then aren’t we

saying a lot of the businesses that might be the next big thing in the state, we’re giving

them high tax rates and the incumbent firms, the big firms, we’re giving them lower

rates? It just seems like a little bit too centralized of a plan. I wonder what your thoughts

and how you approach that is?

GOV. BARBOUR: Well, first of all, let me say, incentives that we give in

Mississippi often are not just tax credits. They are infrastructure, cost money. General

public’s got to pay for it. It is – it may be all – there’s a variety of things from highways

to drainage to pipelines to whatever it makes to do that. So know that there are

expenditures as well as tax credits.

Secondly, you should understand, we’re also the first state in the country to have a

sales tax, 1935. And for the whole time we’ve had a sales tax, there’s been a list of

exemptions as long as my arm. And every time we tried to have a session of the

legislature to reduce the exemptions, we always ended up getting more. (Laughter.) And

it’s just – but that is a total reality. And your point is exactly right that if the tax is the

broadest, then it can be the lowest. So true, a lot of states do it because they think that in

the occasion that economic growth, the job creation gives more to the treasury and gives

more to the public than the other way around.

Now, but nobody can argue with the logic of what you’re saying. Of course,

(that’s right?) and so it gets to be a decision and it can become a corrupt decision. It can

become all kind of decisions. But there is a decision to be made. Is this in the state’s best

interest? Is this in the area’s best interest? Because often the tax breaks are from the

counties, not from the state.

MS. LAFAIVE: In Michigan, I think Governor Engler was widely opposed to

these incentives, even as senate majority leader. He spent a long time opposing these

targeted incentives. And he did so as governor and even went to other governors and

saying, hey, let’s – let’s stop this war between the states. It’s killing us. And then he lost a

Willow Run plant to Texas. He had no –

MR. CARNEY: In Mississippi, “War Between the States” means something else,

by the way.

MS. LAFAIVE: Yes, yes, I should have added economic war between the states.

(Laughter.) And he lost a Willow Run auto manufacturing plant to the state of Texas and

then did an about-face and jumped into the incentive game with both feet.

MR. CARNEY: Is there anything on that that – I’ll come back to questions here,

but this is something I’ve been thinking about for a while. Is there any way we could do

some big multilateral disarmament thing? I mean, if you look at this map, you got – you

got Snyder, Pence, Kasich, Walker, all up there around those unsalted shark-free Great

Lakes. I mean, what if they – and Pennsylvania has a Republican governor for now. What

if they got together and said we’re going to build down our incentives. I mean, the

Congress would have to approve any multi-state pact.

But when I talked to Bob McDonnell about this, he said, well, I don’t want to

have these incentives, but Mary O’Malley has them and Bev Perdue has them and that’s

the only reason I have them. Slightly different answer than yours. But is that part of your

reason for doing them is because otherwise Bobby Jindal will steal jobs from you?

GOV. BARBOUR: We’re doing it to compete generally with other Southern

states. But let me say. There is a feeling or there once was a feeling that the South needed

to do it to attract the jobs from the industrial North. Again, when I was as young as

Grover, the people came to Mississippi looking for strong backs and low wages. They –

we did not have the labor force to attract high skilled, high paying jobs. And that’s where

the incentives got started.

Today, we’re competing with each other. I mean, the new automotive zone in the

United States is the Southern automotive zone, you know, runs all the way across the

South, from BMW to the Toyota plant in San Antonio. That would have never happened

without incentives because the industrial Midwest would have got all the jobs in 1950. So

I mean, that’s just – that’s what you run into, the mentality.

MR. NORQUIST: There’s a piece to the puzzle. I don’t know whether it’s the

silver bullet that you’re looking for. Forty-three states have something called the gift ban.

Thirty-eight have stronger ones, 43 total. And that means the government is not allowed

to give gifts to corporations. This is interpreted in Arizona, where they’ve had the most

success – I was on the phone this morning with the Arizona Goldwater Institute, which

litigated this. And they said giving a bunch of cash to a guy who’s developing a shopping

center was a gift, went up to the Supreme Court of Arizona. And they said, yes, our

reading of the corporate gift ban – you may not give gifts to corporations – says you can’t

do that, OK? They did say they didn’t consider – the court did not consider tax –

nonrefundable tax credits to be a gift. But that is the beginning of saying something there.

So what’s interesting – and I had them email to me the list of the 43 and how

strong they are. And this is actually something I want to look at to see whether this might

be the beginning of a campaign for mutual disarmament. I mean, it is one of those things

that I won’t do it if you won’t do it. Do you really trust them? Is there some other way?

And again, it’s not just cash. It’s building a road somewhere. I’m from Massachusetts

prior to immigrating to the country. And the – there – a town would say we’ll put a

policeman where your workers come in and out, so that people can get to work, OK? And

so it was a cop there all the time. And that was part of getting, you know, a shopping

center or a business located there. So is that corporate welfare, you know? How does that

count in this sort of competition?

MR. CARNEY: And on that front, yeah, there is a lot of sort of muddled things.

There’s this one Wal-Mart distribution center in Florida where it was eminent domain

and then Wal-Mart got the land for free. And then there was a road paved. And it’s a

public road. I’ve driven on it. It’s got street signs and all that stuff. But the road is

basically a driveway. It only goes to Wal-Mart. I think there’s one holdout guy who lives

in a trailer behind the – in the woods behind the Wal-Mart distribution center who’s also

benefited from it. So there we go. It’s not just the big guys win.

MR. NORQUIST: He might tell his friends, look at my driveway.

MR. CARNEY: And – but it’s – and then all sorts of other sort of public

improvements and things that were, you know, on the borderline between a good

infrastructure and paving Wal-Mart’s driveway. So I think it’s a really tricky question to

work through those. And maybe a gift ban that’s broader than just direct handouts, but

you know, doesn’t have to sweep in anything, would at least be a big improvement.

MR. NORQUIST: If you think your only arrow is a subsidy, then you use it. But

as we look at more and more states and Mississippi making tremendous steps forward on

tort reform, Texas making similar progress on tort reform, labor law changes. Then

maybe the governor will say, well, I’ve got eight projects I can work on, and

unemployment insurance and subsidies are one of them. So that may be the way to make

them a smaller problem.

MR. CARNEY: All right. Any more questions from out there? OK, because I do

have another question here that I was – I’m glad I get a chance to ask. The – Governor

Snyder has not sworn off all favors for businesses, has he?

MS. LAFAIVE: No. No, he’s not. He’s actually replaced the Michigan Economic

Growth Authority, which is our primary business incentive program with his own

program, which is reportedly smaller and involves cash grants instead of tax credits or

refundable subsidies. We’re doing a current tally on them right now and the number –

first number we got was very interesting. The first two years of Governor Granholm’s

governorship, she issued 64 deals using the MEGA program. The first two years of

Governor Snyder’s governorship, he used the MEGA program before it was put down

and the followed up with his own program, and he has some 90-plus deals.

So he’s actually done more deals than Governor Granholm and they’re reportedly

smaller, but we haven’t worked out the numbers yet. Some of them might actually be –

end up being bigger.

With the cash issue, this is actually coming full circle. They actually went to the

MEGA program, a business tax credit because people complained that cash grants was

more clearly a robbing of Peter to pay Paul and blatantly unfair. That’s why they went to

the tax credits. And now we’ve come full circle and we’re back to cash grants.

MR. CARNEY: But that’s – part of his argument was that it was more

transparent.

MS. LAFAIVE: In other words, it is more clearly robbing Peter to pay Paul.

MR. CARNEY: Maybe that’s better than a disguised robbing Peter to pay Paul.

MS. LAFAIVE: And he wins that transparency argument. However, it’s still

infected with the same problems that the larger economic development programs run by

the previous two governors are infected with.

MR. CARNEY: Yeah, I know. And Grover, I want to turn this to you with a

question, which is I’ve talked to conservative lawmakers, who – you know, there was

some vote coming up for a Lockheed-specific tax break in Maryland. It was Montgomery

or PG County. And I talked to a conservative Republican, say, lawmaker, and I said, isn’t

this ridiculous? He said, yeah, it’s ridiculous and I’m going to vote for it. I said, why.

And he said, any chance I have to reduce anybody’s taxes, I’m going to take. So you’ve

thought a lot about these weeds, so what are your view on that?

MR. NORQUIST: Well, there’s a difference –

MR. CARNEY: Your mike –

MR. NORQUIST: Thanks. There’s a difference between failing to take

somebody’s money and technically all tax cuts are good tax cuts. What Mae West said

about sex is true about tax cuts. All tax cuts are good tax cuts, even the bad ones. But I do

think broad based rate reduction is just always to be preferred to more narrow tax cuts

because the government isn’t in the business of deciding who’s going to win.

GOV. BARBOUR: Just one point I think about what they’re doing in Michigan.

One of the other advantages to cash grants is that they’re budgetarily immediate. And so

many states, including mine, have got problems with the fact our pitching plan, you

know, we’ve got all of these responsibilities that are in front of us that we don’t know

how big they are and they’re very hidden and they’re very hard for the public to

understand. So I mean, I give him credit not only for transparent, but also fund the damn

thing right now, instead of pretending you’re not ever going to have to pay it.

MS. LAFAIVE: I applaud him for the same thing. I’m sorry. I didn’t mean to

interrupt you. I applaud him for the same thing. He campaigned on that actually, wanting

to know what this was going to cost them because the previous subsidy schemes didn’t

really – were practically open ended. You could come in with – to make a film and get a

42 percent refundable tax credit that could – that had no limit, whatever they wanted – if

they wanted to do another “Titanic” and make it in Detroit, we’d be on the hook for that

into the future. So I applaud Governor Snyder for doing that. But these programs have

been proven empirically not to work. And even just having a rent-seeking apparatus, a

place where you encourage people to come and ask for favors, harms economic growth

according to at least one study done Harold Bloom at the General Accountability Office.

MR. NORQUIST: There’s one model to look at, because if you’re looking at it it

seems intractable. How do you fix it? We did feel the same way about earmarks three or

four years ago. You just said there’s no way you could get congressmen and senators not

to lust after earmarks. The idea of bringing money back to your district – I’ve never

understood. Hey, I’m your friend. I brought money back and I gave it to someone who

lives near you. I’m your friend. Somebody near you won the lottery. Hey, what about

me?

But there is this sense that somehow you bring this money back to the district and

that therefore it must be a good idea. Earmarks were very popular. They were a sign of

whether – of a congressman’s manhood that if you didn’t have earmarks, there’s

something wrong with you. You weren’t able – were you not powerful enough to get the

earmark? Do your other friends not like you in Congress? And yet, it went from the kind

of thing politicians bragged about – I have brought many earmarks back and put in their

ads – to something that – the idea that you brought it, you did an earmark was considered

a dirty thing.

And that – I don’t quite know how you make that, but that was over the course of

one year that that shifted dramatically in the House and the Senate. Whether there’s any

way to have similar attitude towards targeted tax breaks rather than broad ones, or

targeted subsidies rather broader reforms that have tracked all business, I don’t know.

MR. CARNEY: I’d throw this to Haley with a quick anecdote. I was sitting in a

bar in New Orleans with my friend Dave Freddoso and a governor ad went up on the TV.

This was in 2007, I guess. And it was Bobby Jindal calling someone else corrupt or

someone else calling Bobby Jindal – there were four guys in there. The word “corrupt”

was thrown out. And the bartender looks at it and turns to the other clientele and says, I

don’t give a flying flip who’s corrupt as long as they bring in the money. And the bar

erupted into cheers. And yeah – I mean, maybe some political cultures that’s impossible.

GOV. BARBOUR: Well, we live across the river from Louisiana. We understand

them. (Laughter.) Look, let’s think about earmarks a little bit different way because we

don’t much like bureaucrats in the Obama administration decide how to spend our

highway money. We rather Senator Cochran have some influence over where the money

goes that’s going to be given out by NIH for cancer research. And that is the alternative.

Somebody’s going to decide where to spend that money. And to the degree that earmarks

are adding money, then people got a legitimate complaint. But to the degree that they are

directing the money that’s going to be spent, then I would rather have an elected official,

who is accountable to the public, do that than somebody that we’ll never see or hear

from. And that’s – that’s the other side of the argument. I can’t say that Grover and I’ve

agreed on most everything for the last 30 years, but that is a not irrational side of the

argument.

MR. NORQUIST: No, it’s not. I’m not sure we disagree at the end of the day. I

too would agree that you don’t want some bureaucrat in Washington making decision

about how to build roads in the states. But the solution to that is not to have an elected

politician from Alaska down writing the rules about Alaska and other states’ stuff. But

saying to the states, we’re not going to have a federal gasoline tax because we’ve built

the federal highway system. We’re going to let the states have taxes. We’re going to get

rid of the gas tax. You have your own gas tax. You build the roads. You know better than

some bureaucrat, either Bush’s or Obama’s bureaucrat at the Department of

Transportation.

So you can have the local control. I just think you do it by having the guys who

raise the taxes spend the money on the roads in the state, rather than send it to

Washington and then ask – because the congressmen and senators would literally give

them like $14 million – unless you’re on the committee, then you got $60 million – $14

million in earmarks. So you get to touch some of that money, but that’s a fraction of what

they steal and put in the New York subway system and the D.C. subway system.

So the rake-off is much higher. So I think if you let the states steal their own

money and then spend it, it’s much better than running it through Washington, D.C., and

pretending that a Republican congressman is going to fight for a piece of the pie, whereas

the Obama bureaucrat gets to hand it out to (pals?) and stuff like that.

So I’m not sure we’re disagreeing. You do want the local control. I think the way

to get the local control is to have local control of the – (inaudible).

MR. CARNEY: I want to try to move back just for one quick question before

going back to the audience. One of the arguments against earmarks had to do with – and

you hinted at this with the state level money – was sort of breeding this culture of

cronyism in which businesses start investing more in politics – not that there’s anything

wrong with lobbyists – but that businesses start investing more in politics and maybe less

in business, in R&D, and that that corrupts both the political system and the business

system. Even if it’s not corruption in the sense of quid pro quos, it’s corruption in

drawing these businesses away from the – you know, creating value and the governments

away from serving the public interest.

So that’s a question, especially, I guess for Mike and Governor Barbour. Mike.

MS. LAFAIVE: With all the incentives involved, you’re really creating a culture

of political capitalism rather than market capitalism. And as part of that, because there’s

so much money involved, you see people trying to game the system legally and illegally.

There was so much money being given out during the Granholm years when the

economy of Michigan was suffering like no other that everyone was getting in line for

them. They actually granted a MEGA tax credit to a convicted felon just out on parole.

He was not legally allowed to hold a credit card, but they gave him a tax credit deal to

build some business he invented in the room he rented in a trailer park. And that was just

one of the examples that we’d come across during this.

Again, these programs are inherently corrupting.

MR. CARNEY: I don’t have a problem with that convicted guy. I think Jesus

would have give him a tax credit, too, but – Haley, Governor Barbour, what do you

think?

GOV. BARBOUR: Well, the good news, he probably wouldn’t have made much

money, so the tax credit wasn’t going to be a big drain. It’s – you know – you can take

the issue – you can take the position that anything that is political is corruptible. I don’t

happen to believe that. I happen to believe most people in this business, Democrats as

well as Republicans, try to end up at the end of the day doing what they think is right and

in the best interest of their constituents. And I don’t think being for your constituents is

corrupt. Maybe wrong. I mean, you make the wrong the decision, but when businesses

lobby to keep taxes low, Grover and I are for that. When they lobby to raise taxes, we’re

against that. But that doesn’t make lobbying inherently good or bad. In fact, in this town,

you will talk to members and they will tell you that they benefit and their staff benefits

from hearing from a lot of different people on different sides of the issue that they

wouldn’t otherwise hear from.

And so, you know, I don’t begrudge the Sierra Club or any of these left-wing

groups their chance to tell their side of the story. But the better thing for us is to do a

better job, so they lose. (Laughter.)

MR. NORQUIST: One of the things that it does – getting to earmarks, when you

talk to congressmen when they show up, they’ll say nobody told me that half of my job

was responding to local schools wanting earmarks for different stuff. And so not doing

earmarks – Boehner never did earmarks, and he had a lot of free time and he got himself

elected speaker. People only have so much bandwidth and the amount of staff time and

personal time in earmarks is very large. And the kind of earmarks the federal government

hands out all go to nonprofits and government entities to hire Democrats. And so I think

there’s a problem there.

The other part is earmarks are used by leadership to buy votes that a congressman

wouldn’t otherwise pass. So earmarks for Democrats to get them to vote for free trade

agreements are a good idea. Earmarks to get Republicans to vote for stupid tax increase

or to vote for Ford rather than Reagan in 1976 – those are a bad idea.

So earmarks get Republicans to vote against their interests and Democrats to vote

against their interests. And it’s bad for Republican souls – and Democrats don’t have

souls, so it’s not quite the same problem there.

But I’m in favor of earmarks only for Democrats because we need them on the

free trade votes and there’s no other way to get them. And I’m against them for

Republicans because they get bought to do bad things with earmarks.

MR. CARNEY: That’s a great novel – (audio break) – questions from the crowd.

Yes, ma’am, right behind you, mike.

Q: So while we’re on the subject of politics and the business role in politics. I’m

Rachel Bale (sp) with the Center for Public Integrity. So for Mr. Norquist, how has your

fundraising for Americans for Tax Reform changed in the years following the Citizens

United decision? And I would pose the same question to you, Governor Barbour, with

regard to how has the Republican Governors Association’s fundraising tactics changed in

those years.

MR. NORQUIST: Citizens United allows people to spend (c)(4) money

advocating to vote for a candidate, as opposed to just saying issues. So what Americans

for Tax Reform used to do is say taxes are bad. They kill jobs. Mary over here wants to

raise your taxes, just thought you ought to know. So you weren’t allowed to say vote

against Mary. Citizens United now allows you to say “and vote against Mary.”

I’m not sure there’s a big difference on my issue on taxes because it’s fairly clear.

Other people who have to hide their issue and the labor unions want to beat someone and

they run an ad about something else, that’s more difficult for them. They have to say vote

against Fred. They can’t use their issue. But for the taxpayers, it’s fairly easy. Everybody

whose vote I would like to influence wants lower taxes. I don’t have to sell them on that.

I’ve got an audience of 60 percent of the electorate that’s already there. So I just say this

person wants to raise your taxes, thought you ought to know. I could always do that as a

(c)(4). Now, I could also say – and by the way, vote for or against Fred.

So I’m not – I don’t see it on the tax issue. Other issue groups might see a

difference.

GOV. BARBOUR: Of course, not much change at all for Republican governors

because they’re not covered by the federal election law. You know, they’re – each state

has its own different election laws for – campaign finance laws, I guess I should say. So

the governors are not much affected by it beyond the kind of environmental shift among

donors. Donors get accustomed to be able to give to these (c)(4)s or whatever. And they

become more willing to give corporate money to the RGA, which can accept corporate

money because – (inaudible) – of the states –

MR. CARNEY: But could accept corporate money even before Citizens United.

GOV. BARBOUR: That’s correct. But they’re – the attitude of a lot of general

counsels in corporations would say, we better, you know, yeah, it’s legal over there, but

we – you know, we don’t do that and the board doesn’t like it.

Well, the more it becomes legal in – to other groups, then the more people

become accustomed to making that decision, but that’s a pretty small change for the

Republican governors. I mean, what happens to the Republican governors raise money is

went from 22 to 30. That makes people happy that they gave.

MR. CARNEY: More questions. Let’s go right up here.

Q: Elizabeth Graham (sp). I’m a consultant. I think this question may be for you,

Michael, possibly for you, Tim. Governor Snyder said that he encouraged or requested

that the two major utilities in Michigan focus on buying Michigan – is that – did I

understand that correctly, first of all?

MS. LAFAIVE: Buy Michigan –

Q: Yes, thank you. And I thought I heard him say that he did not offer any form of

incentive. He simply said we’ll facilitate it. I understood that correctly, as well?

MS. LAFAIVE: I heard that as well.

Q: Thank you. What incentive did the corporations then have to potentially buy

more expensive products and could you address that? I was very interested and I didn’t

have an opportunity to ask him. Thank you.

MS. LAFAIVE: Yeah, I wondered the same thing when I heard him bring that up.

Very likely, we’re being asked by a political person to make purchases that might be

more expensive than they could get elsewhere. And I consider that to be a bad business

decision and wrote that down here as well.

So I don’t know if there was anything dangled out there or if there wasn’t a

suggestion that there could be a quid pro quo or something negative could happen if they

didn’t, but it’s something that I’d like to investigate myself.

MR. CARNEY: Grover?

MR. NORQUIST: Utilities often are compensated and allowed to set up their

rates on a cost-plus basis. So if your new generator costs twice as much because it had to

be built in Kalamazoo – in Michigan, rather than someplace else, you still get your 7-8

percent on the larger investment base. That may make it easier for people to make bad

decisions.

MR. CARNEY: Things built in Kalamazoo – (audio break) – down as the New

York Yankees about – (inaudible).

GOV. BARBOUR: But don’t rule out the possibility that they are only buying

Michigan when they can get the price right. I mean, we have some big companies in my

state that made an effort to start trying to buy locally if they could. Chevron’s biggest

refinery in North America is at Pascagoula, Mississippi. And when they had a new

manager come in and who made the decision where possible, we’re going to buy locally,

God, it was like a – it was a big, big deal in the community.

One of the things that we asked – that I asked them to do as governor; they

refined 330,000 barrels of oil a day. None produced in Mississippi. I asked them to look

at oil – at a particular oil field that we had already researched that it looked like it was a

good match for the Mexican and Gulf of Mexico oil. They took a lot of time. I’m sure

they spent a lot of money, but today they refine 10,000 barrels a day in that 330 that

comes from Mississippi and they make money on it.

So it is not necessarily that somebody’s doing you a favor or spending more.

Sometimes it’s just that they – that is good business for that they’d just never thought

about it.

MR. NORQUIST: They also maybe just be making a list of things they buy

locally and nobody had ever asked them to put together the list. And then they project

forward. We’re going to be doing more of this. I think it’s wise, small p politics to do

that.

MR. CARNEY: Other questions. Yes, sir.

Q: Thank you. My name is Maurice McTeague. I’m at the Mercatus Center and

before that, I was in New Zealand. What I want to ask you about is did we learn anything

today about getting reforms done because as I listened to Governor Snyder, I thought the

most remarkable thing was that we were actually seeing leadership. And what he did in

Michigan were things that were improbable. And if he counted up the votes before he

started on most of those reforms, he wouldn’t have done any of them. And it sounds to

me like he’s not finished yet.

So would you like to make some comments on issues of leadership? What kind of

political support they win, their ability to be able to get things done? Because I think

what we’ve seen in recent decades has been a dearth of leadership rather than the other

way around.

MS. LAFAIVE: Governor Snyder financed his own campaign. He was his own

man from day one and made it clear that he would be. And then, once he was elected, he

let the chips fall where they may. He also has some terrific advisers who’ve been in

Lansing a long time and share his vision. You could see how he absolutely abhors losing,

too. He lost the first Medicaid expansion vote, had to fly back from Israel, cancel a trip –

a business trip out there, to come back and win – ultimately win that Medicaid vote. And

that’s what he does. And he’s had to pigeonhole. He does what he thinks is right and he’ll

make the tough calls.

We disagree with some of those tough calls. The legislature did not cooperate

with him on building a bridge to Canada. And so he used this interlocal agreement to run

a circle around them and complete the deal with Canada.

I’m, you know, not sold either way on whether building the extra bridge is

worthwhile economically, but he very clearly had no intention of losing what he set out to

do.

MR. NORQUIST: Politics is a team sport. If you’re the governor of Michigan and

you have a Republican House, a Republican Senate, and a think tank like Mackinaw, it’s

a little easier to get things done than if you’re the governor of Nevada, Republican

governor of Nevada, with a legislature that’s trying to kill you or, you know, poor

Romney, who was governor of Massachusetts and the legislature was 82 percent

Democrat the whole time.

So yes, his leadership has been very helpful. Governors can stop stuff. They can

fail to do stuff. He has both pushed, but you’ve also had with him a broader movement

that has a Republican – a Reagan Republican House, Senate, think tanks, and that makes

it an easier combination.

GOV. BARBOUR: You know, I used to tell Trent Lott, who was from my home

state, and – the difference between governors and senators is senators talk about doing

things and governors do things. (Laughter.) And we did tort reform. I did it with a

Democratic House and a Democratic Senate, majorities on both sides. It was bloody,

gory. But there’s no question to do hard things, somebody’s got to lead.

And that’s one of the problems we have in our country today. You know, we need

a president who’s a leader. And I think about Ronald Reagan. I was – I got to run the

political office in the White House for Ronald Reagan, pretty heady stuff for a boy from

Yazoo City, Mississippi. But Reagan had a Democratic House every day he was

president. But he’d learned how to lead. He’d learned how to negotiate, learned to

compromise on everything. But he still led effectively so that we could pass the Reagan

economic plan, Social Security reform, immigration reform, the 1986 Tax reform.

Amidst those four – because they were all complicated and controversial.

And Bill Clinton was the same way. Bill Clinton’s best days as president when he

had a Republican Congress, doing the welfare reform, the first balanced budget in a

generation. He had three balanced budgets in a row. Your point is the right point.

Somebody’s got to lead and legislatures, by their nature, cannot lead, whether it’s a

Republican legislature or Democratic legislature. The governors got to lead. And my

hat’s off to Governor Snyder.

MR. NORQUIST: Just counterexample is North Carolina, where they’ve been

making tremendous progress on a whole series of issues over the objections of the

governor. And the legislature actually got it all done and the legislature – and the

governor slowed stuff down. Not on everything, but the legislature actually led there.

They had the agenda because they’ve been bottled up with a D governor and so it was

ready to go.

And perhaps even faster, the Republican governor shows up and goes, OK, now,

what are going to do, and all the stuff piles on his desk because it’d all been passed

several times before, and the Democratic governor didn’t want it. So there are times when

a legislature can get bottled up and be ready to move even faster than the chief executive

officer.

MR. CARNEY: Up here.

Q: Thank you. John Graham, senior fellow at the National Center for Policy

Analysis. The governor said that the bankruptcy of Detroit was a solution to a problem

that had been bubbling for decades and I wonder if that has national repercussions. I

mean, if Detroit had gone bankrupt in 2010, I can envision Congress would have had

some massive bailout and Stockton, California and who knows how many other

jurisdictions would have jumped onboard. The fact that Detroit has been hived off and

blocked off, you know, if Los Angeles is coming next year, is this a positive sign for

national crisis at the local level?

MR. NORQUIST: Look, we dodged a huge bullet. What Obama might have done

when he walked in would have been to nationalize the unfunded liabilities of all the state

pensions by insuring them, OK? Wouldn’t have shown up on the books and you’d have

had Arnold Schwarzenegger standing next to them and all these Republican governors,

right, thank you, thank you, thank you. And it could have passed. It could have passed

with the super-majorities they had the House and the Senate.

Instead, he did this other stuff, which was vaguely destructive, but not what

national – because then, all of a sudden, everybody had been reasonable on their pensions

would have no reason to be reasonable at all. You’d have nationalized the workforce of

20 million state and local workers and made them all dependent on Washington and

they’re willing to pay their pensions.

When they missed that opportunity and failed and a number of states began to

make the painful – New Jersey and Michigan and Utah, Louisiana moved towards

defined contribution pensions away from defined benefit, you now have enough states

that have made enough progress on those pension issues that when California goes can

you bail us out or Detroit says how about bailing us out, no, no. When enough were in

enough trouble, they’d have gone, oh, we’re not Detroit, but why don’t we help Detroit

out, meaning and me next.

So I think we missed that. We dodged that bullet. Detroit – nobody’s life is a

complete waste. Some people serve as bad examples. OK, Detroit gets to do that. It’s not

something that we’re going to do for everybody, which could have happened very early

in this administration.

MS. LAFAIVE: There’s another lesson to be learned with Detroit, and that’s the

value and quality of the emergency manager laws that exist in various states. I think it

was the Manhattan Institute ranked Michigan’s as the best among the states that do have

emergency manager laws. When?

MR. NORQUIST: How long ago?

MS. LAFAIVE: Right after Snyder took office, he upgraded the emergency

manager law. Previous one had existed since 1990, but it wasn’t very effective. What has

been done just up the road from Detroit in Pontiac is miraculous. They had – they went

from having 700 city employees to having 20. Their budget is half the size it was before

the emergency manager took over. They had something like 85 health care plans for

current and – current workers and retirees. Now they have one, saving millions.

They’ve contracted out and sold off assets and basically revolutionized the city’s

finances, and that could happen in the city of Detroit, not only with Kevin Orr, who’s

working under the emergency manager law, but with the bankruptcy judge as well.

GOV. BARBOUR: I do worry about states. You know, it’s – today, it is

considered unconstitutional for a state to declare bankruptcy, but we got some states that

are in real, serious trouble financially. I look at Illinois. I mean, they don’t pay their bills

in money. I mean because they’re in such bad shape, they sometimes give out script.

That’s just – so that bothers me.

I look at my state, which is a very conservative state. And our pension fund’s

about 60-percent funded, where 15 years ago, it was like 88-percent funded. And bad –

everybody’s got bad pension decisions that are not being addressed aggressively enough.

I couldn’t get my legislature to go nearly as far as they should have. They did some

things, but I’m like Grover. We stepped over one snake when they – when they were –

the first two years. I just worry that we got more down the road.

MR. CARNEY: I just want to ask a couple of questions, again, trying to drill

down, refine some of the points about business incentives and that sort of thing here.

Seems to me that some business incentives are worse ideas than others. I was saying,

these Hollywood film incentives must be particularly inefficient because half the states

are giving them out. So the price for these things must be getting bid up, but also maybe

on a state-by-state basis. Maybe it has to do with if you are starting off with a worse

economic position like Mississippi, that’s different from if you’re in a position like Iowa

or Wisconsin. So if you guys were to say what are some general rules about here’s the

incentives that are destructive, here’re incentives that are tolerable, here are incentives

that are good?

MS. LAFAIVE: I would argue that there’s no targeted incentive that is better off

than a broad based policy. So I think they all come with their various costs and benefits.

But I actually like a tax credit that is not refundable over a cash payment because they

have to, quote, unquote “earn” their credit and it’s really just, you know, avoiding a

future higher tax bill rather than receiving cash from their neighbor.

MR. CARNEY: That’s the opposite of Snyder’s viewpoint.

MS. LAFAIVE: That’s right. That’s exactly correct.

MR. CARNEY: Do you have any thoughts on which are dumber than others or –

MR. NORQUIST: Obviously transparent, broad based, and I would include – I

think tort reform is one of the most important things you can do to attract businesses. I

think voter ID helps because it gives you more hones elections. I mean, everything that

gives you more stability and more rule of law and a more sense that the governing of the

state is going to be more honest and clear, transparency – the first I saw it was Perry of

Texas put all of the spending of the governor’s office online, all the checks, all the

contracts.

And then Susan Combs, the comptroller, did it for the whole state. And 20-plus

states have now done fairly good transparency, so you can see all the expenditures. That

sort of thing is a big help. And transparency – and they’ve been going after some of them

to try and get more clear transparency on these deals for businesses. That may help. It’s

not saying you can’t do it. Make it transparent. Then people could look at it and say, well,

that was a really good idea or hey, that was the guy’s cousin.

MR. CARNEY: It seems to me that technologically there shouldn’t be any barrier

to me as a reporter sort of knowing everybody who’s applied for one of these things and

seeing, you know, then the – who’s getting them, when they’re getting them. I should be

able to sign up for an email list for who just got an incentive from Mississippi.

GOV. BARBOUR: As long as you put that in the past tense – remember, this is

about competition. And we were picked by Toyota for the most sought after economic

development project in the United States in 2007. The “Wall Street Journal” said it was

between Chattanooga, Tennessee, and Marion, Arkansas. The Japanese had asked us to

keep it a secret. We did. But if that had gotten out before we were chosen, I mean, we’ve

had to – you know – who knows? I mean, this – we’re talking about a competition and

negotiation. That’s – so I disagree with you on that. But I will tell you the stupid

incentive is for the state to raise income taxes and then go give existing businesses tax

breaks against the new income tax, which Illinois is the most bizarre, stupid thing.

I mean, you could maybe make a case to raise your taxes and then somebody

who’s coming to town and bringing some new jobs, but to go just excuse people from

this, that’s a –I put that on – I bid that down as the dumbest.

MS. LAFAIVE: I just wanted to add. Many of these economic development

agencies make keeping information out of reporters’ hands an art form because all too

often they know that a reasonable analysis will show that programs are not as advertised.

MR. CARNEY: We’re going to wrap up just a tiny bit early. The governor’s got

another thing to do. But let me just ask, just very quickly to you , to all of you, how

hopeful are you that states will move towards a system of, you know, lower, broader rates

and regulations and fewer special credits and handouts?

GOV. BARBOUR: I’m very hopeful because it’s happening. I mean, Grover

talked about it. You look at these states with Republican governors (thoroughly ?) and

you’re just seeing over and over and over and over again that that’s exactly where they’re

heading.

MR. NORQUIST: That’s what they’re focused on. They’re focused on the broad

based ones, and the more those succeed, the smaller some sort of subsidy looms in a

company’s decision making. The idea that you won’t get sued for $1 billion is a bigger

deal perhaps than here’s $20 million to come into the state. That organized labor can’t

pick your pocket, you know, that the environmentalists aren’t going to close you down,

all those things. You take those off the table, you’ve really got a much more attractive

situation.

MR. CARNEY: The lower your tax rate, the less valuable the carve out is, the tax

carve out.

MS. LAFAIVE: I wanted to add, I think Governor Snyder on balance is doing

great work. He’s lowering the price of investing in Michigan, and it’s going to pay

dividends. It’ll take 10 years before we can empirically tease out the exact impact, but

time will pass and we’ll measure it.

MR. CARNEY: All right. Thank you everybody for coming, and let’s thank our

panelists. (Applause.)

(END)