Michigan’s Economic Development Corporation Favors Perception, Bluster Over Real-World Needs

Published June 1, 2008

Since 1999 Michigan has operated its Economic Development Corporation (MEDC) and a variety of other expensive programs designed to create or keep jobs in the state. According to Gov. Jennifer Granholm’s (D) 2008 State of the State Address, more such programs are in the offing.

These efforts call to mind two popular tales–The Wizard of Oz and “The Emperor’s New Clothes”–because they represent a marriage of blustery theater and a deliberate disregard for reality.

MEDC officials and their apologists want us to believe these programs “create” jobs. The truth is that while MEDC was appropriated more than $1.6 billion in federal, state, and other dollars to facilitate its mission, Michigan between 1999 and 2006 shed 244,000 jobs, and the state’s unemployment rate is the highest in the nation, at 7.6 percent.

Scrutiny of MEDC job-creation claims may lead the public to wonder why the department even exists. Perhaps this is why legislators have tweaked language in the state budget guiding audits of MEDC job-creation claims.

Auditor Out

Prior to 2008, boilerplate budget language said MEDC “shall work with the office of the auditor general to implement procedures to annually audit the number of jobs claimed to be created by firms.” For some reason the text was changed for the current state budget and now says MEDC “may implement procedures to annually audit the number of jobs claimed to be created by firms.”

What had been mandated is now optional, and the reference to working with the auditor general was stripped away.

One has to question the wisdom of allowing MEDC to audit job creation it claims to have influenced. If they’re hiding the fact that these development programs fail to create net new jobs, it would not be the first time such claims did not square with reality.

In 1993 and 2003, Michigan’s state auditors criticized the state’s development agencies for their job-creation claims. For instance, in 2003 the auditor general reported recipients of MEDC job training grants were supposed to have created 635 jobs, but only 222 were verifiable.

In 2004, the Michigan Economic Growth Authority (MEGA) was claimed to have created more than 28,000 jobs. Finding those numbers suspect, I made repeated attempts to obtain an explanation from MEDC. Those requests were ignored or rebuffed until several state legislators practically compelled MEDC to explain itself. Once it did, it was clear the jobs numbers were practically pulled out of thin air.

This is not the only example of the agency trying to take credit for jobs that did not exist. The Hemlock Semiconductor Corp. in 2004 actually disavowed job-creation claims made by MEDC on a project for which it had received a MEGA deal.

Press Value Prized

In 2003, state Republican leaders argued in a press release and conference that they would “fight for every Michigan job,” in part by extending the MEGA program. The Mackinac Center public policy organization ultimately acquired the GOP’s internal strategy plan for the jobs fight.

It contained descriptions of the “political value” and “press value” of their ideas, but little about the economic value.

While such programs are little more than public relations opportunities whose actual impact must be hidden, they continue because politicians don’t care about job creation as much as they care about the perception of it. That is why it is so important for the political class to quash any reasonable accounting of job-creation claims.

The naked truth is that the public might realize lawmakers are not job-creating wizards capable of great feats, but are more like the tired old man trying to distract his audience with fire and smoke, desperately praying there are no “Totos” around to pull back the curtain.

Michael D. LaFaive ([email protected]) is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy in Midland, Michigan.