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Business Subsidies Coincide With Fewer Jobs In Michigan

Defenders of Michigan’s extensive business subsidies say they are crucial for job creation, but the state’s experience over the last 16 years suggests otherwise.

The Michigan Economic Development Corporation (MEDC) was established in 1999 to stimulate job creation through economic development subsidies, but since then the state has only enjoyed 17 months with an unemployment rate below the national average, Michigan Capitol Confidential reported Thursday. (RELATED: States May Have to Disclose Business Subsidy Costs)

Tellingly, those happened to be the first 17 months of the agency’s existence, and were followed by a string of 174 consecutive months during which unemployment remained above the national average– an ignominious streak that was finally snapped in April when Michigan’s unemployment rate matched the national rate of 5.4 percent.

Throughout that period, though, MEDC officials and a succession of governors consistently touted the agency’s effectiveness, predicting with each funding increase that the subsidies would imminently lead to a profusion of new jobs. (RELATED: ‘Oz’ Film Costs Michigan Taxpayers $40 Million)

Early in 2006, for instance, Democratic former Gov. Jennifer Granholm announced that, “In five years you’re gonna be blown away” by the effects of a major increase in business subsidies. Shortly thereafter, Michigan’s unemployment rate became the highest in the country, remaining there for the next 49 months, which was probably not what Granholm had in mind five years earlier.

Similarly, former MEDC Director James Epolito asserted in 2005 that, “A year from now, our success in transforming Michigan’s economy and generating jobs for Michigan workers will make any legislator think twice about reducing that ‘job creation services’ line item in the state budget.”

Yet that is exactly what some Republicans in the state legislature are now proposing to do as part of an effort to fund infrastructure projects (it is unclear how many times they thought about the idea). (RELATED: Michigan Lawmakers Consider Repealing Business Subsidies)

The GOP proposal calls for cutting $185 million from the MEDC’s $400 million budget, prompting advocates — including Republican Gov. Rick Snyder — to credit the agency with any and all positive news about jobs in an effort to blunt the proposal’s appeal, according to Michigan Live.

Snyder, who served as the MEDC’s first chairman, said in a speech last week that job creators “want certainty and consistency,” explaining that, “Every time you look like you’re bouncing around or do not have a clear direction that you stay true to, you’re creating a disincentive for investment.”

Another argument advanced by MEDC supporters is that business subsidies are responsible for Michigan’s unemployment rate reaching parity with the national average in April for the first time in 15 years, Bridge Magazine reports.

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