MEGA Prescient

The parole violation arrest last week of convicted embezzler and Michigan Economic Growth Authority tax credit winner Richard A. Short has caused deep embarrassment for state officials. Faces are even redder given that Short shared the dais with Gov. Jennifer Granholm at a press event announcing his and other MEGA awards; at her invitation he even took the microphone for several minutes to relate all the wonderful things his apparent shell-company was planning to do.

Piling on yet more embarrassment, a simple Google search would have turned up the fact that Short was a parolee not even allowed by the state to have his own credit card.

While this has caused embarrassment in Lansing, for me it has occasioned some poignant reflection on two former colleagues, Martin M. Wing, Ph.D, and Joseph P. Overton, who co-authored the Mackinac Center's first MEGA study in 1995, with a third scholar, before the program even became law. Sadly, neither of these good men is still with us, both having died too young and all too soon.

The study, "MEGA Industrial Policy: An Analysis of the Proposed Michigan Economic Growth Authority," is part of their legacy, as is its prescient warnings about MEGA:

It allows a small political board to grant an unlimited total amount of Single Business Tax credits to large firms based on very subjective criteria. It is hard to imagine a program more open to abuse.

Abuse there has been; although due to a growing lack of transparency at the Michigan Economic Development Corp., we cannot (yet) quantify just how much. That Richard Short with his questionable background could have slipped through the system suggests a lack of due diligence that exceeds even our worst fears. And then there are questionable deals that may have violated the plain language of the law, such as the original Waldenbooks award.

Also foreseen by Overton and Wing was the way politicians would manipulate the program for their own advantage:

While net new jobs are dubious, MEGA is certain to create excellent photo opportunities for the Governor and other state officials at ground-breaking ceremonies for the new "job creating" projects.

However, the full extent of this self-serving politicization may have even shocked the men who predicted it. Former Gov. John Engler and Gov. Granholm both arranged countless press conferences announcing new jobs that allegedly would be created by the latest batch of MEGA recipients. One experienced Lansing journalist recently opined that such events appear to be the sum total of the current administration's efforts to right Michigan's broken economy.

It's been a forlorn effort, because the number of MEGA deals also appears to be positively correlated with Michigan's unemployment rate, as we noted in a previous post: As the unemployment rate rises so too does the rate at which the political class seems to hand out MEGA's selective tax breaks and subsidies.

State officials may view dealing in such favors as the only way they can generate news stories containing the word "jobs" in the same paragraph with their names. An occasional embarrassing misstep is one price they pay for substituting this favor mill for doing the real work of reforming Michigan's dismal tax, regulatory and labor law climates. A 14.3 percent unemployment rate, falling population and dwindling hope are the price the rest of us pay.

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