The Perils of Politicians' Promises

Former state Rep. Bill Huizenga, now a U.S. Congressman, is viewed by some as the "godfather" of a state government economic development program known as the “21^st Century Jobs Fund.”

Former Gov. Jennifer Granholm conceived the 2005 program, which among other things has seen the state buying ownership interest in private businesses, breaking a 154-year practice of steering clear of state equity investments that are not pension-related.

The GOP House majority at the time was skeptical about Gov. Granholm's proposal to borrow $2 billion for this adventure, but Huizenga, a Republican from Zeeland, managed to convince his colleagues to support a scaled-down version. This became one of the corporate welfare initiatives that Gov. Granholm promised would blow you away over the following five years. In the end, the bill that passed authorized borrowing $400 million up-front, and spending an additional $75 million annually for the next eight years.

A few weeks before the bill passed in the fall of 2005, Rep. Huizenga appeared in an impromptu debate on WJR radio's popular Frank Beckmann Show with a long-time critic of government economic central planning programs — me.

Naturally, Rep. Huizenga argued that this latest version would provide new job creation for the state (although he did not use the words “blown away”). I responded that since 1947 Michigan politicians had been making the same claim about new corporate welfare initiatives that seemed to grow over the decades in both size and scope. The 21st Century Jobs program was perhaps the high water mark of this trend (the subsequent open-ended film producer giveaways enacted in 2008 might be considered its reductio ad absurdum).

So who won that 2005 radio debate? There was no panel of judges in the studio then, but you can listen and offer your own verdict today:

The program Rep. Huizenga helped become law had many moving parts, but history has already given its verdict on the “direct investment” portion that featured prominently in that radio debate: After spending $109 million, a 2011 report from the Michigan Economic Development Corp. credits it with just 267 jobs created or just “retained.” Some of its failures have been highly embarrassing to the state, such as the one reported in a Michigan Capitol Confidential article titled, “ ‘Green’ Company Awarded Up to $120 Million Promised 70 Jobs—Creates Just Three Jobs in Three Years.”

The Detroit Free Press looked at the 21^st Century Jobs Fund program in 2010 and, citing the MEDC itself through September 2009, reported that in two major areas of spending, job claims posted by the MEDC amounted to one-third of what was originally anticipated. Some articles describing other specific examples of the programs shortcomings are listed below.

MEDC Programs Consistently Fall Short of Initial Claims

The State as Venture Capitalist: Michigan Fund Loaned $7.7 Million, Creates Only 20 Percent of Promises Jobs

Michigan Government Program Gives $30 million to Seven Universities, Creates Less than Half of Projected Jobs

‘Green’ Company Awarded Up to $120 Million Promised 70 Jobs—Creates Just Three Jobs in Three Years

(Editor's note: A call to the MEDC seeking comment was not returned.)

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.