Michigan Gov. Gretchen Whitmer offered a company billions of dollars, and her administrators signed a contract saying that they won’t tell anyone about it. After the company canceled its project, officials disclosed the name of company and what was offered. This is not how the state ought to conduct its business.

The offer included $5.5 billion in cash payments to Sandisk Corp. That’s more than the state spends repairing roads each year. It would have been the equivalent of taking $1,400 from every household in the state to give to a profit-seeking enterprise. It’s a large payment to encourage private activity that doesn’t serve a public purpose.

That does not include subsidies from the federal government, either. How much this company could have gotten from Washington is unknown. It might never have been known had the company proceeded. Federal lawmakers made the contracts for CHIPS Act subsidies confidential.

The state has a terrible record of turning deals for jobs into reality. Administrators were only able to turn 9% of the jobs announced in major deals from 2000 to 2020 into reality. That is, when governors say that they’ve lured a company to the state with taxpayers’ money to create 1,000 jobs, the companies typically create just 90.

Could this particular project have done better? That’s doubtful. Company officials cited uncertainty about the future as the reason the deal was called off. The project must have been on shaky grounds if billions of subsidies couldn’t make it viable.

In other words, taxpayers dodged a bullet. But not entirely. A local economic development agency was given $259 million to purchase land and prepare it for the company. It would have been better to spend that money fixing roads or paying down pension debts, or just leave it in taxpayers’ pockets.

Note that little of the cash outlined in the state deal had been authorized by lawmakers. Company officials also asked the state to create a new program that would give the project extra cash. No legislation was introduced to create this program, though apparently legislators had discussions about whether to give the company money.

There were huge expenses proposed for uncertain benefits, with offers of public money made in private. Administrators even agreed not to talk about the project without the company’s approval.

It’s bad public policy, and it’s not what works to improve the state economy. Around the country, the states that are doing well are not the ones wooing select companies with dump trucks full of money.

Idaho, the fastest growing state from just before COVID until the present, would struggle to find $5.5 billion to hand to companies; it only collects $7.5 billion in tax revenue. Yet the state is up 110,900 jobs, an impressive 14% gain. By comparison, jobs in Michigan are only up 2% over the same period.

This is not to say that Idaho lawmakers have the economy figured out and Michigan needs to emulate their policy. Rather, it is to point out the ineffectiveness of using subsidies to drive the state economy.

This is the major conclusion of the decades of research from economists who have looked at economic development programs. Lawmakers promise that their subsidies will deliver the future of jobs to the state, but the deals fail to live up to their own expectations and don’t change the state’s economic trends.

It’s possible that legislators have learned their lesson. They did not give the company the money that was agreed to in private. Michigan’s growth is not going to be driven by subsidies to select companies. Infrastructure, service quality and the state business climate will matter much more.

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