State needs to abandon subsidy favors
A new study claiming that the Pure Michigan advertising campaign funded by taxpayers returns a sizable investment for the state is dubious for several reasons.
The projections are based on an online survey from Longwoods International, a travel consulting firm that found that every dollar spent by the state returns $4.90 in tax revenue. This is actually up from their previous 2010 study that found that each dollar returns $2.23.
There are multiple problems with this type of analysis. The consulting firm, which has an incentive to find a high return, has apparently never seen a tourism campaign it does not like. Whether it’s showing visitors that the best thing about Canada is its “foreignness,” claiming to generate 7,000 jobs in Philadelphia at a cost of only $600 each or using “hidden motivators” to change people from taking a “left-brain” logical response to vacationing in Hawaii, Longwoods always finds a high return on every dollar invested in tourism.
My colleague Michael LaFaive pointed out the main problems with the group's analysis. For one, scholarly studies will include references to all of its sources, something Longwoods has not done in the past. More significantly, despite this overwhelming return on investment, there is no industry support to directly fund their own advertising. This means that either the government is crowding out private investment or the travel industry does not find this type of advertising worthwhile.
Disregarding the fact that government beneficiaries like Longwoods International always believe government spending is worth the investment, there is still another issue, the fact that these beneficiaries always ignore the cost side. That is, that the money to fund these campaigns has to come from somewhere.
For example, groups that support public arts funding have found that every dollar in grants returns $51. Early childhood education returns $16. Film credits apparently have a six-fold return. Even the RASCO scandal involving convicted embezzler Richard Short was supposed to bring back $45 for every dollar spent.
This raises the question for those who support government investment into these areas: What if the dollar that went into Pure Michigan tourism advertising would have been spent instead by a taxpayer on sending their child to preschool? Apparently, the state’s return would have been $16 rather than a mere $4.90. According to these beneficiary’s numbers, the government would have made us poorer.
The state should focus on select areas of public good, not entangle itself into private industry which breeds corruption and encourages “rent seeking” from groups that otherwise could not survive in a competitive economy. One of former Mackinac Center President Larry Reed’s Seven Principles of Sound Public Policy is apt: “Nobody spends somebody else’s money as carefully as he spends his own.” Our elected officials should keep that in mind.