Governor Gretchen Whitmer pledged “generational” investments for Michigan, yet with the end of her tenure approaching, the record shows little tangible payoff.
One enduring economic fallacy is the notion that pouring taxpayer dollars into private enterprises will magically produce a windfall, spurting new jobs, and create wealth that would not exist otherwise.
Yet repeatedly, the promised benefits fall short, or never materialize at all. A fresh review suggests Michigan may be the latest to witness this hard truth firsthand.
“Michigan Gov. Gretchen Whitmer offered billions of taxpayer dollars to select companies in an effort to create jobs during her eight-year term,” writes James M. Hohman, director of fiscal policy at the Mackinac Center for Public Policy. “Overall, she has authorized $6.9 billion for business subsidies since gaining office in 2019.”
In a new report, Hohman assessed eight major initiatives—”those that featured $100 million in payments and drew substantial media attention”—amounting to $2.7 billion in promised incentives. He then evaluated the outcomes of those investments.
Governments have a notoriously poor track record at selecting winners and losers, and Michigan under Whitmer did not buck that trend.
“None of these deals have delivered what was originally announced,” Hohman notes. “All told, the governor asserted that her large subsidy projects would generate 20,595 jobs in Michigan. To date, these deals have produced 602 jobs, a mere 3% of the forecast. Of the $2.7 billion promised, $1.8 billion has already been disbursed—transferred to either companies or local economic development agencies.”
In four of the eight initiatives, the state provided funding to one of the Big Three U.S. automakers—Ford, General Motors, and Stellantis (formerly Fiat Chrysler)—while two other efforts targeted a firm manufacturing auto components.
In one instance, May 2019 saw Whitmer announce “the largest automotive assembly plant deal in the country in the last decade.” As part of that package, Fiat Chrysler committed to investing $4.5 billion in Michigan to construct a new plant and expand five existing facilities, creating 6,433 jobs, which Whitmer described as a “generational investment in our state.” In return, state and local authorities would contribute cash and incentives totaling more than $200 million.
The package included $109 million specifically to upgrade Fiat Chrysler’s Detroit and Warren plants. The plan envisioned producing electric trucks at the Warren site and adding 1,400 jobs. However, the Michigan Strategic Fund, the state’s economic development agency, indicated in a 2021 report that this portion of the project was “dismissed with no agreement being executed,” as “it was determined the incentive was no longer necessary for the project to move forward.”
“The fact that the state canceled” that portion, Hohman observes, “suggests that special subsidies were not responsible for the jobs that might have been created.”
Indeed, this cancellation stands out as one of the more favorable outcomes, with officials simply retracting an offer before any funds were disbursed. But state taxpayers did not always receive such luck.
In December 2021, Michigan lawmakers established the Strategic Outreach and Attraction Reserve (SOAR), an “economic development fund to ensure the state can compete for billions of dollars in investment and attract tens of thousands of jobs to bolster our economy.” In its first 18 months, the state distributed $1.4 billion, entirely to companies developing electric vehicles, batteries, or battery components.
That sum included $210 million for Ford and $666 million for a joint venture between General Motors and LG Energy Solution, a Korean battery maker. Each arrangement anticipated establishing an electric-vehicle battery plant, with GM slated to create 4,000 jobs and Ford 2,500.
Neither arrangement unfolded as planned. Regarding General Motors, Hohman writes, “Its lofty promises have been revised downward, and GM abandoned its stake in part of the deal.” That factory is now under LG Energy Solution’s control, which will manufacture residential and commercial batteries for Tesla.
Ford, for its part, reduced its job-creation target from 2,500 to 1,700, yet thus far it has created none and has not received state money, as the construction is still underway. The state did, however, spend an additional $780 million on site preparation.
Officials also pursued a semiconductor maker, Sandisk, to build a plant in Mundy Township near Flint, pledging 7,400 jobs. In return, the state offered $261 million in incentives, though lawmakers allegedly dangled as much as $20 billion as part of the deal. This entailed acquiring and clearing 1,300 acres of private land, including purchasing and demolishing homes and schools. Demolition began in March, even though Sandisk withdrew from the agreement last year.
“The local developer has received about $200 million in state payments,” Hohman wrote. “The end result is a large, vacant lot.”
In total, Hohman concluded that $1.75 billion of the $2.67 billion pledged by the state yielded a mere 602 jobs at three of the eight projects—out of more than 25,000 jobs promised. That translates to Michigan taxpayers spending nearly $3 million for each job created by Whitmer’s deals.
As is often the case, Hohman observed, ambitious pledges of taxpayer money by government officials collided with the harsh realities of the free market. “People should not expect these projects to drive economic growth, even if officials repeatedly insist they will. The state’s economic fortunes are shaped by the choices of millions of individuals responding to their own opportunities and incentives,” he concluded. “The Whitmer administration’s record shows that marquee economic development deals rarely turn out as announced and that targeted business subsidies fail to spur broad-based growth.”
