LANSING (AP) – Michigan’s image, already in tatters from the troubles caused by its shrinking manufacturing base and a budget impasse that wasn’t solved until a temporary government shutdown, isn’t going to recover anytime soon.

Some of that is because domestic automakers continue to struggle to find a mix of products and cost cutting that will enable them to do better in the North American market. Michigan remains more dependent than most states on the Detroit Three’s financial health.

But some of the damage is self-inflicted.

Take the political infighting that continues in the wake of the recent marathon legislative session that finally resulted in a way out of Michigan’s $1.75 billion budget hole.

The Michigan Republican Party is running a radio ad that blames Democratic Gov. Jennifer Granholm and Democratic lawmakers for raising taxes. The Michigan Democratic Party is running a radio ad that says Granholm showed leadership by bringing Republicans and Democrats together to make tough choices.

Much of the jockeying is tied to the 2008 elections and 2010 governor’s race.

Recall campaigns are being considered against Granholm and some of the lawmakers who voted to increase the income tax from 3.9 percent to 4.35 percent or expand the 6 percent sales tax to more services.

Businesses hit by the new service tax are pointing fingers at those who were exempted, arguing that the tax isn’t fair, will cost jobs and make them less competitive.

Some economists are saying it would have made more sense to tax all services at a lower rate, like 2 percent, than to punish a few with a 6 percent rate. Some businesses are threatening to leave the state.

And it’s still difficult to tell when Michigan’s battered economy, which continues to have the highest unemployment rate in the country, will gather the energy to lift itself out of its seven-year funk.

Judging from the economic indicators, the answer is, “Not anytime soon.”

Downsizing in the domestic auto industry continues; overall, the state has lost nearly a third of the 904,000 manufacturing jobs it had in mid-2000, adding to the total 413,000 jobs lost overall, a drop of nearly 9 percent.

Economists with the state and at the University of Michigan expect job losses to continue through late 2008, with nearly 50,000 jobs disappearing next year, most of them in manufacturing.

Ford Motor Co. is fighting to keep its spot as the country’s No. 2 automaker over Toyota Motor Co., and other industries, such as pharmaceuticals, are taking hits.

Michigan also has one of the highest foreclosure rates in the country. In Detroit, one of every 21 mortgages was foreclosed last year.

Standard & Poor’s rating service wrote last week that Michigan was making progress, having resolved its budget crisis for the time being.

It said the state benefited from the quick resolution of contract talks between General Motors Corp. and the United Auto Workers, with a two-day national strike causing barely a ripple in the national economy.

Michigan also is taking other steps to fight back, including replacing its 30-year-old business tax with one that now gives bigger tax breaks to manufacturers on the equipment they own, charges profitable companies more than unprofitable ones.

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