Bad Advice from Gov. Polar Star

In 2006, Michigan Gov. Jennifer Granholm told citizens, “In five years, you’re going to be blown away by the strength and diversity of Michigan’s transformed economy.” When those words were uttered, Michigan’s unemployment rate was 6.7 percent. It’s now almost 13 percent.

Although Michigan’s economic doldrums can’t entirely be pinned on Granholm, her fiscal policies have not helped, such as her higher taxes on businesses.

The Mackinac Center’s Michael LaFaive explains why Granholm’s grandiose proclamation in 2006 hasn’t panned out:

In this case, Gov. Granholm was promoting her administration and the Legislature's massive expansion of discriminatory tax breaks and subsidies for a handful of corporations. The purpose and main effect of this policy is to provide "cover" for the refusal of the political class to adopt genuine tax, labor and regulatory reforms, which they shy away from because it would anger and diminish the privileges and rewards of unions and other powerful special interests.

LaFaive’s colleague James Hohman recently pointed out that “Michigan’s economy produced 8 percent less in 2009 than it did in 2000 when adjusted for inflation. The nation rose 15 percent during this period.”

Granholm has written an op-ed in Politico on how federal policymakers can “win the race for jobs.” This would be like Karl Rove penning an op-ed complaining about Obama spending too much. Oh wait, bad example.

Granholm advises federal policymakers to create a “Jobs Race to the Top” modeled after the president’s education Race to the Top, which as Neal McCluskey explains, has not worked as she claims. Granholm’s plan boils down to more federal subsidies to state and local governments and privileged businesses to develop “clean energy” industries.

Typical of the dreamers who believe that the government can effectively direct economic activity, Granholm never considers the costs of government handouts and central planning. A Cato essay on federal energy interventions explains:

The problem is that nobody knows which particular energy sources will make the most sense years and decades down the road. But this level of uncertainty is not unique to the energy industry—every industry faces similar issues of innovation in a rapidly changing world. In most industries, the policy solution is to allow the decentralized market efforts of entrepreneurs and early adopting consumers figure out the best route to the future. Government efforts to push markets in certain directions often end up wasting money, but they can also delay the development of superior alternatives that don’t receive subsidies.

Granholm recently received “Sweden's Insignia of First Commander, Order of the Polar Star for her work in fostering relations between Michigan and Sweden to promote a clean energy economy” from His Majesty King Carl XVI Gustaf. Unfortunately, her prescription for economic growth would be a royal mistake.