State of Michigan Spins, Puffs Economic Contribution Of Agriculture To Economy

The state’s department of agriculture recently tweeted a claim that may have greatly exaggerated the true impact of agriculture on the state’s economy.

“Did you know Michigan’s food & agriculture system has a total annual economic impact of $101.2 billion!”, the Michigan Department of Agriculture and Rural Development recently tweeted.

It should be noted it also tagged the state’s corporate welfare agency – the Michigan Economic Development Corporation — in that tweet.

The claim calls for a closer look.

Industries that get a lot of government assistance have an incentive to overstate their importance to a state’s economy.

And Michigan farmers received $5.82 billion in government subsidies from 1995 to 2016, according to the nonprofit Environmental Working Group. Corn subsidies were the largest, at $2.8 billion over that 21- year period.

Total agricultural sales in the state came to $8.7 billion in 2012, the most recent year for which data is available from the U.S. Department of Agriculture. That’s still a far cry from $101.2 billion the state claims.

Michigan’s total economic output (gross domestic product – or the total market value of all goods and services produced in a year) was $487.2 billion in 2016, according to the Federal Reserve Bank of St. Louis. And according to the U.S. Bureau of Economic Analysis, agriculture, forestry, fishing and hunting in Michigan accounted for $3.5 billion of the state’s $487.2 billion GDP.

The Michigan Agriculture Department got its $101.2 billion figure by including “value added activities” and “indirect and induced effects.”

“Value added activities” includes, for example, items purchased at a grocery store or meals eaten at a restaurant. “Indirect and induced effects” include agricultural spinoff activities, which, in theory, would include something such as auto repairs for a farmer’s personal vehicle or a farmer taking his children to an amusement park.

These activities and effects accounted for $87 billion of the $101.2 billion the state estimated was agriculture’s total annual economic impact. The state estimate was for 2013.

“Obviously agriculture and food would be huge industries in Michigan and any state without government subsidies for ‘economic development’ because of course people demand food,” said Chris Edwards, director of tax policy studies at the Cato Institute, a Washington, D.C.-based think tank. “People need to eat, and they were doing it long before governments starting subsidizing it.”