There's bad news: A recession is coming. It's not clear when or why or how, but the U.S. economy is entering its 10th straight year of expansion. If the economy continues to grow, it would rank as the longest expansion in the nation's history. And while that's not impossible, economists agree it's unlikely.

The stock market has wobbled. The housing boom seems to be ending. There's some stuff about U.S. Treasury note interest rates that economists say is pretty important. Ford Motor Co. and General Motors are planning layoffs, and while that's not entirely about sales, it's not a good thing.

And there's good news, sort of, for the Michigan economy, and the state government: Both are in much better shape than before the 2008 crash.

The economy has diversified, and the state has a rainy day fund, two things that weren't the case a decade ago.

But . . . there's also more bad news: The last decade's tax cuts have left the State of Michigan with too little money to maintain and repair vital infrastructure. A legislative plan to fix Michigan's roads relies on future economic growth, which is a bad way to plan to pay for things.

In a recession, the budget would take an even bigger hit ... and the roads, schools, water systems and sewers we rely on will continue to fall apart.

The short answer

What needs to happen? Policymakers in Lansing need to raise the tax revenue necessary required to invest in our schools and roads, while building the state's rainy day fund. Easy, right?

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Democratic Gov.-elect Gretchen Whitmer has signaled that she's not averse to raising taxes or fees. But the Republican-controlled Legislature seems unlikely to sign off on any tax increases, despite polling data that shows Michiganders aren't as concerned about taxes as adequate schools and roads.

But that's no reason not to talk about it. It's a question of when, not if, and none of us want another 2008.

Because ...

Recession's coming when, not if

There are a lot of economic warning signs, says University of Michigan economist Don Grimes, a regional forecast specialist with the Research Seminar in Quantitative Economics.

There's the Treasury note thing: The gap between the returns on the 10-year and two-year U.S. Treasury note, Grimes says, has narrowed to a quarter of a percentage point. "If the two-year gets out above the 10-year, historically it has led to a recession about a year later," he explains.

And there are indicators like the softening housing market, peaking auto sales and increasing interest rates. "Everybody’s watching to see if things are headed in that direction," Grimes says.

Michigan has about half the number of auto workers it did at the beginning of this century. But Michigan State University economist Charles Ballard notes that our state still produces more autos than any other state.

"Our dominance in the industry is way down from what it used to be. Still, a downturn in autos hurts us more than it hurts anybody else," he says.

But because the economy has diversified, says Great Lakes Economic Consulting's Mitch Bean, with more white-collar workers and a larger health-care sector, "If we go into a recession and cars stop selling, there will be job loss, but it won’t be as big of a problem as it was last time."

That's just one indicator that the next recession might not be as severe as the last one.

"I don’t see the asset bubble in the sense of the financial markets being in meltdown like in 2007," Grimes said. "The question, at least in the immediate term, is whether we are better positioned to absorb these auto industry job losses, which is not even hypothetical; it’s happening. And I think the answer to that is yes, we have diversified."

Meanwhile, in Lansing

"We’re just starved for revenue," MSU's Ballard says. "For decades, the answer to all questions in Lansing has been tax cuts . . . The first rule of holes is, if you’re in one, stop digging."

It's a particularly pressing need, because in a recession, demand for government services increases. Folks out of work need food assistance, or medical care, or unemployment payments.

Gov. Rick Snyder's signature tax reforms delivered whopping tax cuts for businesses (with tax hikes for individuals). But the growth Snyder and his team promised if business taxes were cut?

"All these wonderful things that were supposed to happen, I don’t see it," says Bean, who served as director of the nonpartisan state House Fiscal Agency from 1993 to 2011. "The economy is doing better, but the whole nation’s economy is doing better. Thank goodness we have such a low unemployment rate, but what are the jobs? Are they jobs people can work at and make a living at, or do you still have to have two and three jobs to get by?"

Ballard says, Michigan levies lower taxes as a percentage of the state's economy than most of the nation. If Michigan's tax burden was on par with other states, that would generate $3 billion more each year.

"I consider us so stretched for revenue that I would revisit just about any tax," Ballard said. "I think we could tweak the business tax to get some more revenue."

The Legislature ought to consider extending the state sales tax to services, he said. Right now, services, such as hair cuts and landscaping, aren't taxed at all.

"It's tricky politically, but from an economics standpoint it’s a no-brainer," Ballard says. "Instead of levying a 6% tax on ⅜ths of the economy, you could get more revenue from taxing ⅝ths of the economy at 5%."

Taxes on beer and wine, he notes, are still levied at volume, not as a percentage of value. "The wine tax last changed in 1981, the beer tax in 1967," he said. "The chances of changing that are slim politically, but there are lots and lots of places we could get more revenue."

Despite the state's dismal revenue picture, Whitmer is in better shape than her last Democratic predecessor.

In the 18 months before Gov. Jennifer Granholm took office in 2003, Bean recalls, outgoing Gov. John Engler's administration "blew through every surplus that we had" Engler's 11th-hour spending spree blew through roughly $3.2 billion, he says, including $1.62 billion in the state's rainy day fund, leaving Granholm few options to stem losses from the economic downturn that had already begun in Michigan.

"So far, at least they haven’t tried to spend all the money," he says. "We have about $1 billion in the rainy day fund. It's not nearly enough to weather a recession, but it helps."

Don't forget the Motor City

Detroit emerged from its historic municipal bankruptcy in 2014 with a healthier balance sheet, in part because the city's retirees were willing to take a big hit for the team.

There are plenty of promising developments, literally and figuratively, to point at: Building booms in Detroit's midtown and downtown, skyrocketing housing values in the city's stable neighborhoods.

But Detroit's neighborhoods continue to face significant challenges. And the way the city pays for its services hasn't changed that much.

"Detroit still gets less revenue from property tax, and is getting most of its revenue from casino gaming taxes, sales tax, and revenue sharing," says Eric Lupher of the nonpartisan Citizens Research Council. "And really, the casino gaming tax might be the most stable of three."

In other words, Lupher says, Detroit is just as susceptible to economic downturns as it always has been, something folks behind the scenes are talking about.

"When the next recession comes," Lupher said, "it's going to cause some hard decisions at the city level."

What happens next?

You and I? We wait.

To see when the next recession hits, to learn whether it's a well or a trough, and how quickly the state, and the nation, can recover.

The folks in Lansing? They need to get moving.

Nancy Kaffer is a Free Press columnist. Contact: nkaffer@freepress.com