The Possibility of Political Behavior

In such instances, the policy error lies at least as much with the state as with the business seeking the favors. Indeed, political officeholders face an incentive to create rent-seeking opportunities, since they can point to the benefits they've helped provide a business when they seek votes and when they solicit businesses for financial and other political support.

This risk has implications for a program like MEGA (and, indeed, the other programs of the MEDC). The view that government can perform essential economic development by awarding various business incentives is based on an assumption that the public officials administering the program are responding to economic information and not being swayed by political incentives.

There is evidence, however, that political incentives have in fact affected MEGA's performance.

For instance, the failed MEGA deals discussed earlier under "Case Studies" involved publicity when the MEGA deals were approved — well in advance of the possible delivery of the jobs and investment expected. In the case of Delphi Automotive Systems, the Engler administration accompanied the announcement of the MEGA package with a news release proclaiming "Southeast Michigan Job Bonanza: 2,891 New Jobs Coming to Michigan: Delphi Automotive Systems Builds in Troy."[114] In the case of Texaco Energy Conversion Devices, the administration news release read, "MEGA Milestone: 100th Tax Credit Offered to Energy Conversion Devices, Inc."[115] In the case of Plastech Frenchtown, the Granholm administration issued a news release proclaiming 900 new jobs were expected, and the governor was quoted as saying, "Michigan's leadership in attracting new businesses and expanding our existing manufacturing sector continues today with Plastech's commitment to the future of our state." She added, "My administration wants to make Michigan a magnet for economic growth - Plastech's expansion is evidence that we're making it happen."[116]

If the MEGA program were strictly focused on the creation of jobs, it would publicize the jobs and investment only when they actually occurred and the tax credits were actually awarded. Merely offering them would be viewed as meaningless. And yet the public is almost unfailingly alerted whenever a new MEGA package is approved and told infrequently, at best, what the actual results are.

[114] John Truscott, "Southeast Michigan Jobs Bonanza: 2,891 New Jobs Coming to Michigan: Delphi Automotive Systems Builds in Troy," (State of Michigan: Executive Office, 2000).

[115] Truscott, "MEGA Milestone: 100th Tax Credit Offered to Energy Conversion Devices, Inc."

[116] Liz Boyd, "New Plastech Facilities Bringing 900 Jobs to Monroe Area," (Michigan Economic Development Corp., 2003), -4311-43cd-98c6-3f153a15c7f2 (accessed August 14, 2009).