Analysis: MEDC Letter an Admission of Failure
On May 25, the executive committee of the Michigan Economic Development Corp. publicly cried foul over "unwarranted criticism" of the agency and warned that "political in-fighting" could hurt the state's business investment climate. But the criticism of the state's chief "jobs" department is not only warranted, it's overdue.
The letter specifically references the MEDC's Michigan Economic Growth Authority tax credit program as evidence of effectiveness, claiming the program is "enabling us to compete successfully against other states and countries. ..." The officials cite no supporting evidence. The claim, however, is at odds with the four scholarly analyses of MEGA that have been produced since its inception - two by the Mackinac Center, one by the Anderson Economic Group and one by the Upjohn Institute.
A 2005 study by the Mackinac Center showed that MEGA had no impact on per-capita personal income or job creation. We did find that for every $123,000 in tax credits offered, one construction job was created, but 100 percent of those jobs disappeared within two years.
Last year, we used a different modeling technique to isolate MEGA's effects from the larger economy and found that for every $1 million in tax credits earned in a county there was an associated loss of 95 manufacturing jobs.
The Anderson Economic Group study, published in March and funded by the Michigan Education Association, found that MEGA and two similar state programs cost the state 25,000 jobs and $85 million in tax revenue annually.
The Upjohn study, published in April, was by far the most favorable study done. Even so, the authors' claim that MEGA has created 18,000 jobs since 1996 totals just 1,600 a year on average. If this is the MEDC's idea of success, we would hate to see their definition of failure.
In March, the MEDC offered a refundable tax credit deal to a convicted felon out on parole. While the state would not allow embezzler Richard A. Short to possess a credit card, the MEDC placed him on stage with Gov. Jennifer Granholm to celebrate his $9.1 million subsidy deal.
In April, the state Auditor General chastised the job agency for handing out MEGA tax credits to companies that had not earned them. During later testimony before a House committee, MEDC CEO Greg Main acknowledged that for its first 10 years, the MEDC did not audit the businesses that were collecting tax credits.
To date and to our knowledge, MEDC officials have not refuted a single fact in these critiques. Since its creation, the MEDC has spent hundreds of millions of dollars in appropriations and tax expenditures while Michigan has lost 708,500 jobs and led the nation in unemployment. Yet they have the temerity to describe public discussion of these failings as "unwarranted."
The MEDC is a highly secretive organization that in recent years has become even less transparent. The Mackinac Center has documented many of its efforts to delay, deflect and obfuscate. Why hide? Because the MEDC is creating more job announcements than real jobs.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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