Any company in big-time trouble has to do two things: First, cut costs to the bone. That's rule one for survival. But no company can prosper without driving up sales of its major product lines. Therefore, the second rule for any struggling concern: Launch a long-range investment program designed to strengthen your most competitive, durable, and proprietary assets.

Doing that equips you to compete, and maybe even . . . thrive.

And the tragedy up to now is that Michigan has done neither.

We've had plenty of chances. Over the years, we could have radically cut costs by restructuring state government. We could have closed prisons and taken a hard look at our generous state pension and health care benefits. We could have slashed wasteful overhead costs in school districts and overlapping local government units.

But we didn't do it.

We could have faced the fact that Michigan led the nation in job losses for the entire decade, 1995-2005. Those numbers could have told us, had we cared to analyze them, that the long-term auto manufacturing base of our economy was in desperate trouble.

But we didn't.

We could have taken serious, far-reaching steps to fix the chronic billion-dollar-plus structural deficit in the state's General Fund. But we didn't do that, either.

Instead, over the last five years we adopted a series of one-time accounting gimmicks that never got to the heart of the problem and merely patched the state's finances together with the fiscal equivalents of chewing gum and bailing wire.

And we could have, meanwhile, taken a hard look at what kind of Michigan we wanted to construct over the next decade. We could have identified our durable, distinctive competitive assets and launched an investment program to feed those assets and regain our competitiveness. But again, we didn't do that either.

Instead, we starved our university system, especially the research universities. We short-changed the environment that sustains our marvelous quality of life. And we cut back on investing in human capital - the brains and skills of our people.

So when Governor Granholm comes back to Lansing from her tour around the state, she won't find things much different in Lansing than when she left. And when House Speaker Andy Dillon and Senate Majority Leader Mike Bishop finally sit down to thrash out what needs to be done - pronto - to resolve a billion dollar hole in the state budget, they won't have time to do much more than apply more chewing gum and bailing wire to the balance sheet.

It's too bad, because all three of our top leaders are smart and sensible people, trying to do their best with an impossibly difficult situation. But they're as locked in as anybody else by a pervasive lack of long-term strategic thinking about our state's future.

Yet there is one thing that happened last week which is cause for a glimmer of optimism, and that's what the three research or "constitutional" universities did last week. They came together and proposed that University of Michigan, Michigan State University and Wayne State University be separately funded from the other 12 public universities in the state. The big three argued that the research universities in fact drive a lot of the state's economic future. They noted too that state funding for their institutions has experienced something like a net 14 per cent cut in state support since 2001.

"Here we are," said WSU President Irvin Reid, "the three research universities, bringing in in excess of $1.3 billion (in federal, state and business research grants) annually to the state. ... And we are spending that here in the state. ... we're not only creating jobs, ... we're creating knowledge, which hopefully will lead to more jobs."

The core of the argument for supporting research universities is a powerful one: Collectively, they return $26 to the state for each dollar of state support. "You find me another place where the state invests $1 and gets $21 (she meant to say $26) back," U of M President Mary Sue Coleman told the Detroit Free Press.

The presidents pointed to the "Research Triangle" in North Carolina as an example of what can happen over time. Fed by three high quality research universities - Duke, the University of North Carolina at Chapel Hill and North Carolina State University - the triangle today hosts 157 companies, some 50,000 direct and contract employees and an annual payroll of around $2.8 billion.

For years and years, Michigan's leaders have oddly looked on spending money on research universities as an expense, not an investment. You can't get much more wrong-headed than that. If we're going to get anywhere, the corporation known as the State of Michigan needs to figure out what kinds of long-term investments we need to make in order to survive and compete.

Our great universities are a terrific place to start.

*** Phil Power is a longtime observer of politics, economics and education issues in Michigan, and was a regent of the University of Michigan from 1987 to 1999. He is also president and founder of The Center for Michigan, a moderate think-and-do tank. These opinions and others expressed in his columns are his own and do not in any way represent official policy positions of The Center for Michigan. Phil would be pleased to hear from readers at ppower@hcnnet.com