The Place Where Ludington Talks
Michigan #1 in Propping Up Businesses by Government
No Surprise: It's near the last in most measures of economic success
Why do we have the government grab money from hard-working individuals, just to give it back to businesses out for a quick buck or companies seeking handouts? It can be called economic development, or developing public-private partnerships, or incentivizing success, but whatever name it's called, it's nothing more than called corporate welfare steered towards businesses that sell their brand more to the government for grants than to the customer.
In this article we find that Michigan leads the nation in such economic development schemes by far, and is only second to New York state in scale. Giving public tax dollars to private interests selected by politicians and their appointees used to be a serious type of corrupt, unethical behavior, now it's the accepted status quo in Michigan.
Where has it got us? To a point where we are seriously uncompetitive; where failed businesses or laughable business models get their government check because of all those theoretical jobs they create which the government can add to their statistics to show who is the best job-creator. Like anything involving government, it is almost impossible to scale back. So until it universally becomes unacceptable once again to bestow public money to private purses, these monies-for-cronies schemes will continue, and our free market system will be dictated by the firms subsidized by the folks in Lansing and Washington. Here's our story:
Michigan has offered more large government-funded subsidies and tax incentive packages to corporations than any other state, according to a new report.
Good Jobs First, a Washington D.C.-based taxpayer advocacy group, compiled a national list of 240 “megadeals” — economic development subsidies dating back to the 1970s that cost state and local governments at least $75 million each. It did not include sports arenas.
Michigan has awarded 29 of these deals, followed by New York with 23. It ranked second in terms of total dollars at $7.1 billion, behind New York’s $11.4 billion, the report found. Those numbers reflect announced awards; the actual dollar amount given to the companies may be higher or lower since many deals were tied to job creation.
Good Jobs First criticized the “lavish” deals, saying state and local governments have gone too far in subsidizing private business.
“We’re not libertarians here, who say there should never be any interference in market,” report author Philip Mattera said. “Our problem is the overuse of these subsidies, the fact that too much money is being given to companies that don’t need it, and that there are not adequate strings attached to make sure the money is being used to create good jobs and is not having an undue burden on state and local finances.”
Companies and government officials say incentives help the economy by spurring corporate investment, creating jobs and retaining existing ones.
Most of Michigan’s megadeals were awarded to automotive companies while former Gov. Jennifer Granholm was in office. She told Stateline that “The auto industry has rebounded and factories and new shifts are being added all over Michigan. Of course the incentives from all levels of government helped.”
But Good Jobs First argues that quite a few megadeals nationwide didn’t result in truly new job creation.
“Some are instances of job blackmail in which a company threatens to move and gets paid to stay put. Others involve interstate job piracy, in which a company gets subsidies to move existing jobs across a state border, sometimes within the same metropolitan area,” Mattera said.
The $7.1 billion figure for Michigan comes from various government disclosures and project announcements. Much of the money was offered in the form of tax credits tied to job creation, so if the jobs didn’t pan out, the companies wouldn’t receive all of the funds.
For example, A123 Systems was listed as receiving $152.3 million in state and local incentives, but the company went bankrupt and was purchased by a Chinese firm that’s not expected to get those tax credits. It was still included in the megadeals report with a note explaining the situation.
Other incentives came in the form of property tax abatements, infrastructure improvements, grants and financing. Many of the deals were orchestrated by the Michigan Economic Development Corp., which refused to comment on the report.
The top-three largest deals in the state went to Chrysler, General Motors and Ford, respectively. GM and Ford were among the top five recipients of megadeals nationally. The Big Three automakers all defended their use of tax incentives and other subsidies.
“Economic development officials know that when a large manufacturing company makes an investment, the benefits begin to accrue immediately because they are routinely followed by supplier investments, small business growth, infrastructure improvements and all of the other benefits of a growing employment base,” General Motors Co. spokesman Tom Henderson said in a statement.
Ford Motor Co. spokesman Christin Tinsworth Baker also said tax incentives have been used to help secure jobs and drive investment.
Michigan’s biggest single incentive package in the report was $1.3 billion over 20 years for Chrysler to invest in its Sterling Heights Assembly Plant and the Global Engine Manufacturing Alliance (GEMA) in Dundee, announced in 2010.
“Due in part to the tax incentives provided by the State – which will be realized over a 20-year term and are contingent on the company retaining jobs – Chrysler Group has made significant progress toward building a successful enterprise…” according to a company statement. It went on to note a billion dollars in investments in Sterling Heights and Warren and adding 900 jobs in Sterling Heights in 2011.
Good Jobs First wants to see better disclosure on the megadeals.
“When the details of subsidy spending are easily available, policy makers and the public can take closer and more informed looks at the deal making,” Mattera said.
The MEDC has been criticized by both Democrats and Republicans for not being transparent enough or making sure companies meet all the conditions in order to receive subsidies.
The Mackinac Center for Public Policy, a free-market think tank in Midland, has slammed the MEDC for announcing incentives tied to job creation that doesn’t end up panning out.
And a January audit report found the quasi-governmental agency didn’t properly monitor compliance for its Renaissance Zone Program.
MEDC officials have said the agency previously didn’t have enough authority from the state to monitor Renaissance Zones, but said it has since made changes to increase transparency and ensure the state’s getting a good return on investment. Under Gov. Rick Snyder, the MEDC has transitioned to more up-front grants and subsidies tied to job creation and investment instead of the tax credits.
http://www.mlive.com/business/index.ssf/2013/06/report_michigan_awa...
The stats:
Michigan is currently 43rd of 50 in state unemployment rates.
Michigan is 34th in household income.
Michigan is 35th in per capita income.
Michigan is 33rd in overall business climate
Michigan is 34th in 'business friendliness.
These rankings were even worse, until recently. One will find that those states that are towards the top on these charts are ones that do not foster dependency on state grants and tax abatements, but offer more freedom to entrepreneurs to just concentrate on business fundamentals.
Michigan megadeals
The Good Jobs First report included 29 business subsidies dating back to 1984 that each had a total value of $75 million or more in Michigan. The actual dollar amounts given may be higher or lower than these announced figures:
Company :subsidy, location • Chrysler: $1.3 billion, Sterling Heights, Dundee • General Motors: $1.02 billion, Orion Township • Ford: $909 million, statewide • Hemlock Semiconductor (controlled by Dow Corning): $372.3 million, Hemlock • GM: $284.600 million, Delta Township • GM: $268.500 million, Detroit and Flint • Ford: $222 million, Dearborn • LG Chem-Compact Power: $198 million, Holland • Dow Kokam: $194.3 million, Midland • Ford: $174.7 million, Wayne • Johnson Controls-Saft Advanced Power Solutions: $168.5 million, Holland • GM $166.8 million, Brownstown Township • A123 Systems (now owned by Wanxiang): $152.3 million, Livonia, Romulus, Ann Arbor • Ford: $151.2 million, statewide • Dow Chemical: $129.3 million, Midland • AutoAlliance International (now Ford): $125.9 million, Flat Rock • Mazda Motor: $125 million, Flat Rock • Severstal: $119 million, Dearborn • Motown Motion Pictures: $114 million, Pontiac • fortu PowerCell Inc.: $112.6 million, Muskegon • Compuware Corp.: $100 million, Detroit • GM: $98.9 million, Lansing • United Solar Ovonic (no longer operating): $96.9 million, Battle Creek • Nexteer Automotive: $93.7 million, Buena Vista Township • Ford: $90.3 million, Wayne • Pfizer: $84.2 million, Ann Arbor • Blue Water Fiber: $81 million, Port Huron • GM: $76.5 million, Orion Township • General Electric: $76.2 million, Van Buren Township Source: Good Jobs First
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