Corporate welfare policies that Michigan now takes for granted were extremely unpopular during the debate on the state's current Constitution, which still retains explicit bans on giving taxpayer money to politically favored corporations.

Gov. Whitmer signed $4.7 billion in subsidies to select businesses in 2024, and all but ten lawmakers voted for at least $1.5 million, according to the Mackinac Center’s Business Subsidy Scorecard.

Yet when Michigan’s current constitution was debated, a request for a corporate welfare fund of just $100 million proved so poisonous that delegates rejected it by a margin of more than two to one, while the governor who tried to get his hands on that cash may have damaged his own career.

Dollar depreciation means the $100 million requested by Democratic Gov. John Swainson in 1961 would equal $1.07 billion today. But the contrast in the sums of taxpayer money involved, and in the popularity of spending it on crony companies, is still remarkable.

Michigan has held occasional statewide constitutional conventions beginning in 1835 (two years before statehood). The most recent convention occurred in the early 1960s and resulted in the 1963 Michigan Constitution that remains the law of the land today.

All of the state conventions treated questions of authoritative and economic powers that the state government should possess. And the consensus against handouts to the private sector broadly termed “economic development” was strong up to and through the most recent convention.

Since 1850, Michigan’s constitution has contained a ban on use of the state’s credit to aid private interests. This ban, originally found in Article 14, Section Six, was retained as Article Ten, Section 12 of the 1908 Constitution, and as Article 10, Section 12 of the 1950 Constitution.

Economic development was prominently debated during the constitutional convention in 1961. Swainson wrote the delegates and proposed an amendment replacing the corporate welfare ban with a provision that “The credit of the state, up to a sum of $100,000,000, may be pledged or granted to or in aid of public benefit corporations, for the purpose of financing industrial, manufacturing and municipal development projects in this state.”

Debate over Swainson’s proposal began the day after receipt of his letter.

Delegates in favor of creating a corporate welfare fund argued that developments in transportation, research and industry made public expenditures necessary, pointing out that states including Pennsylvania and New York had adopted similar propositions with the putative goal of obtaining or protecting jobs in changing times.

Opponents made a range of arguments, some of which seem novel today, while others turned out to be right on the (public) money. Delegates worried that the fund would force Michigan cities to compete against each other. They argued that government aid in this amount would hurt private enterprise and force Michigan companies to subsidize their competitors.

The crucial argument against the amendment was that a permanent subsidy would put a new burden of on our tax system. The fund would hurt taxpayers as well as large industries, while centralizing economic decisions in Lansing and reducing the capabilities of local governments.

The delegates to the constitutional convention rejected the amendment in a vote of 84 to 39. Later, two separate roll call votes were taken, and once again the $100 million amendment was struck down. A subsequent ballot initiative seeking $5 million was rejected by voters in April 1961.

The constitutional provision was re-adopted as Article Nine, Section 18: “The credit of the state shall not be granted to, nor in aid of any person, association or corporation, public or private, except as authorized in this constitution.”

Another constitutional provision — Article Nine, Section Two — states that government at the state and municipal level can never cede its power to levy taxes, whether by grants or contracts or other means. One delegate noted that problems arise when communities promise tax exemptions to new industries for extended periods of time. He indicated such exemptions “are construed by some to be in violation of this section.” This constitutional provision later passed 100 to zero.

Lastly, a constitutional provision regarding internal improvements — Article Three, Section Six of the current constitution — states that Michigan can’t participate or invest in infrastructure and development projects to benefit private interests. These public improvements include transportation development, control of water for public health and drainage, reforestation and expenditure of grants to the state of land.

Again, a minority of the committee invoked changing times to argue that this provision be struck from the new Constitution, and again they lost. Despite promises of new research centers in conjunction with universities and private industries, in the face of threats that Michigan would fall far behind other states without public giveaways to private corporations, delegates retained the restriction for the 1963 Constitution by a vote of 63 to 39.

It is evident that many of the proposals involving large expenditures for economic development were readily struck down by the delegates who created Michigan’s current Constitution. Swainson himself didn’t do much better. He was defeated in the 1962 election by American Motors Corp. Chairman George M. Romney, never getting a chance to govern under the new Constitution.

It is also evident that Michigan voters and politicians in the early sixties knew the implications of excessive government spending and the burden it would have on the taxpayer. This is starkly different from attitudes and practices we see today, when Michigan ranks among the most profligate states.

Current state government overreach harms the economy, costs taxpayers billions, and results in hundreds of ill-considered pork projects. The state’s reckless corporate welfare spending spree also goes against longstanding Michigan traditions of frugality, honest government and plain dealing. Whether it is the mindset of politicians or of the state itself that has changed over the last 60 years, Michigan can’t afford to go on violating its own principles.

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