'America has to wake up,' former Gov. Granholm tells crowd at Michigan Theater in Ann Arbor

"A business' responsibility is to maximize the shareholder return, and you're going to invest those extra dollars where you can maximize the return," she said. "And that return isn't going to be maximized nowadays in the United States. It's going to be maximized elsewhere."

Tuesday's event marked the first stop Granholm and husband Dan Mulhern are making as part of a national tour to promote the couple's new book, "A Governor’s Story: The Fight for Jobs and America’s Economic Future," which went on sale this past week.

As she did on The Daily Show last week, Granholm used Michigan as an example of why cutting taxes and reducing the size of government doesn't necessarily create jobs. She admits she tried that as governor and learned the hard way that it doesn't work.

"If that laissez-faire, small-government and trickle-down theory were effective, we would have the most robust economy in the nation," she said, noting Michigan cut more spending and reduced its corporate tax burden more than any other state over the past decade.

"America has to wake up," Granholm said. "The old strategies are not doing us any favors in a new global economy. We have got to see active government — not big government, but active government — so that we get jobs created in America."

After a spirited conversation on stage, Granholm and Mulhern took several questions from the audience before signing copies of their book in the theater lobby.

A woman who identified herself as a recent University of Michigan graduate asked Granholm what she sees as a constructive solution to the nation's political divisiveness.

"I believe that compromise is always the best solution. You're never going to get 100 percent of the loaf," Granholm said. "But if you don't have somebody on the other side who's willing to give you a crumb … then I think you have to take the gloves off."

Granholm said voters should feel empowered to go to the ballot box and seek "sweet revenge" by voting to get rid of politicians who refuse to compromise.

After leaving office, Granholm and Mulhern were hired this year to teach at the University of California-Berkeley, where Granholm completed her undergraduate studies. An audience member asked Granholm if she had plans to move back to Michigan or seek higher office.

"I'm not running for office again," Granholm responded. "And we are on a sabbatical in California. We have a two-year contract with the University of California-Berkeley."

At one point during Tuesday's discussion, Granholm expressed regret for some of the higher education cuts that went through while she was governor.

"In terms of the future, the investment in higher education and access to it is so fundamentally important," she said.

Granholm and Mulhern both said the United States can't compete on low wages in a global economy, so it must invest in education.

"It's all about education," Mulhern said, expressing hope for dramatic educational reform. "I think the biggest mistake we can make and will make is if we don't invest in education."

Mulhern talked about the couple's time in Lansing, where Granholm served as governor from 2003 through 2010 following a four-year stint as attorney general.

"To be governor was really an extraordinary thing. It was very hard for us as a family … and very challenging as Michigan went through what it went through, and as Jennifer strove to make a difference day after day," Mulhern said. "But we never ever regretted that."

Granholm recalled the economic downturn that hit Michigan just before she took office. She said Michigan never came out of what was then a one-state recession.

"We were on the early edge of what the nation is experiencing now, which is this persistent joblessness," she said. "And why? Because the structure of our economy has changed due to globalization."

Granholm said tens of thousands of American factories have closed in the past decade, taking millions of jobs away, while millions of jobs have been created overseas.

She recalled a time she moderated a panel of multinational business CEOs. She said she asked what impacted their decision-making and none of them said state tax policy.

"If you don't have tax policy that is tied to job creation in the United States," Granholm said, "you may be in effect facilitating the flight of capital and jobs somewhere else."

Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's e-mail newsletters.