![[Photo of Michael D. LaFaive]](/media/images/people/LaFaiveMed.jpg)
Michael D. LaFaive
Director of the Morey Fiscal Policy Initiative
Michael LaFaive is director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy, where he has worked for more than 15 years.
He is the author or co-author of hundreds of essays, commentaries and blog posts and 12 studies on fiscal policy topics as varied as local and state privatization efforts, corporate welfare, school finance, state budgeting and cigarette taxes.
Among his studies is the Mackinac Center for Public Policy’s largest, a nearly 200-page state budget analysis that recommended more than 200 ideas for trimming some $2 billion from the state budget without cutting Medicaid or School Aid funding. Many ideas first presented by LaFaive in 2003 have been adopted or adapted by lawmakers in Lansing.
He is also the originator of the Center’s annual school privatization survey, which routinely garners a 100 percent response rates from districts. There is no database of competitive contracting like it in the United States. In addition to this product, LaFaive authored in 2001 a 26-page, full-color edition of Michigan Privatization Report specifically dedicated to fixing Detroit. The ideas in that publication are more relevant today than when it was published.
LaFaive is perhaps best known, however, for his cutting-edge, scholarly work examining state “economic development” programs. His studies and frequent commentaries on this topic have garnered him a national, if not international reputation as a respected government development critic and were probably influential in the decision to kill the Michigan Economic Growth Authority, the state’s high-profile corporate welfare program.
LaFaive is typically interviewed more than 125 times a year by members of the press seeking comment on fiscal issues and remains a popular public speaker.
He has undergraduate and graduate degrees in economics from Central Michigan University.
LaFaive is married and resides in Midland, MI.
By Michael D. LaFaive
Taxpayers Are Not Sheep Lining up to Be Sheared
Notwithstanding the claims of many tax-friendly Lansing politicians and their government employee union patrons, it appears that taxation really does matter. … more
Bills Swap Selective Business Tax Breaks for Broad-Based Relief
A package of 17 bills sponsored by State Rep. Justin Amash would eliminate or reduce targeted business tax breaks in favor of across-the-board business tax relief. The idea is to minimize state interference in business by preventing government planners from handing out special favors to a favored few, while simultaneously granting a measure of relief to all MBT payers. After all, if tax cuts create economy- and job-boosting "incentives" for a few hundred firms selected by government "economic development" officials, won't lower taxes do the same the 100,000-plus firms who get no special treatment? … more
Michigan’s Rank Position
There is no perfect method known for measuring a state's economic well being, or forecasting its future prospects. Nevertheless, over time many scholars using different methodologies have presented a relatively consistent picture: Michigan's economic performance and outlook have trended in a negative direction since their first reports. It's not hard to understand why: Lawmakers here continue to stifle growth with counterproductive policies. … more
Federal Reserve Study: Economic Freedom Matters
A new study published by the Federal Reserve Bank of St. Louis, called "Economic Freedom and Employment Growth in the U.S. States," concludes that there is a link between economic freedom and employment growth. Other studies have come to the same conclusion. One of the things that makes this one different is its findings on labor markets. The authors write: "In addition, we find that less restrictive state and national government labor market policies have the greatest impact on employment growth in U.S. states."
That conclusion doesn't bode well for Michigan, which is known for having a relatively hostile labor climate and which over the last 10 years has seen its overall national economic freedom ranking tumble. … more
That conclusion doesn't bode well for Michigan, which is known for having a relatively hostile labor climate and which over the last 10 years has seen its overall national economic freedom ranking tumble. … more
State MEGA Audit Finds MEGA Problems
The Michigan Auditor General yesterday released a 72-page audit of the Michigan Economic Growth Authority program, finding that it is poorly administered. MEGA is the state's flagship "jobs" program, granting selective tax breaks and subsidies to particular firms selected to be "winners" by its staff.
The Auditor General's examination focused on reviews conducted by the agency that oversees MEGA. In other words, this was a review conducted to determine whether or not MEGA companies granted selective tax breaks have used proper "job count and salary information." … more
The Auditor General's examination focused on reviews conducted by the agency that oversees MEGA. In other words, this was a review conducted to determine whether or not MEGA companies granted selective tax breaks have used proper "job count and salary information." … more
Michael Moore Inadvertently Makes Case Against Film Subsidies (Again)
Rick Lowe of the Nassau Institute posted a blog entry April 3 about his experience with a group gathered near his home in the Bahamas to watch and discuss Michael Moore's latest film, "Capitalism: A Love Story." … more
MEGA Marks 15th Anniversary
Yesterday marked the 15th anniversary of the creation of the Michigan Economic Growth Authority, a business-tax credit and subsidy program designed to create new and keep existing jobs in the state. The Mackinac Center has published two rigorous analyses of MEGA: "MEGA: A Retrospective Assessment" in 2005, and "Michigan Economic Development Corporation: A Review and Analysis" in 2009.
Both studies found that the program had no impact on overall job creation in the state. Another study found that Michigan would have been better off economically if the state had just cut taxes for all businesses instead of operating a targeted tax break program. … more
Both studies found that the program had no impact on overall job creation in the state. Another study found that Michigan would have been better off economically if the state had just cut taxes for all businesses instead of operating a targeted tax break program. … more
Economic Development 'Chicanery'
The recent news that the state's Michigan Economic Growth Authority offered a convicted embezzler's company a $9.1 million tax credit has caused quite a stir in Lansing. Last week, legislators held hearings on how the Michigan Economic Development Corp., MEGA's parent agency, could have let someone with the embezzler's background be part of a multi-million-dollar selective tax break deal.
There is so much money sloshing around economic development programs around the nation — up to $50 billion or so as late as 2004 — that it would be surprising if there were not many questionable deals brokered by similar agencies across the nation. … more
There is so much money sloshing around economic development programs around the nation — up to $50 billion or so as late as 2004 — that it would be surprising if there were not many questionable deals brokered by similar agencies across the nation. … more
A MEGA Blast From the Past
How deep does this hole have to get before the people demand that the political class finally turn its back on what are now clearly recognized are not "economic development" programs but a self-serving political development agenda? … more
MEGA Cliché 'Mistakes Were Made' Not Good Enough
In her first public statements since it was revealed that the Michigan Economic Growth Authority approved a $9.1 million tax credit deal for a convicted embezzler, Gov. Jennifer Granholm was quoted by the Gongwer Michigan Report as saying, "And obviously, a mistake was made, and it cannot happen again." … more
MEGA Prescient
The parole violation arrest last week of convicted embezzler and Michigan Economic Growth Authority tax credit winner Richard A. Short has caused deep embarrassment for state officials. But for me it has occasioned some poignant reflection on two former colleagues, Martin M. Wing, Ph.D, and Joseph P. Overton, who co-authored the Mackinac Center's first MEGA study in 1995, with a third scholar, before the program even became law. … more
MEGA Show Trial?
The Michigan House and Senate plan to hold hearings this week on how a convicted embezzler on parole duped the Michigan Economic Development Corp. and Michigan Economic Growth Authority into offering his company — which was being run out of a Flint mobile home park — a $9.1 million tax credit. (This could have become a "refundable" credit, meaning the state would likely be writing checks to the embezzler.) … more
This Just In: Convicted Embezzler's Business Awarded State Tax Subsidy
The Associated Press is reporting that a convicted embezzler currently on parole has been approved for business tax credits under the state's Michigan Economic Growth Authority program. The article also noted that when the deal was announced, the embezzler, Richard A. Short, "shared the stage" with Gov. Jennifer Granholm.
Had the program managers performed even a cursory background check, they certainly would have discovered Short's past. … more
Had the program managers performed even a cursory background check, they certainly would have discovered Short's past. … more
Governor Offers $2.1 Billion Toast to Health of Government
Last week, Gov. Jennifer Granholm introduced the final budget of her tenure. She proposes spending $2.1 billion more than the current year, and requests a $554 million net tax increase for fiscal 2011. The tax hike comes from immediately increasing the tax burden on consumers by expanding the sales tax to services, while gradually implementing a reduction in business taxes.
This net tax hike would ensure the health of state government at the expense of families and business owners. … more
This net tax hike would ensure the health of state government at the expense of families and business owners. … more
State of the Statists
Gov. Jennifer Granholm gives her last State of the State speech tonight.
Mackinac Center analysts have reviewed each State of the State speech dating back to 1969 and tallied the number of proposed expansions and limitations of government that each governor has offered. The "scorecard" of proposals below provides some insight into each administration's desire to see government solve perceived public policy problems.
These counts are not an exact science, but determining whether a proposal expands or limits state government is usually not too difficult.
Below is a set of historical averages covering the administrations of Governors William Milliken, James Blanchard, John Engler and Jennifer Granholm. … more
Mackinac Center analysts have reviewed each State of the State speech dating back to 1969 and tallied the number of proposed expansions and limitations of government that each governor has offered. The "scorecard" of proposals below provides some insight into each administration's desire to see government solve perceived public policy problems.
These counts are not an exact science, but determining whether a proposal expands or limits state government is usually not too difficult.
Below is a set of historical averages covering the administrations of Governors William Milliken, James Blanchard, John Engler and Jennifer Granholm. … more
Half of Washington Smokes Expected to Be Illegal With Proposed Tax Hike
The state of Washington is considering an increase in its cigarette taxes by $1 per pack. As we've shown in our 2008 study on cigarette taxes, these tax hikes carry a large degree of unintended consequences. Increasing cigarette taxes is expected to ensure that half of all cigarettes smoked in Washington are smuggled in from other states.
In December 2008 we published a study "Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review." The study reviewed the efforts of states trying to fight the growth of smuggling, documented the history of cigarette taxes in Michigan, New Jersey and California, and modeled the level of illicit tobacco use in states due to cigarette tax rates. We recently updated the model to include changes to the Federal Excise Tax, as well.
The 2008 study already found that Washington has the fourth highest smuggling rate. In applying the model to the proposed tax increases, we found that a $1.00 per pack increase in taxes would jump the state's smuggling rates from 39.3 percent to 51.5 percent. … more
In December 2008 we published a study "Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review." The study reviewed the efforts of states trying to fight the growth of smuggling, documented the history of cigarette taxes in Michigan, New Jersey and California, and modeled the level of illicit tobacco use in states due to cigarette tax rates. We recently updated the model to include changes to the Federal Excise Tax, as well.
The 2008 study already found that Washington has the fourth highest smuggling rate. In applying the model to the proposed tax increases, we found that a $1.00 per pack increase in taxes would jump the state's smuggling rates from 39.3 percent to 51.5 percent. … more
Citizens, Investors and Legislative Circus Poodles
We all pay a price when government treats investors, entrepreneurs and households as circus poodles made to jump through hoops in order to collect selective tax-break or subsidy "biscuits" handed out at the whim and discretion of bureaucrats and legislators. … more
Blown Away by Former Detroit Mayor James Cavanagh's Ghost
As Detroit and the rest of Michigan look forward to 2010 and beyond, it might be wise to look back at what economics lessons the experience of the past half-century may provide to guide our future choices. … more
Why State "Economic Central Planning" Fails
Reams of empirical evidence indicate that when it comes to increasing the prosperity and opportunities of the people in a state, nation or society, government "economic development" programs fall far short of what their proponents advertise. Here are three of the reasons this is true. … more
Happy Birthday Dr. McCracken
Happy Birthday, Dr. Paul J. McCracken. … more
American Greetings Says Goodbye to Michigan
Just one day after Michigan Economic Development Corporation director Greg Main claimed that Michigan can look forward to a brighter economy next year, American Greetings offered a stinging repudiation of his agency's failed "picking winners and losers" methodology with the announcement that it would close its plant in Kalamazoo. … more
Main Forecast: Hoping for a 'Broken Clock' Moment
In short, MEDC talk is cheap. Its officials can make wild claims about their ability to see the future or "create" jobs from thin air, but none are ever demoted or fired when they eventually prove to be divorced from reality. … more
Passing the Torch
Here's the latest evidence that so-called "economic development" programs are actually nothing more than political development programs. … more
Tea and Tourism Subsidies
Just one day after the 236th anniversary of the Boston Tea Party, Michigan legislators are preparing to divert a portion of today's sales tax revenue to provide a permanent subsidy for a particular group of business owners, Michigan's tourism industry. … more
Playing Favorites
In studies and blog posts, this author and others have argued that state "jobs" programs are really political development programs used by term limited legislators to advance their own political careerism by handing out special tax favors and subsidies to select corporate "winners," all under the guise of "economic development."
Consider Senate Bill 323, sponsored by state Sen. John Pappageorge, R-Troy. … more
Consider Senate Bill 323, sponsored by state Sen. John Pappageorge, R-Troy. … more
Film Subsidies — Smokin'!
Does Michigan's film subsidy program encourage children to smoke? Will Michigan's workplace smoking ban put an end to smoking in movies made here? After all, isn't a film set a "workplace?" … more
MEGA Madness and Big Labor Contradictions
Ironically, a special tax break offered by the state of Michigan to a for-profit arm of the Service Employees International Union was arranged in part to address the union's complaint that it is at a disadvantage due to Michigan's "high labor costs" compared to two other states the SEIU was supposedly considering (one of them with a right-to-work law reviled by the union). This according to a document obtained by Detroit News business writer Daniel Howes ("State tax credit to labor union is baffling," Nov. 20). … more
Film Subsidy Is Political, not Economic
An unusual joint hearing occurring right now of two state House committees on Michigan's film subsidy program brought to mind a letter received last summer from Janet Lockwood, director of the Michigan Film Office. The letter was in response to a Mackinac Center press release describing how the subsidy program may actually destroy jobs. … more
State Legislators Need All the Facts on Film Subsidies
Dear Legislators: It has come to my attention that you will be meeting today to discuss the Michigan film incentive program. As you consider the testimony and documents presented by various parties, be advised that certain items with seemingly pristine pedigrees may be deeply flawed. … more
Politically Powerful Special Interest Gets Special State Tax Break
A business operation created by the politically powerful SEIU labor union will be granted a special $2 million tax break by the state of Michigan. … more
Dear Tax Raisers: Please Tell Us Where to Cut
If Michigan's governor and Legislature insist on taking more from families to solve the state's self-created overspending crisis, they should at least tell those families where to trim their budgets. … more
'Live Free or Die' State Chooses 'Die'
New Hampshire’s inspiring state motto is a tribute to individualism, but it shines a bit less brightly today after the state offered to guarantee part of a “loan” to an ailing newspaper. That’s a mistake, and if the “Live Free or Die” state has any doubt they should look to the record of the Great Lake state. … more
Inspiration or Desperation?
A recent Detroit Free Press editorial too easily dismisses Gov. Jennifer Granholm's now infamous 2006 quip, "you'll be blown away" ("Granholm an unfortunate victim of her own words," Nov. 11). They did so by truncating the full sentence and arguing that it was simply "delivered as an inspiration." … more
MEGA Tax Credits Are Not Without Cost
Last August, the Mackinac Center released a study critical of the Michigan Economic Growth Authority. This was the second of two rigorous analyses of MEGA by the Center, and both found that - at best - the program has had no net positive job creation impact. Indeed, the latest results suggest that the program may actually destroy jobs. Not surprisingly MEGA apologists have bristled, and when compelled to respond, have done so with what could charitably be called a series of untruths about the program. … more
MEDC Untruths Reveal Political Nature of 'Jobs' Department
The Mackinac Center's recent analysis of the Michigan Economic Development Corp. elicited some misleading or erroneous responses from MEDC officials. Although the MEDC is supposed to be about economic development, its true mission is political, and so its pronouncements should be viewed with the same skepticism as ones from politicians. … more
Dancing With the Government
When you "dance with government," be prepared to get stepped on. … more
MEGA Stories
Michigan Economic Development Corporation CEO Greg Main boasted that he "would invite (critics) to take a look at the results (of the MEGA targeted tax break program)." We did. Twice. In depth and detail. We found that - at best - MEGA creates no new jobs, and on balance it may even destroy them on a net basis. Further, only 29 percent of the direct jobs promised by its deals ever happened. To date, the MEDC has not refuted a single point of fact, or produced independent, systematic evidence that its approach does squat to create jobs, increase state incomes or expand our economy. … more
"Slashing" Economic Development Staff? Please Sir, Can We Have Some More?
The Michigan Economic Development Corporation — the lead agency in a statewide "economic development" empire — is arguably the most ineffective, least necessary department in state government. Shrinkage of the agency's staff is good news; staff levels reaching zero would be excellent news! Alas, declines reported by a recent Detroit News article aren't quite what they appear to be. … more
Jobs Braggadocio
The Granholm Administration wasted no time after the Michigan Economic Growth Authority monthly rubber-stamp board meeting on Tuesday to start pumping out press releases bragging that more than 2,800 new jobs were coming to Michigan as a result of selective tax break deals for the latest gaggle of "winner" firms and projects. The MEGA-related jobs claims should be discounted by 71 percent, based on a recent Mackinac Center study that found only 29 percent of the jobs promised by past MEGA deals actually happened. … more
How Big Is Michigan's Government, Really?
The Detroit News on Saturday published an article in which reporter Ron French compiled various indicators to suggest that Michigan state government is smaller now than at the start of this decade (“Michigan’s shrinking government”). Actually, gross state spending during this decade rose a modest 3.4 percent after adjusting for inflation, while the state's economy shrunk by 3.3 percent. … more
Is it The Wall Street Journal or The Onion?
This week, The Wall Street Journal published another critical examination of Michigan's political leadership, economy and budget. In a delicious irony, the online version posted a Michigan Economic Development Corp. advertisement featuring actor Jeff Daniels alongside the piece. … more
Mississippi Not Burning
Gov. Jennifer Granholm took a gratuitous swipe at the state of Mississippi. The Mackinac Center takes a nuanced look at the Magnolia State's fortunes. … more
How to Fix Michigan? Cut Cost of Living, Working and Investing Here
On Oct. 9, 2009, Michael LaFaive, director of the Mackinac Center's Morey Fiscal Policy Initiative, spoke at the invitation of Rep. Justin Amash, R-Kentwood, at an "Economic Town Hall" meeting convened by the representative. Here's what he told the participants: When I was first asked to participate here I was a bit taken back by the specificity of Representative Amash's request. He said, "Mike, my constituents have endured nearly a decade of bad news. I want you to tell them what we're doing right. Give them the good news." So, in conclusion let me say ...Obviously, I am joking but at the same time, I am not joking. … more
Come Fly With Me: Will Detroit City Airport Get Dose of Fiscal Sanity?
Detroit Mayor Dave Bing has recommended outsourcing the management of the Coleman A. Young International Airport to save money, as recommended by the Mackinac Center back in 1998. When we did so the city had recently provided the airport with a $1.9 million subsidy. In 2007 (the latest year for which data is available), the subsidy was down to $900,000, but the city's ability to afford any subsidy has collapsed altogether. At this point, the city should investigate just completely unloading the airport with an outright sale. … more
A Rebuttal to the MEDC's Wall Street Journal Letter Part III
Yesterday, I published the second part of this essay, which uses an MEDC letter-to-the-editor in the Wall Street Journal to illustrate the agency's pattern of using illegitimate rhetorical devices in response to serious critiques, including distractions, irrelevancies and non sequiturs. Part I was published Wednesday. Here's third and final part: … more
The Coming $50 Billion Budget Battle
The state is currently wrestling with how to close a $2.8 billion budget deficit for fiscal year 2010. Some of the proposed cuts to state spending are significant and debate over them may be holding up completion of the budget, which must be passed by midnight Sept. 30 to avoid a government shutdown. … more
Tourism Subsidy Beneficiaries Chant on Capitol Steps: "Gimme! Gimme! Gimme!"
Actually we don't know what they chanted, but MIRS News reported that that tourism-related business officials did demonstrate in front of the Capitol yesteray, protesting a proposed cut to the state's "Pure Michigan" advertising campaign.Here's a concept for them: If ad campaigns like Pure Michigan are really such a success, why don't the hotels that benefit from this taxpayer largesse pay for it themselves? That the tourist industry's members refuse to do so speaks volumes about the program's real value. … more
A Rebuttal to the MEDC's Wall Street Journal Letter Part II
Yesterday, I published the first part of this essay illustrating how an MEDC letter-to-the-editor responding to a critical Wall Street Journal editorial illustrates the agency's pattern of using illegitimate rhetorical devices to avoid responding to the substance of serious critiques, including distractions, irrelevancies and non sequiturs. Here is the second part of the essay, deconstructing other statements in MEDC CEO Greg Main's letter. … more
A Rebuttal to MEDC Letter in The Wall Street Journal
On Sept. 4, The Wall Street Journal published an editorial titled “The Michigan Example,” excoriating the state’s reliance on government central planning to “create” jobs, rather than undertake genuine overall business climate reform. The editorial was based in part on research published a few days earlier by myself and James Hohman. … more
Michigan Sets Another Dubious Record
Data released last Friday by the federal Bureau of Labor Statistics showed that for the second month this year, Michigan was burdened with an unemployment rate exceeding that of Puerto Rico. Michigan’s rate was 15.2 percent while Puerto Rico’s stood at 15.1 percent. … more
Green Jobs Fad Means More Government Intervention
The Michigan Economic Development Corp., state Legislature, governor and other supporters of government “jobs” programs have adopted an almost pop-culture idolatry for all things environmental by showering taxpayer subsidies upon corporations claiming to bring purportedly “earth friendly” products to market. It has a shiny, new green paint job, but in fact this is just the latest in a long line of failed state economic development program fads. … more
Trick, or Treat
The Michigan Legislature is this morning taking up House Bill 5275, a bill that authorizes a Michigan Economic Growth Authority business tax credit deal for a battery cell manufacturing facility. … more
