MEDC Fights for Its Political Life

The Michigan Economic Development Corporation (MEDC) is in self-preservation mode.  After years of using special tax incentives and subsidies to lure favored businesses to Michigan, the highly paid leadership of this quasi-state department must now contend with a changing of the guard.  In November 2002, Michigan citizens will elect a new governor.  Will that new governor be as favorably predisposed to the MEDC's questionable programs as is the present administration? 

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The MEDC is not taking a wait-and-see approach.  The agency's top bureaucrats are promoting themselves to help ensure their own political survival.  For instance, the MEDC recently released a brochure of its "2002 Corporate Objectives."  The brochure listed, "Ensure the Continuity of the MEDC" as its number-one objective.  In other words, the bureaucrats at Michigan's "department of jobs" have made protecting their own jobs their number-one priority in 2002.  

The MEDC is also running a series of self-aggrandizing radio advertisements through the 2001-02 fiscal year.  The fiscal year ends on Oct. 31, 2002, just days before the next election.  The MEDC is spending $850,000 to produce and run the ads which all underscore the importance of the MEDC in general, or what it has meant to specific entrepreneurs.

For instance, of the 16 MEDC advertisements that the Mackinac Center for Public Policy has obtained through the Freedom of Information Act, all contain the following introductory remarks:

"The Michigan Economic Update is presented by Michigan Economic Development Corporation, the number-one driving force behind business growth in Michigan" (emphasis added).

So the MEDC believes that thousands of Michigan entrepreneurs who risk their own money bringing products to market, who meet payroll, jump through state-mandated regulatory hoops, and pay taxes to support bureaucracies such as the MEDC are a secondary force in Michigan business development?

In addition, every advertisement concludes with this statement:

"The Michigan Economic Development Corporation is in the business of helping businesses grow and succeed.  They can give your business an edge, provide you with expert help on workforce training, recruiting skilled workers, and corporate tax strategies.  The experienced staff at the Michigan Economic Development Corporation can help you cut through red tape that can save time and money.  Plus, their services are free" (emphasis added).

Free?  Since fiscal year 1999-2000 the MEDC has received more than $244 million in General Fund/General Purpose (GF/GP) dollars-tax money taken from the people of Michigan, including both those businesses who receive MEDC favors and those who merely foot the bill for their competitors who receive those favors.  The General Fund is a fund in the Michigan budget over which politicians have the most discretion.  This figure does not include the money that is received by the MEDC from the federal government and other sources.  Much to the governor's credit, his 2003 fiscal year budget recommendations for the state call for a 23 percent reduction in GF/GP spending on the MEDC. 

It is important to underscore that entrepreneurs who do not receive special favors from the MEDC must compete directly against those who do.  One MEDC advertisement features John James, CEO of the James Group, a trucking company based in Wayne County.  It has received more than $700,000 in assistance from the state for job training and help in creating a new railroad spur.  But other taxpaying companies who do not receive these advantages (but pay the taxes that support MEDC activities) are not so fortunate.  (You can listen to this MEDC radio spot in either the Windows MediaPlayer or Apple QuickTime format.)

One of the most fundamental principles of sound economic policy is that everything has a cost.  In order for the government to create anything-such as a new railroad spur-it must take resources that would have gone toward something elsewhere.  Whatever is spent by the state to improve the business climate of one entrepreneur must be taken from consumers and other businesses who would otherwise save, invest, and consume in a way that made their individual lives better; and that includes investing in new, efficient operations of other businesses.

The fatal conceit of MEDC bureaucrats is that they believe they possess such superior knowledge that they are equipped to know which businesses are worthy of special tax breaks and incentives and which are not.  But only the market-that is, free people voluntarily choosing to patronize companies they believe provide the best products or services-can truly determine economic "winners" and "losers."   It is to be hoped Michigan's next governor will recognize that average, everyday consumers pursuing their own preferences and interests are quite capable of driving economic development without the centralized planning directives of highly paid political appointees who seem to have no clue about the workings of a modern market economy.

"The bureaucrats at Michigan's 'department of jobs' have made protecting their own jobs their number-one priority in 2002."