Cor­porate welfare is alive and well, even here in Hillsdale.

The Michigan Eco­nomic Devel­opment Cor­po­ration is the insti­tution respon­sible for orga­nizing and directing cor­porate welfare in the state of Michigan. According to their website, the MEDC offers “business assis­tance ser­vices and capital pro­grams for business attraction and accel­er­ation.” In practice, this amounts to allo­cating tax dollars as direct sub­sidies to busi­nesses, often coupled with special tax breaks.

The MEDC recently funded two projects in Hillsdale. The first was an $82,865 subsidy to Mar-Vo Mineral Company to pur­chase the old FW Stock and Sons Mill (“Mar-Vo moves in, ‘breathes life’ into aban­doned mill,” Sep­tember 17, 2015). The second was the heftier $785,000 “com­munity devel­opment block grant” for the pur­poses of ren­o­vating an old factory into apart­ments (“Former fur factory fitted for flats,” March 17, 2016).

Pro­po­nents trotted out familiar argu­ments to justify the tax­payer subsidy of private enter­prise, noting that the projects would revi­talize downtown Hillsdale, as well as create jobs and housing. While these are cer­tainly ben­efits, the argu­ments ignore the costs. For one, similar argu­ments are made across the state to justify cor­porate welfare, resulting in almost $600 million doled out in “grants, pro­grams, and projects” in 2015.

Orga­ni­za­tions like the MEDC are an affront to the free market, and little more than a vehicle for crony cap­i­talism. Unlike a private investor, the MEDC can only get funds through tax­ation. So tax­payers from across the state of Michigan, from Houghton to Detroit, are obligated to sub­sidize busi­nesses to the tune of hun­dreds of mil­lions of dollars a year. Despite the gross injustice of being forced to sub­sidize projects that most receive no ben­efits from, cor­porate welfare per­sists. Why?

The answer is simple. Busi­nesses and private indi­viduals realize that, rather than trying to succeed or fail in the market, it is easier to get help from the state. Under the guise of “eco­nomic devel­opment,” or “jobs,” or “revi­tal­ization,” they can earn sub­sidies from the MEDC, and stick Michigan tax­payers with the bill. The ben­efits are con­cen­trated to busi­nesses and polit­i­cally-con­nected indi­viduals, while the costs are dis­persed over mil­lions of Michi­ganders.

Frederic Bastiat, a 19th-century French political econ­omist, noted that eco­nomics involves looking at the seen and the unseen. In terms of cor­porate welfare, the seen effects are the projects they fund. New apartment buildings, bustling fac­tories, and so on. The unseen is more com­pli­cated.

Think of what $600 million could have done in the hands of Michigan res­i­dents, rather than in the hands of gov­ernment bureau­crats fun­neling the money to special interests. Private indi­viduals, working in the free market, fund projects they think will be prof­itable, and decline those which seem likely to fail. In this system, busi­nesses only profit by pro­viding what the con­sumers want, and not by lob­bying the gov­ernment for subsidy. All of these potential oppor­tu­nities are nec­es­sarily unseen, because they never came to be. Instead, tax­payers are stuck with a bill of almost a million dollars to build apart­ments in a small, out-of-the-way city in southern Michigan.

Stu­dents of Hillsdale College, an insti­tution that stands for defending liberty, should oppose this great injustice. The MEDC is nothing more than dressed-up cor­porate welfare, existing to benefit special interests at the expense of the state as a whole, and the tax­payers that have to foot the bill.

  • Abe Dane

    You’re coming at this from the wrong angle. Yes the system is broken and faulty, but it’s the system regardless. If you want to change it, please do! But you’ll have to get into pol­itics to do that. In the meantime, if local busi­nesses do not take advantage of these public monies, someone else will. It’s really federal money from the HUD, not state money. And that money will be raised from tax­ation and spent regardless. If the city of Hillsdale doesn’t play the game, we ulti­mately lose. That same money will be uti­lized some­where else. We pay taxes, we should benefit from the system that is in place.

    • gaylep

      It is tax­payer money, regardless. This is an enormous gift to someone who didn’t want to risk investing her own money in her own business. I’d find it more for­givable if this were to be a loan, even a low interest loan. It’s cor­porate welfare, crony cap­i­talism, and con­tributes to much of what is wrong with the country. What’s even worse, though, is a person setting aside her prin­ciples in accepting such a large sum of tax­payer money for what amounts to per­sonal profit, despite that some res­i­dents will benefit.

    • Tyler Groe­nendal

      I respect­fully dis­agree. Unless I’m mis­taken, you cur­rently work for Mar-Vo Mineral, so I under­stand why you’re defending a corrupt system.

      Ulti­mately, the blame for cor­porate welfare rests in two places. The gov­ernment, for doling it out, and the busi­nesses, for seeking AND taking it. By par­tic­i­pating in this system, you’re per­pet­u­ating it.

      I pay taxes too. Does that entitle me to your money?

      • Abe Dane

        Yes, I work for Mar-Vo Mineral. And I also grad­uated from Hillsdale College, so I sat through the same lec­tures and I rec­ognize and respect the same ideas I see in the article above. I cannot speak for the grant that was awarded for the apartment building on Union St. But for the company I work for, I think the sit­u­ation is unique. Let’s take a look at it.
        First of all I will sum­marize my last point. This federal money is already raised from our taxes. Our gov­ernment, using the broken system of redis­tri­b­ution of wealth, is looking to dole out this cash. If the city of Hillsdale does not put out our little hand to take some of this money that our com­munity has already con­tributed to from tax­ation, that same money will be given to someone else. That’s a fact. Also under­stand the money was awarded to the city, which then gave it to the cor­po­ra­tions listed above under strict guide­lines that require added jobs and other results. The cor­po­ra­tions have to pay the money back if the require­ments are not met.
        Next look at the unique sit­u­ation with the property at 115 E. Bacon street. This property has been vacant for about 15 years and has been dete­ri­o­rating rapidly. The city and any pre­vious devel­opers were faced with 3 options. Let it sit and con­tinue to decay as a lia­bility for the city and the property owner, develop it into some­thing viable in an eco­nom­i­cally poor com­munity, or demolish it which would lit­erally cost mil­lions due to its size and all of the con­crete. In short, my employer chose to benefit from this grant (and our grant is minimal in com­parison to the actual cost to ren­ovate) in hopes that our work here would finally allow this once beau­tiful property to mutually benefit our com­munity and our company.
        If my employer had not done this, it is certain this property would con­tinue to decay for many years.
        Lastly, if you think paying per­sonal taxes is a painful expe­rience, try owning your own company and see how many taxes you pay then. This small company with only a handful of employees will pay back that grant in equiv­alent taxes before the year is out.

        • Tyler Groe­nendal

          I don’t agree with the argument that just because the oppor­tunity for taking money exists, and that it would go to some other purpose if not taken, is a suf­fi­cient reason for taking the money.

          Your business, and any other business that takes MEDC funds, is still taking tax­payer money, most of whom will see absolutely no benefit. Why should they pay for factory ren­o­va­tions in a small city in southern Michigan? In the same vein, why should tax­payers in that same small city pay to sub­sidize a now bankrupt solar cell man­u­fac­turer?

          As I say in the article above, I under­stand that there are certain (con­cen­trated) ben­efits to the project, and the grant, but the costs are many, and dis­persed over mil­lions of tax­payers across the state.

          I don’t think anyone can purport to support the free market, and then turn around and accept sub­sidies in the other hand. The mill was empty because it wasn’t eco­nom­i­cally viable to have some­thing there. The subsidy doesn’t change that.

          The company may bring some ben­efits to Hillsdale (and it will def­i­nitely bring some to itself), but at the cost of per­pet­u­ating a system of cronyism at tax­payer expense.

          • Abe Dane

            Tell you what, we both agree the system is broken. So how about this, when you graduate and start par­tic­i­pating in the system we are stuck in, by all means, please do your best to fix the system by being polit­i­cally active and voting con­ser­v­ative.

          • Tyler Groe­nendal

            And you can do your best by not par­tic­i­pating in a corrupt system just because you per­sonally benefit. Hillsdale College could benefit by taking gov­ernment money. After all, if they don’t, some other college will get it. And yet they don’t.

          • Ellsworth_Toohey

            Actually Tyler they do take gov­erment money, in the form of gov­erment ser­vices they don’t pay for. I fully agree with your L2E and com­ments, but Hillsdale College is one of the biggest welfare queens in Hillsdale county.

  • Marcy Almay

    Oddly enough, it’s a college pro­fessor who is running the MEDC in this county AND the city Eco­nomic devel­opment which Snyder had to develop an “emer­gency man­agement” program called Rising Tides just to rescue our com­munity from the damage. Flannery who runs your endowment votes on Wolfram’s 2 failed bids to get on the BPU board, and as a lob­byist who never SAYS he’s a lob­byist, nor says he’s a city econ devel­oment con­tractor, nor says he’s in county MEDC, sounds like part of the problem is that Dr. Arnn turns a blind eye to how Gary uses the college as a “cre­dential” to do shady things with your rep, And all we get is a sign, since the college is exempt from paying taxes? Doesn’t seem fair.

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