A MEGA Blast From the Past

This week, both the Michigan House and Senate are holding hearings on how the state's economic development apparatus managed to offer a $9.1 million tax credit to a convicted embezzler. Sen. Jason Allen, R-Traverse City, is presiding over the Senate event. ("Legislature's Most Persistent Targeted-Incentives Booster to Run Hearings on Embezzler's Tax-Break Deal.")

We've been here before. As described in a previous post on this page, in 2003 the same program involved in the current imbroglio, the Michigan Economic Growth Authority, was embarrassed by a series of newspaper reports describing how it had failed to improve the state's economy. Then as now, lawmakers hastily convened hearings, which critics feared would be mere smokescreens intended to obfuscate the program's failures, not get to the bottom of them. That's exactly what happened.

Sen. Allen also participated in that cover-up. Here is an excerpt of his remarks from one of those hearings:

Twenty-four months ago we were in an entirely different economy; and it is very obvious that the tools that were put together under the previous administration were probably adequate for that type of an economy, but with the stress that's going forward with our manufacturing base; the changes going on in the economy with regards to technology, it's very appropriate for us to take some time to sit down and review the activities of the organization and see what other areas we can be of assistance to promote jobs and create economic wealth in our state. (Emphasis added.)

Since then, Sen. Allen has been extremely busy adding to those tools, as has the Granholm administration and the entire Legislature. Indeed, there has been a veritable explosion in state selective tax break and corporate welfare subsidy programs.

In 1995 when the MEGA program was created, Mackinac Center analysts explained why it would not work. In 2005 and 2009, we demonstrated empirically that it had not worked to slow or reverse what had become Michigan's "one-state recession." Since those September/October 2003 hearings, unemployment in this state has risen from 7.1 to 14.1 percent, our state gross domestic product ranking among the states has fallen from 16th to 41st, and our per-capita personal income is now 13.1 percent below the national average.

How deep does this hole have to get before the people demand that the political class finally turn its back on what are now clearly recognized are not "economic development" programs but a self-serving political development agenda?

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.