Film Subsidy Is Political, not Economic

An unusual joint hearing occurring right now of two state House committees on Michigan's film subsidy program brought to mind a letter received last summer from Janet Lockwood, director of the Michigan Film Office. The letter was in response to a Mackinac Center press release describing how the subsidy program may actually destroy jobs.

Lockwood's arguments were without economic merit, but perhaps one point deserves to be rebutted.

At issue was the Mackinac Center's critique of the Michigan State University report that claimed the film subsidy program had "created" 1,102 year-round equivalent jobs since April 2008, and yet excluded 100 percent of the $48 million worth of associated costs. Including the costs would dramatically reduce the supposed jobs. In response Lockwood argued:

"Furthermore, as the (movie industry) infrastructure in Michigan grows over time, a larger portion of such rebated funds will remain in the state's economy. This is the primary reason that the REMI analysis conducted by Michigan State University did not deduct the cost of the incentive from the spending that occurred as a result of these film projects."

This claim is specious. A hypothetical possibility that a greater proportion of future subsidies will remain in Michigan (as opposed to being "repatriated" back to Hollywood, presumably) provides no rationale for excluding current costs.

In addition, one of the MSU authors told me on April 27 that their purpose was simply to measure the "economic impact of the film industry expenditures, not necessarily the incentive program." While pointless, that exercise does not encompass any part of Lockwood's byzantine rationale for why hypothetical future benefits justify ignoring real current costs.

Here's the bottom line: No economic (vs. political) case can be made for robbing taxpayer Peter of $48 million, giving it to filmmaker Paul, and expecting both to be better off. The state should stop trying, and stop pretending that this is about "economic" rather than political development.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.