Snyder Orders a State Economic 20 Year Plan

Gov. Rick Snyder has issued an executive order that some economic experts fear repeats a mistake made by the previous administration — trying to plan the state’s long-term economic future. While the executive order aims for long-term goals, they caution that officials have been unable to foresee much more immediate events about which they had a good deal of information.

The executive order was filed in June with the Secretary of State and calls for a commission to recommend a “comprehensive economic vision” for Michigan for the next 20 years. The order asks for “long-term economic development tools” and strategies to “support Michigan’s top industries,” which it lists as automotive, manufacturing, tourism and agriculture.

A final report would be delivered to the governor and state Legislature by June 2017.

“It all sounds pretty wonderful in theory, I suppose the concern would be that ‘economic development tools’ could mean ‘taxpayer subsidies,’ similar to the Michigan film subsidies,” said Mark Perry, an economics professor at the University of Michigan-Flint, in an email. “So perhaps the big question will be: How much taxpayer support/subsidies will this grand vision cost?”

The state of Michigan is projected to give companies $1 billion in corporate welfare checks in the current fiscal year due to deals signed under a discontinued subsidy program known as Michigan Economic Growth Authority (MEGA). There's another $217 million in expense this year for other subsidies and the overhead of the state agency that distributes them, the Michigan Economic Development Corporation.

This agency has a poor record of projecting the number of jobs created by companies that receive its tax breaks and subsidy checks. A report from the state auditor general in 2013 found that only 22 percent of the projected jobs that the MEDC reported had materialized. In one example, a company projected 600 jobs but created just seven.

In 2010, then-Gov. Jennifer Granholm declared that Michigan was becoming the world capital for advanced batteries for electric, plug-in vehicles. Michigan had 918 battery manufacturing jobs as of 2015, according to the U.S. Bureau of Labor Statistics.

Granholm stated that the film incentives law she signed in 2008 would bring good-paying, long-term jobs to Michigan.

“So, everyone, get ready: The movies are coming to Michigan,” Granholm said in 2008. “Not just the latest releases at your local cinema — though there's nothing I enjoy more than taking in a good movie — but the multibillion dollar moviemaking industry and all the jobs and economic investment it creates.”

But the film subsidy program was terminated in 2015. After state spending of nearly half a billion dollars, Michigan had fewer film jobs in 2013 (1,561) than when the subsidy program began in 2008 (1,663), according to the BLS.

The current governor is looking to the commission to create a comprehensive vision for Michigan’s economic future that will leverage the state’s strengths and encourage development, said Ari Adler, Snyder’s spokesman.

“Michigan is the comeback state because of recent economic development and job growth, but the governor always insists on looking ahead to future goals and finding the best way to pursue opportunities to achieve those goals,” Adler said in an email. “As the governor said when the commission was announced: ‘We must focus on the future to set Michigan up for success in the 21st Century economy. This commission will help us get there as it works to establish a strategy for growth that will help new and existing industries thrive in our state.’”

There is nothing wrong with having information about the current economic situation of the state and examining what can be done to reduce government barriers to economic activity, said Gary Wolfram, the William E. Simon Professor of Economics and Public Policy at Hillsdale College. In his email, he sounded a caution.

“It is interesting to go back and read the old press releases,” Wolfram said, referring to subsidy and tax break deals the state entered into over the years. “One cannot predict what industries will be satisfying consumer needs even five years from now. The commission should focus on efforts to protect property rights, expand choice for parents as to where their children go to school, reduce taxes, and reduce the regulatory burden of state and local government.”

Wolfram had an additional concern: “One has to be careful about attempting to provide special benefits to particular industries, as witnessed by Gov. Granholm's misguided efforts to expand the state's renewable power industry.”