A Bipartisan Disaster: Michigan 'Corporate Welfare' Program Rolls On
State's attempts at economic development costs plenty, returns little
The Michigan Economic Development Corp. is the corporate welfare arm of state government.
The state agency provides tax breaks and outright cash subsidies to select corporations and developers chosen by legislators and bureaucrats.
The MEDC’s website contains press releases going back to 1998, when the agency was created by a Republican governor with bipartisan votes in the House and Senate (it replaced another agency, the “Michigan Jobs Commission”). There are a lot of them — several press releases a week in most years. Newspaper readers around the state have often seen these turned into “news” stories about particular corporations getting money or selective tax breaks (incentives), always with hopeful projections of some number of jobs that will be created.
Unfortunately, newspaper readers rarely see follow-up stories reporting whether those job promises panned out. The MEDC doesn't issue press releases when the jobs don’t materialize, or fall far short of the number promised. If it did, citizens would know that for all the hundreds of millions of dollars in MEDC handouts and lost tax revenue over the years, less than one-third of the promised jobs ever happen.
Michigan Capitol Confidential was created in part to provide the rest of the story on this state's corporate welfare record. Here’s a sampling of headlines from recent stories doing just that:
- "The State as Venture Capitalist: Michigan Fund Loaned $7.7 Million, Creates Only 20 Percent of Promised Jobs"
- "'Green' Company Awarded Up to $120 Million Promised 70 Jobs — Creates Just Three Jobs in Three Years"
- "State Program Awards $67 Million, Creates One-Third of Projected Jobs"
- "Corporate Subsidy Program Lives On Despite Lackluster Results"
- "Select Tax Breaks for State 'Renaissance Zones' Program Returns One-Fifth of Predicted Jobs"
- "Michigan Government Program Gives $30 Million to Seven Universities, Creates Less Than Half of Projected Jobs"
These are just from the past several weeks. CapCon has done hundreds of stories documenting what has really happened when our state government has tried to pick economic winners and losers.
Ironically, another source for this record of failure is a YouTube channel created by the MEDC itself, containing interviews by agency staffers of corporate CEOs or promoters who received special favors from the state. Nearly all of the companies profiled ended in failure. The site is in effect a playlist of crony capitalism failures.
A scan of the MEDC press releases reveals hundreds of quotes from agency officials, governors and local politicians all boasting about the influx of jobs and wealth their actions will "create." However, these actors tend to make themselves scarce when the promises don’t come true. A comparable scan of the CapCon stories above reveals a particular statement repeated over and over: "Officials did not respond to CapCon’s request for comment."
Since he took office last year, Gov. Rick Snyder has scaled back some of the excesses of this program, but he hasn't eliminated the program. The amount of incentives is capped now rather than being open-ended, and press releases no longer claim credit for "indirect jobs" — notoriously hard-to-measure, mostly falsifiable, and primarily cited as a misleading public relations tool.
But corporate welfare schemes will always be an attractive nuisance to politicians. For all the talk of how conservative the current Legislature is, its members have been persistent in voting to continue and expand the handouts. This will continue as long as a state government agency exists for this purpose. The only way to stop it is to put that agency out of business.
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.