"We are in a pickle. The state of Michigan is in the midst of serious structural economic trouble, probably its worst crisis in our lifetime. Since 2001, the state has lost one-quarter of its automotive work force and is in its sixth consecutive year of job loss, a period of decline unequaled in the 50 years for which we have data." -- George Fulton, University of Michigan economics professor

That dash of cold water from a nationally recognized authority was just one of many bracing moments at last week's "Where Do We Go From Here?" economic policy agenda-setting conference in Ann Arbor.

Some 250 policy experts and civic leaders gave up their entire day to take turns listening to detailed policy papers and then huddling in small groups to discuss Michigan's situation -- which vitally concerns all of us.

The objective of the conference, co-sponsored by The Center for Michigan and U-M's Center for Local, State and Urban Policy, was to see if a cross-section of Michigan's leaders could reach broad agreement on an economic policy agenda that could work -- and make a major impact.

And remarkably, though it was a highly diverse group, broad agreement was reached on a number of topics. They included:

*  The vast majority of the public woefully lacks understanding about the true nature of our state's present financial circumstances.

For example: Michigan has a reputation as a high tax state, but we actually rank below average. We were 29th in the nation in state and local taxes as a percentage of personal income for 2002, the last year for which data are available. That's down considerably from 1972, when only a dozen states ranked above us. The experts' best guess is that we may be even lower today.

*  Michigan's government is also, believe it or not, malnourished. The state has experienced a $1 billion-plus state operating budget deficit for the past six years. The politicians have covered the deficit by cannibalizing rainy day funds and selling off assets. But without serious structural tax and spending reform, this deficit can only get worse, according to Tom Clay, the highly respected budget expert of the non-partisan Citizens Research Council.

And our leaders' actual spending patterns seem bizarrely out of whack. For example, conferees were astonished to discover that Michigan spends $1.8 billion on our prison system in 2006 -- with substantially higher incarceration rate and operating costs than our neighboring states.

This expenditure just about equals the total amount we spend on all our colleges and universities. We spend more to keep a prisoner behind bars each year than it would cost to send them to Harvard Law School.

Participants wondered if very expensively warehousing felons was more important to us than educating our young people.

The conference agreed far-reaching tax reform is necessary, beginning with the Single Business Tax (SBT). Most felt the SBT has become politically so unpopular that, as a practical matter, any serious discussion of tax reform must take on the SBT, either by substantial revision or outright repeal.

However, an equally strong consensus was that any revenue loss from SBT reform or repeal must be replaced. Not doing so would be "financially irresponsible to an extreme degree," according to Michigan State University Professor Charles Ballard.

A review of state-by-state economic data revealed that no evidence could be found that further tax cuts, in and of themselves, could contribute in any serious way to economic growth.

The leading candidate to plug the $1.9 billion hole left if the SBT was repealed is extending the sales tax, now levied on goods, to services while reducing the rate from the current 6 percent. Another possibility, politically less popular, would be to make the state income tax more progressive. The conference also examined issues of competitive advantage for Michigan's economy and actual spending patterns in labor force skills and education.

Participants agreed that it is vital for Michiganders to come to terms with the fact that the state is deep into a fundamental transition from a relatively low-skilled manufacturing base to a higher skill- and knowledge-based economy. To that end, conferees agreed that Michigan needed to make substantial investments in education and knowledge infrastructure.

Education, ranging from very early childhood through high school and on through community college and four-year and graduate universities, was regarded as suffering from years of underinvestment by the state.

Lately, the lack of investment has turned into something even worse -- actual budget cuts, which threaten to cripple our future.

Many participants expressed frustration that many basic issues lying at the heart of Michigan's economic crisis have not been addressed by our state's leaders. They believed many Michigan citizens were yearning for a way to express their concerns and get something practical done without political posturing or ideological diatribe.

As a co-sponsor of the conference, I ended the day by saying that "a successful conference is just the first step in a journey of structural reform that could last many miles," while pledging that our new think-and-do tank, The Center for Michigan, was committed to investing in the process for the long haul.

Whether the conference turns out to be a one-day flash in the pan or the start of something really big will depend on the willingness of people to step forward. As the famous comment goes, all that is necessary for the triumph of evil is for good men and women to do nothing.

Phil Power, the former chairman of Hometown Communications Network, is a longtime observer of Michigan politics, public policy and economics. He is the founder of The Center for Michigan, which co-sponsored the conference in Ann Arbor. For more information on The Center, go to www.thecenterformichigan. net.