A Plea for Fairness, Transparency and Intellectual Honesty

Testimony prepared for the Michigan Travel Commission

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The following is testimony prepared for the Michigan Travel Commission at its June 22 meeting in Muskegon, Michigan. The Commission is charged with the mandate to “promote, maintain and develop the orderly growth of the Michigan travel industry” and is required to take testimony regarding policy adoption or adaption “from a broad cross section of travel interests.”

Good morning, my name is Michael LaFaive. I am an economist and director of fiscal policy for the Mackinac Center for Public Policy, with which I have been associated now for 25 summers. I am here today to call upon the Michigan Travel Commission to demand greater fairness, transparency and intellectual honesty in state and industry dealings.

I have written many scholarly studies during my time with the Mackinac Center, but one of the most recent involves state tourism promotion. My study, co-authored with professor Michael Hicks, looked at tourism promotion by 48 states over 39 years. We found a huge negative rate of return.

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As one prominent example, we found that for every $1 million increase in state promotion efforts there was a corresponding $20,000 in extra economic activity in the average state’s accommodations industry. That’s a mere 2-cent increase for every taxpayer dollar spent. Other sectors we looked at fared no better. The Pure Michigan program is ineffective and should be shut down. I ask that the Travel Commission to do the following:

  1. Call on the state of Michigan to repeal its failed Pure Michigan program.

    Not only does the program not work, it is fundamentally unfair to every other taxpaying business in the state not lucky enough to have its advertising subsidized by government. If the Commission and larger industry truly believe that these programs are effective, then they should have no problems self-assessing to finance the Pure Michigan program.

    Doing so would provide observers with what economists call a “revealed preference,” where the actions of a person or group reveal far more than vocal testimony alone. The state claims that Pure Michigan generates more than $8 in tax revenue for every $1 spent on it. If everyone believes this to be true, the travel industry should want to happily invest in its own well-being.

    If only that were true. In the industry’s strategic plan for 2007-2011, titled Michigan Tourism Strategic Plan, the authors write:

    There is absolutely no industry support for a broad-based industry self-assessment approach to generate sufficient monies to fund Travel Michigan. Last year, TICOM (Tourism Industry Coalition of Michigan) created a special task force to explore such an approach. Without exception, representatives from a variety of tourism industry segments indicated their members and/or Boards would strongly oppose such an approach.

    The hostility to such self-assessment suggests that members of the travel trade group fully understand they would not enjoy the benefits that the state has claimed occur when it runs Travel Michigan at someone else’s expense.

  2. Call on the state to find a vendor willing to publish a transparent review of Pure Michigan’s return-on-investment number.

    The state currently hires Longwoods International to make return-on-investment calculations, but that company’s officials refuse to explain precisely how they generate their claims, specifically the one that says Pure Michigan generates more than $8 in tax revenue for every $1 spent on out-of-state advertisements. These are the figures used to sell the program as a success to lawmakers and others, especially during the appropriation process.

    Why anyone takes such pronouncements seriously is beyond me. The vendor and proponents at the Michigan Economic Development Corporation and elsewhere are basically saying, “Hey lawmakers and taxpayers, trust us, we are right about this; now please appropriate more public money to the cause of private industry’s profits.”

  3. Demand that the industry’s association (Michigan Lodging and Tourism Association) back its assertions with evidence.

    Last spring the president of this organization, Deanna Richeson, wrote in an email that an unnamed think tank had published a “study … that has already been discredited.” Curious that someone somewhere may have discredited our work, I emailed, faxed, called by telephone and mailed a letter to Richeson asking her to explain who had done so and where I could locate any takedown of the Mackinac Center’s tourism work. I’m still waiting for her answer and her silence speaks volumes.

    The answer won’t be forthcoming because our study is the most scholarly and comprehensive in existence today.

  4. Ask Richeson and Travel Michigan Vice President David Lorenz to publicly debate me and my colleague Michael Hicks in a public forum.

    Public officials and industry spokesmen have made inflated claims about the effects of this taxpayer-supported program. They ought to be transparent on their views and accountable for them.

    We asked them to debate ourselves and they refused our request. Perhaps they may reconsider.

It is clear to us that the state and the industry want to keep the status quo. But it should not come at the price of fairness to other industries, state secretiveness or a refusal to support public statements with actual evidence or a real debate.

Thank you for your time.

Related Articles:

Pure Fiction: State Tourism Cost-Benefit Analysis Ignores Costs

State Tourism Subsidies Unnecessary, Ineffective and Unfair

Governor's Tourism Conference Must Address Pure Michigan Shortfalls

One State May Do Away With Taxpayer-Funded Tourism Promotion

Snyder Budget Whacks $10 Million from Business Subsidy Programs