Media Loves Corporate Welfare Stories, But Silent When Jobs Go Bust

Free-market economists have coined the term “press release economics” to refer to state corporate welfare deals whose job projections generate round after round of favorable media reports — but seldom any follow-up when no jobs materialize.

A good example is related to a recent WikiLeaks release containing leaked emails from former Gov. Jennifer Granholm. In one letter from 2008, Granholm highlighted a company called the Mascoma Corporation that was promised state subsidies to build a wood-to-ethanol fuel processing plant. Granholm highlighted the company’s job projections as an example of her success at reinventing Michigan’s economy.

Those projections had also been the subject of many media stories for a few years before Granholm crafted the leaked email. But in 2016, eight years after she sent it, information appeared suggesting that the company received as much as $155 million in taxpayer subsidies, including $23.5 million from the state of Michigan – and no facility was ever built. In 2014, Mascoma sold its intellectual property rights to Lallemand, a private Canadian company.

Granholm’s leaked 2008 email was addressed to John Podesta, a top aide to President-elect Barack Obama. It contained a pitch that she be named the new secretary of energy and cited a media article about Mascoma.

The email she sent included an excerpt from a news publication that had this glowing description: “Granholm could hardly control her glee. Obama used some of the material her office had supplied his campaign. His 45-minute speech mentioned Mascoma, Michigan’s first-ever wood-to-clean-burning fuel plant. He used Granholm’s oft-referenced projection that Michigan has the second-best potential for wind generation and production of any state in the country. . . . By the time Obama talked about turning ‘shuttered factories’ into job-creating wind turbine and solar panel production centers, capital press corps members were rubbing their eyes to make sure Granholm hadn’t suddenly stole the microphone.”

That was just one of the several media reports repeating the narrative of how Mascoma was going to bring jobs to Michigan.

According to Newspapers.com, a newspaper archival service, the Lansing State Journal published stories on Mascoma announcements in August 2007, June 2008 and October 2008.

These articles repeated Granholm’s assertions that the plant would create 50 direct jobs and also generate as many as 700 spinoff jobs across the Upper Peninsula.

The last mainstream media reports about Mascoma were in 2012. On Feb. 13, a Detroit Free Press headline read: “After delays, plant construction to begin.”

The newspaper reported that the company had found financing via an $80 million U.S. Department of Energy grant and the backing of Valero Energy, which was set to invest $132 million into the facility. On Aug. 12 of that year, the Free Press reported that groundbreaking was once again delayed but work should be underway by year’s end.

That was the last word about Mascoma published by a Michigan news outlet. In 2013, a nonprofit news site, Midwest Energy News, reported that Valero Energy had pulled its support and the Mascoma project was all but dead.

Then a 2016 report from the advocacy news site Biofuelwatch detailed how Mascoma had taken as much as $155 million in public funding but never built the Michigan factory.

Mascoma was one of the many corporate welfare projects whose original projections garnered extensive media coverage but there was little coverage when they come up short — or didn’t appear at all.

An analysis by MIRS News in 2010 added up all the job projections in press releases the Granholm administration released between 2003 and 2010 on corporate welfare projects. The Michigan Economic Development Corporation, the lead agency for the policy, claimed credit for 1.4 million direct, retained and indirect jobs.

This number of jobs would have represented 29 percent of the entire state labor force at that time. “Direct jobs” refer to individuals that had or would be hired directly by a subsidy recipient. In September 2013, Michigan's auditor general released a report on one of the MEDC’s programs, the 21st Century Jobs Fund. It found that only 19 percent of the projected direct jobs materialized.

Leon Drolet, chair of the Michigan Taxpayers Alliance, said he doesn’t believe the media’s credulity over government economic development schemes reflects a partisan bias. Both Democratic and Republican administrations get positive press when the projects are introduced, he noted.

“It’s a bipartisan delusion,” he added.

Drolet believes the lack of follow-up reports comes from newspapers no longer having the resources to keep tabs on all the corporate welfare projects, especially since the ultimate fate of a project can take years to play out.

“In some ways, it is Amelia Earhart economics — it just disappears with no evidence of what happened,” Drolet said.