News Story

‘Economic Development’ Week Skips the ‘Development’ Part

Corporate welfare claims are grand, but the results are practically nonexistent

On March 18, 2010, Gov. Jennifer Granholm appeared at a media event with Richard Short, the CEO of a company called RASCO. The company had just been awarded $9.1 million in business subsidies from the state of Michigan for what officials called an “alternative energy business.”

The day after that media event, Short was arrested by the Michigan State Police. Short had violated his parole and had defrauded a mortgage company by cashing a $73,000 check. He was accused of having stolen money from an elderly woman with dementia, who lived next door to him. Short’s daughter said her father was a serial con man who once faked having cancer. At the time he met with Granholm, he was living in a mobile home park.

Short never received that tax credit award from the state’s corporate welfare agency, the Michigan Economic Development Corporation.

Gov. Gretchen Whitmer has declared May 3 through May 9 to be economic development week. But residents are unlikely to hear the checkered past of economic development programs in this state. Since 2001, Michigan lawmakers have approved $17.7 billion in cash subsidies for developers and corporation owners, and billions more in tax breaks and other select favors. A Mackinac Center scorecard shows how individual state representatives and senators voted on bills authorizing some $6 billion of this amount.

Corporate welfare in Michigan usually follows a predictable pattern: There is a press conference that gets substantial media coverage, which announces a deal with projected job numbers. Then there is very little follow-up on how these companies fare.

That played out numerous times during Granholm’s administration. The governor promoted the opening of an alternative battery company called A123 Systems in a 2010 press conference, which was preserved on video at the MEDC website. Granholm said numerous alternative energy companies such as A123 Systems would create 63,000 jobs in Michigan over a decade. She repeated the claim of 63,000 jobs for emphasis, and then a phone rang with a prearranged call from President Barack Obama. Obama congratulated A123 Systems on reaching “a tremendous milestone.”

But A123 Systems filed for bankruptcy in 2012 and was eventually bought by a Chinese company. The MEDC deleted its video of the press conference.

A similar fate happened to many MEDC-supported alternative energy projects during the Granholm administration.

While the MEDC promotes its state-subsidized projects by touting how many jobs these projects will create, it does not have to disclose how many jobs end up being created.

Many of the jobs touted in press releases never come to fruition.

An Auditor General report in 2013 found that only 19% to 22% of the jobs promised by businesses subsidized through various MEDC programs were created.

But that didn’t stop Granholm from claiming the jobs were real.

The economic development corporation claimed credit for generating 1.4 million direct, retained and indirect jobs, according to a MIRS News study of all the job claims that were made in press releases during the Granholm administration. That would account for 29% of the state’s labor force at a time when Michigan had the highest unemployment rate in the country. By the end of Granholm’s two terms as governor, 596,000 fewer Michigan residents had jobs.

In 2017, the Michigan Auditor General examined the performance of a state subsidy program called MEGA, comparing the number of projected jobs with the number of jobs created. The state audit found that companies rarely produced the number of jobs they initially claimed during 2014, 2015 and 2016.

Years later, the MEDC still is credited for achievements that have not transpired. In 2021 during the COVID-19 pandemic, Whitmer said that the MEDC had subsidized a building that the pharmaceutical company Pfizer used to make a COVID vaccine. The building had yet to be built, however.

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.