Michigan’s Economic Dreams Subsi-Dying on the Vine

Gov. Jennifer Granholm recently signed into law new tax credits for automotive battery manufacturers. The refundable credits — outright cash handouts, really, because the state expects the credits to exceed any tax that the companies may owe — could cost Michigan taxpayers up to $300 million. This is the latest in a long line of programs where the Legislature has undertaken to subsidize dwindling industries.

Yes, dwindling. Despite legislative dreams of electric cars that need batteries, the contributions and prospects of this industry to the economy has been weak. Since 2000, American battery manufacturers shed 28.7 percent of their jobs. Plus, it's a fairly small industry to begin with, accounting for only 0.2 percent of all U.S. manufacturing jobs, roughly the equivalent of this country's curtain and linen mills.

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Subsidies for battery manufacturers are similar to those being handed out to last year's fad industry — film producers. The costs and the benefits of those handouts have been unclear, though, because the Michigan Film Incentive office hasn't disclosed the former, and the latter because the jobs figures from the industry haven't been anything to write home about.

Specifically, Michigan has shed 83,700 jobs (about 2.0 percent) since passing the film subsidy law last April. Government figures don't reveal whether there are more film jobs in Michigan, but do show that since then the state has lost 3,100 jobs in the information industry (about 4.8 percent), which includes film production. Nationally, the film industry has been stagnant. There has been no change in the number of people employed in the industry since 2002.

Last year the governor and Legislature also decided to subsidize wind farms. Despite all of the press releases and new laws, alternative energy production jobs are minuscule. There are more construction jobs in Wayne County than in the entire nation's alternative energy production.

Simply put, efforts by politicians to pick winners and losers in fad industries du jour can never keep pace with changes in a dynamic economy. All those incentives and handouts simply provide cover for legislators and a governor unwilling to do the heavy political lifting required to pass across-the-board tax cuts, let workers have greater freedom through a right-to-work law and scale back the excessive regulatory regime.


James M. Hohman is a fiscal policy research assistant at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

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