Gov. Granholm's economic and political legacy

By Dan Balz
Washington Post Staff Writer
Saturday, October 23, 2010; 12:57 PM

ANN ARBOR, MICH. - President Obama likes to say he was dealt a bad hand when he arrived in the Oval Office amid the worst recession since the Great Depression. If that's the case, what was Michigan's Democratic Gov. Jennifer Granholm dealt?

It's doubtful any elected official in the country would have traded places with Granholm over the past eight years. The economic problems shaping the midterm elections to the Republicans' advantage have been more acute and have lasted longer here in Michigan than anywhere else in the country. The political fallout will be felt in just over a week.

Granholm is term-limited and so not on the ballot. When Michigan voters go to the polls, it now appears likely they will choose as her successor Republican businessman Rick Snyder, who bills himself as "one tough nerd," over Democrat Virg Bernero.

Snyder will bring a different philosophy to the office, but whether he is more successful in turning around the state's economy may depend as much on forces beyond his control as on his own prescriptions. That, at least, is what Granholm's tenure as governor suggests.

Granholm was elected in 2002 to considerable fanfare. Dynamic, charismatic, attractive, she was one of the new faces in the Democratic Party to be seen as a rising star. Had she not been born in Canada, the story went, she would be on a trajectory that could lead to the White House.

Instead, she has battled the forces of economic decline. Those forces have had a profound effect on the state: an auto industry dramatically smaller and reorganized; the highest unemployment rates in the nation over the past five years; an exodus of younger college graduates; frustration bordering on despair among those who have seen their jobs disappear, probably permanently.

Numbers tell a depressing story. Employment in Michigan peaked at about 4.7 million in the summer of 2000, 2 1/2 years before Granholm took office, and has since gone steadily downward. Employment today stands at about 3.8 million. The unemployment rate, which was 6.6 percent when Granholm took office, topped 14 percent at the end of last year and now stands at 13.1 percent.

During her tenure, Granholm has lost little of her dynamism or her relentless optimism. But things look far different for her as she leaves office. Her approval rating, which once was in the high 70s, has plummeted. Ask her what it is now and she laughs - it's so low she has stopped worrying about it. "In the 30s," she says. "I hope it's 30. But it's low. It's low because people are impatient."

Snyder, a moderate Republican in a year of tea party conservatism, believes the kinds of economic change he favors should have been carried out years ago but would not directly attack Granholm in an interview Friday.

"It could have been four years ago, but I actually looked at the issue. It could have been done back in 1982," he says. "These things have been out there for a long time in terms of how we fundamentally should have restructured our state."

Other Republicans in the state have also attacked Granholm's approach, arguing that she has kept taxes too high, that government is too big, that regulations impede business activity. Granholm is philosophical about all the criticism. "It's funny," she says. "They use the same 'Taxes are too high, bureaucracy's too great,' but really we've shrunk, shrunk, shrunk, shrunk, shrunk government."

The state's general fund is about 40 percent smaller in real terms than it was when she came into office. At $7.1 billion, it is exactly the same in dollar terms as it was in 1989. Granholm has done everything from closing prisons to eliminating the state fair. The number of state jobs is about 300,000 lower than when she took over as governor.

Granholm is deeply skeptical that the Republican prescription for the economy - cutting taxes and government - is the answer. She inherited tax cuts from her predecessor, Republican John Engler, and instituted some others. "Believe me, if tax cuts worked, I'd be all over it. I really would be, and I'd be unabashed about it," she said in an interview during a recent trip to Washington. "But it just didn't work, because the world had changed, so the economic theory had to change."

Then why does the public appear to accept the GOP critique? "Because they're impatient," says Granholm, without any hint of resentment or self-pity. "They want to see change." With a nod to "Waiting for 'Superman,' " the new film about education reform, she said the public is looking for the same to fix the economy, but adds:

"In many ways, they elected Superman. They elected the Terminator [Republican Gov. Arnold Schwarzenegger] in California, and he wasn't able to fix it. They elected Jesse Ventura [the former independent governor of Minnesota], and he wasn't able to fix it. . . . These are tough problems, and they don't set themselves up for quick fixes. That's why the pendulum is always swinging, but it's particularly acute, I think, in times and in places that have high stress of citizens."

There were two moments in Granholm's tenure, she said, when she realized what she was up against. The first came at the end of her first year in office when a manufacturer in the small town of Greenville, Mich., population about 8,000, announced its intention to close a plant that employed 2,700 workers and move to Mexico.

Granholm and her team came up with a package of incentives that included a 20-year moratorium on taxes and state assistance in building a new factory. The company moved anyway, drawn by the low wages it could pay workers in Mexico.

That led to a wall-to-wall assessment of the state economy, which in turn led to a plan to diversify and restructure it. Granholm tried to convince her constituents that the changes would bring dramatic improvements. "In five years, you're going to be blown away by the strength and diversity of Michigan's transformed economy," she said in her 2006 state of the state address.

After her reelection that year, however, unemployment remained the worst in the nation. Still, Granholm hoped to finish her time in office on an upward trajectory. Then came the economic collapse in late 2008, which doubled the job losses during her time in office. And then came the auto bailouts, which she supported, and the president's decision to put General Motors into bankruptcy, which she initially opposed but now says was the right thing to do.

That was the second moment of clarity. When Obama told her he was taking GM into bankruptcy, Granholm recalls, "I said to Dan, my husband, that's it, there's nothing that we will be able to do to be normal by the time I'm done being in office. That this was going to be a huge, heavy, long-term structural lift for me, for the next governor, for probably the next governor after him."

Today, the auto industry is showing improvement, leading some economists to predict that the worst may be over for Michigan.

"It seems to me the headwind into which we're sailing is not so extreme as it's been for half a century," said Charles Ballard, an economics professor at Michigan State University. "Regardless of what she might have done, she was extremely unlucky to have been governor when she was governor, and there is a good chance the next governor will be luckier."

That may be small consolation for Granholm.

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