Projections vs. Reality

An article in the July 24 Detroit Free Press reported, "Companies are searching for a billion-dollar breakthrough in battery design. General Dynamics is working on a zinc-air cell battery. Ford is actively interested in a sodium-sulfur cell. Gulton Industries and General Motors are tinkering with lithium…All the activity is bound to pay off probably within the next five years..."

The promise sounds so bright that readers might imagine that the Michigan Legislature’s recent authorization of $500 million worth of subsidies and tax breaks for car battery makers is a good investment. Unfortunately, that article appeared on July 24, 1967.

Regrettably, too many politicians see no difference between projections and reality. For example, while it has been demonstrated that only 29 percent of the jobs promised in Michigan Economic Development Corp. press releases ever materialize, Gov. Jennifer Granholm in a recent op-ed titled “How to win the race for jobs,” ignored this and restated her vision of a state government active in picking economic winners and losers. Echoing those wide-eyed projections from the 1960s, Granholm wrote, “In Michigan, we…focused on the lithium-ion advanced battery for electric cars, a high-tech product previously manufactured almost exclusively in Asia.”

The Governor explained that government “created” jobs by offering “irresistible state tax incentives” and “pancaked our state incentives on top of the competitive federal Department of Energy grants to advanced-battery companies and suppliers” to create “robust public-private partnerships” that are “projected to create 63,000 private-sector jobs in Michigan.” (Emphasis added)

It’s not hard to understand Gov. Granholm wanting to put a positive spin on her failed eight-year effort to correct Michigan’s dismal economic performance, but once again these political projections are almost certainly an expensive illusion; her past projections have turned out to be almost always wrong.

There are good reasons for why giving bureaucrats the power to pick and choose winners and losers in the market place always fails to “create jobs” on a net basis. Among many other economists, Thomas Sowell has described that reason: "It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong."

Granholm concluded her article with this: “If the states are the laboratories of democracy, Washington can take a lesson from what is happening in Michigan.”

But since Michigan is the leader in per-capita job loss over the past decade, it is a bad role model and perhaps Washington should do the opposite.

Instead of playing corporate welfare games for the past eight years, the people of this state would be better off  had government stuck to its proper role of providing a fair field for all businesses with no favors for a politically faddish industry or well-connected few.

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Jarrett Skorup is research associate for online engagement at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby authorized, provided that the author and the Center are properly cited.