MEDC has record of failure
Is there a state agency with a worse track record than the Michigan Economic Development Corp.?
The MEDC tries to promote economic growth in Michigan by giving billions of dollars of taxpayer money to hand-picked corporations.
Sometimes, the MEDC brings a new company to the state. Sometimes, it bargains to keep a company from leaving.
New research shows that decision-makers at the MEDC are failing, creating only one job for every 11 promised.
The way it usually works is that the MEDC strikes a deal in which it agrees to shower a company with cash handouts or tax cuts. The development corporation and the private company announce the deal. The announcement earns big headlines on the front pages of newspapers: “Detroit pill maker plans to expand, creating 600 jobs,” “Another jobs boost for the state: IBM to develop center at MSU,” and, “Tech firm to create 1,085 jobs in area.”
But who goes back to see how many jobs were actually created?
My colleague James Hohman has.
He pulled 20 years’ worth of headlines from the front pages of the Detroit Free Press and found every front-page headline from 2000 to 2020 wherein the MEDC announced a new handout. He then analyzed how many jobs were promised and how many were actually created.
In that 20-year span, the state promised 123,060 jobs would be created through various deals.
According to official reports, only 10,889 jobs were created — not quite 9%.
Of the deals announced, three times as many deals produced zero jobs (21) as those that met their goals (six).
How embarrassing.
The 2003 Detroit Tigers, who finished that year with only 43 wins and 119 losses, still had a better win rate. As did the 2023-24 Detroit Pistons at 14-68.
Go back to the 0-16 Detroit Lions in 2008 to find a Michigan professional sports team with a worse record than the Michigan Economic Development Corp.
The headlines listed above each represent a failure.
A Detroit pharmaceutical company was offered a $6.8 million tax credit to create 600 jobs. How many jobs produced by that deal exist today? Zero.
IBM announced it would create 1,500 jobs, for which the state was prepared to shell out $1.5 million. The company never completed the project, delivering none of the 1,500 jobs that were announced.
Even when companies deliver some jobs, the number is rarely what was announced in headlines. A California tech firm planned to create 1,085 jobs in Ann Arbor. It delivered 217.
The MEDC is no stranger to embarrassment.
The corporation recently found itself in hot water when a businesswoman who secured $20 million purchased a $4,500 coffeemaker with the funds. That is the same agency that put former Gov. Jennifer Granholm on stage with a convicted embezzler to announce a deal with him — while he was on parole.
The MEDC can obfuscate its abysmal record with complicated financing and eye-glazing descriptions: grants, incentives, tax increment financing, brownfield redevelopment, tax abatements, tax credits, tax freezes, etc.
The state continuously rebrands its subsidy programs: “Michigan Economic Growth Authority,” “Good Jobs for Michigan,” “Michigan Business Development Program,” and “Strategic Outreach and Attraction Reserve.”
But, at the end of the day, the MEDC’s jobs announcements are pixie dust.
Empty calories.
Sugar highs that do not increase prosperity for the state.
Lawmakers who vote for business subsidies should know that those deals routinely fail. The state sends out press releases when it makes deals, and it rarely says anything when they fall through.
Our lawmakers ought to be more skeptical the next time a company asks for taxpayer cash.
Michael J. Reitz is executive vice president of the Mackinac Center for Public Policy, an independent, nonprofit research and educational institute based in Midland.