Michigan’s economy struggled through a one-state recession in the early 2000s. In response to the state’s broad economic problems, lawmakers went hunting for factories and made deals: jobs for taxpayer cash. The Democratic governor and Republican Legislature didn’t agree on much, but they both got behind plans to spend more on business subsidies, with legislators giving their overwhelming bipartisan support.
Things have changed since then. Advocates of business subsidies struggle to get votes for the kind of programs that used to breeze through the political process.
This is due, in part, to the Mackinac Center’s work.
We demonstrated that the policies didn’t do what lawmakers wanted them to accomplish. Lawmakers wanted to see more jobs, so they gave money to companies to create them. Yet the Bureau of Labor Statistics kept reporting that employment in Michigan was going down.
This was because Michigan’s economic problems were deep and broad, while business subsidies were narrow and targeted. Giving costly subsidies to a particular plant for dozens of jobs does little when the economy creates and loses hundreds of thousands of jobs a year, which it does through the underappreciated churn that goes on naturally.
We attacked business subsidies on several fronts. Our careful academic analyses showed that the programs were not worth their costs. We found that deals often went bad. We did what we could to make people aware of state government’s embarrassing moments, like when it awarded a deal to a con artist. We found new ways to demonstrate that these programs were ineffective at creating jobs, unfair to businesses that don’t benefit from them, and expensive to the state budget. That’s in addition to pointing out that it is inappropriate for the state government to pick winners and losers in the marketplace, which is what lawmakers do when they offer deals to select companies.
In short, we tried to make business subsidies unpopular.
It’s been a long, hard battle. We butt heads with regional economic development agencies, business interest groups and sympathetic commentators. The people who get to hand out special favors like having that power, just as recipients of the favors like getting them.
Our success depends on creating a climate of popular opinion that is skeptical of business subsidies. This will ensure that lawmakers see costs the next time someone comes around to ask for money for jobs.
Indeed, supporters call their latest pitch to give taxpayer money to select businesses the “Good Jobs for Michigan” program. Many lawmakers, though, see beyond the self-promoting and misleading label to find it the same kind of as unfair, ineffective and expensive program that has been tried before. The original law prevented administrators from signing new Good Jobs deals after 2019. Lawmakers have rejected calls from lobbyists to give administrators authority to approve new deals.
A reflection on this history shows that our work has helped make business subsidies less popular and more difficult to get approved through the legislative process. This is remarkable progress, and we hope to continue it.