Since 2000, Michigan has lost more jobs than any other state. Accordingly, residents of the Great Lakes State should be fairly skeptical of any government plans for economic recovery and job creation. But last week, the folks over at the Michigan Economic Development Corporation almost set into motion the most glaringly stupid job creation plan in history.

The MEDC is a state agency that heaps tax credits onto select individuals, businesses and industries — whomever it thinks is going to rescue the state economy. According to a Mar. 18 report in The Detroit Free Press, a supposed businessman named Richard Short appeared with Gov. Jennifer Granholm on Mar. 16 to commemorate the $9.1 million in tax breaks he was set to receive from the MEDC. Short had pledged to start a renewable energy business and hire 765 people in exchange for the money.

By the next day, authorities had learned that Short was a convicted felon who has served six years in prison for embezzlement and loan fraud. In fact, he still owes $96,000. It turns out that this information was available in a news article that readily appeared on a simple Google search of the man’s name. This means that the MEDC doesn’t run even the simplest of background checks before it hands out generous tax credits at the expense of small businesses. By way of apology, MEDC President Greg Main promised that the agency would definitely do background checks from now on. Yeah, thanks, groan the taxpayers who fund Main’s salary.

Only a government agency could be incompetent enough to neglect background checks. As anyone who has applied for a real job or internship knows, most competently run businesses conduct them. I spent two summers working for Comcast, and I underwent a background check and drug test both times. As college students, we expect prospective employers to be looking for us on the Internet. That’s why underage students who post pictures of themselves drinking on Facebook have to change their privacy settings. It’s completely unacceptable that the MEDC wouldn’t spend 30 seconds investigating the potential recipients of tax breaks.

But there actually may be a surprise winner in this debacle — the car rental businesses. As the Short scandal hit, the state legislature was cooking up a $13 million tax on car rentals at airports. The tax was intended to fund an expansion of Pure Michigan, an MEDC money-wasting project that runs advertisements in other states in hopes of attracting tourists here. But with the MEDC’s actions under increased scrutiny, the state legislature will have more trouble justifying funneling tax money to it.

While this scandal will hopefully lead to improvements in the MEDC’s operating procedures, what won’t be on the table — but definitely should be — is shutting it down entirely. Agencies like the MEDC only move money and jobs around, dooming at least one job or business for each one they create.

The Pure Michigan ads are a good example of this. Sure, maybe someone in the country will see the ads and decide to vacation in Michigan. That person will come here and consume, creating the jobs and businesses necessary to facilitate this increased consumption. Indeed, if the state had a magic money box that never ran out of cash, it could keep pumping money into the ads and endlessly improve the economy.

Unfortunately, that magic money box is funded by Michigan taxpayers and small businesses. In this case, the rental car industry, which essentially pays for the ads, would take a hit proportional to the amount that the Pure Michigan ads were helping. The car rental industry would have to respond to new taxes by increasing rates, firing employees, closing locations, etc. The tourist would return to his state and tell his friends that, you know, Michigan is nice and everything, but next time, he’s picking a place where the rental cars are less expensive or more easily available. So for every dollar that was spent helping the tourism industry, the industries that paid for the ads suffered, less consuming occurred, jobs were lost and businesses shrunk.

But it gets even worse. Since the government doesn’t have to worry about running out of money — it could always generate more funding through taxes — it can’t spend as wisely as private entities. The MEDC is more likely than the taxpayers to put money toward frivolous endeavors, waste it, give it away to convicted felons, etc. Every dollar that the MEDC spends would have been put to better use if left in the hands of the business from which it was taken.

No state agency can fix Michigan’s economy by handicapping certain industries in order to help others. The government should replace selective tax credits with an across-the-board tax cut for small businesses, which would give more power to the people who actually know what they’re doing.

Robert Soave was the Daily’s editorial page editor in 2009. He can be reached at rsoave@umich.edu.

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