Gov. Granholm Gambling on Michigan's Economic Future With Energy Subsidies

Excuse me for not feeling all warm and tingly after Gov. Jennifer Granholm announced the latest state subsidies for wind and solar manufacturing. The Dow Chemical Co. is a big beneficiary of the state's generosity and is slated to receive $61.3 million in state tax credits over 15 years as an incentive to construct a production facility in Midland to produce solar shingles. Dow will also receive an advanced battery tax credit worth $42 million to help finance its joint effort with Townsend Ventures in producing batteries for hybrid and electric vehicle. Gov. Granholm is placing a big bet with tax payer money that green energy manufacturing is the best hope for Michigan's economic future. Let's hope she is right — however the track record of government officials picking winners in the economic lottery is not good. As this study by Fiscal Policy Director Mike LaFaive and Fiscal Policy Analyst James Hohman shows, the state does not have a very good track record with this type of gamble. Less than 30 percent of jobs promised by these subsidies ever come to fruition. Furthermore, an econometric analysis showed that every $1 million in MEGA manufacturing tax credits awarded in a given county was associated with the loss of 95 manufacturing jobs in that county.

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Much of the economic case for alternative energy requires action by state and federal governments to favor alternative energy through mandates and schemes like the proposed cap-and-trade legislation currently languishing in the U.S. Congress. Among scandals which are calling into question the scientific validity of anthropogenic global warming, the meltdown of the Copenhagen Summit on Climate Change and frigid temperatures and record snowfall gripping much of the nation, it appears federal legislation that forces more expensive alternative energy on Americans, already immersed in the worst recession since the Great Depression, are all but dead. The odds of a massive move to green energy in the U.S. are slim at best.

Dow Chemical and other companies should be applauded for developing new energy technologies, but those technologies will only be sustainable in the marketplace if they do not have to rely on government subsidies and mandates.

Gov. Granholm through policy directive has clearly decided to place her bets on green energy as opposed to conventional energy development and the jobs it provides. I would not gamble my money on the bet of green energy, but unfortunately the governor has done it for me.