An economist is decrying the recent $360,000 Michigan Economic Development Corporation grant to Bandit Industries in Isabella County as unfair.
The taxpayer-funded grant was announced by Gov. Gretchen Whitmer and MEDC officials on Thursday.
Mackinac Center for Public Policy Senior Director of the Morey Fiscal Policy Initiative Michael LaFaive told The Midwesterner that public funds given to private industry essentially places government leaders and bureaucrats in the position to favor Bandit over its nearby competitor Morbark Industries.
LaFaive said the Michigan Strategic Fund grant from the MEDC forces Morbark to subsidize Bandit, because the MSF monies derive from taxes paid by Michigan residents and businesses.
“It’s fundamentally unfair,” LaFaive said.
Both Bandit and Morbark were founded in Isabella County. The two companies manufacture wood chippers, stump grinders, and other wood-clearing equipment. Bandit is expanding its business in the county’s Union Township, which the company claims will generate a $1.5 million total capital investment and create 80 advanced manufacturing jobs.
“The decision by Bandit Industries to expand in Michigan underscores our state’s leadership in advanced manufacturing as well as the strength of our business climate and talented workforce,” MEDC Sr. Vice President of Regional Prosperity Matt McCauley said in a statement. “This project is a win for Central Michigan and for the entire state. We are grateful to Governor Whitmer, legislators from both parties, and local officials for their continued support for our programs that help make announcements like today’s possible. We appreciate the work of our local partners in supporting our efforts to create high-skill jobs for our residents, and will continue working to win projects, invest in places and support our people as we encourage businesses of all sizes to make it in Michigan.”
Not only does LaFaive consider the MEDC grant unfair to Bandit’s chief competitor, he also noted such taxpayer-funded subsidies seldom yield promised results.
“Once again it seems the Whitmer administration is conflating the promise of new jobs with the actual delivery of them,” he said. “Our research shows that there is frequently the gulf between what is promised and what ultimately gets delivered. This is an unfair subsidy as well as it underwrites the commercial activity of one company and at the expense of another one just down the road.”
LaFaive continued: “These are unfair to those businesses who don’t also receive assistance from the state. I would like to add that the program they’re using for this subsidy is through a business development program that the Mackinac Center has studied twice and found twice to have a net negative impact on the state. It’s an ineffective and expensive program as well as unfair to businesses who are not able to receive a subsidy from the state.”
LaFaive pointed out a 2020 study he coauthored with economists Michael Hicks and Srikant Devaraj, which concluded only three of nine government business-subsidy programs studied since 1983 generated a significant positive impact on job growth. For every job created, the authors concluded, the state gave out an average $600,000.