Every year since 2018, the Center for Economic Accountability (CEA), a nonpartisan tank that opposes corporate welfare, has designated its worst economic progression deal of the year, an embarrassment given to the ultimate egregious misuse of taxpayer money, supposedly meant to stimulate economic growth.
This year, the ignoble honor will go to Michigan, which awarded more than $1. 75 billion to Ford Motor Co. and Contemporary Amperex Technology Ltd. (CATL), a Chinese battery manufacturer. The two corporations are jointly building a factory in Marshall, Michigan, that would build lithium iron phosphate batteries for the automaker’s electric car (E. V. ) lineup.
In its announcement, the CEA breaks down what the state has pledged so far, which includes $630 million worth of road paving and site development; grants from various state funds of $210 million, $120 million, and $36 million; and a 15-year tax abatement valued at $772 million. Other estimates have put the total amount at $2.2 billion.
Last month, in the face of severe economic difficulties, Ford announced that it was “reprogramming and resizing certain investments. “While the Michigan plant was expected to first create 2,500 jobs, Ford replaced its commitment to create 1,700 jobs and reduced its potential production. up to 40 percent, which is expected to reduce the company’s monetary investment by at least $1 billion.
Given that Ford had pledged $3. 5 billion, Michigan’s contribution to the task could be almost as large as what Ford plans to spend on its own plant. Gretchen Whitmer, D-Mass. , told reporters that Michigan’s investments could also be “scaled back” and that “because Ford has had to make some changes . . . The role of the state will also change. “
Of course, the merits of the deal were questionable from the start. When the task was first announced, Whitmer’s workplace claimed it would have “a task multiplier of 4. 38, meaning another 4. 38 tasks would want to be created in the Michigan economy for each and every new direct task. “
It’s a fanciful idea. Tim Bartik of the W. E. , Upjohn Institute for Job Research, estimated that a more typical multiplier at the local or state level is between 1. 5 and 2. Last month, Bartik calculated the estimated benefits of Michigan’s proposed investment; While overall positive, he noted that a multiplier of 4. 38 was “very high” and that “if Ford’s task had a more typical multiplier (2. 5 instead of 4. 38), the gross profits from the task would be less than the incentive costs. “
The automaker’s announcement that it would abandon its Michigan breakthrough came just a month after the automaker announced it was delaying $12 billion in EV investments nationwide due to financial losses. Ford, which in the past had estimated it would lose as much as $4. 5 billion. this year in your electric vehicle. The department revealed in October that it had lost $36,000 for every electric vehicle that sold out in the third quarter.
This is the second year in a row that the CEA has given its biggest embarrassment to a factory that makes electric cars or electric cars. Last year’s “winner,” the state of Georgia, which signed a lucrative deal with newcomer E. V. Automaker Rivian valued as much as $1. 5 billion in state subsidies at a time when the company had delivered fewer than 50 vehicles to its customers.
In 2020, the CEA highlighted Ohio’s allocation of more than $60 million to General Motors to keep its Lordstown plant open; The automaker closed the plant in 2019 but was only forced to pay a portion of the incentives. He then sold the plant to Lordstown Motors, an electric vehicle company. enterprise. The automaker earned $24. 5 million in subsidies before filing for bankruptcy this year.
“It’s noteworthy that in five years, we’ve had two EV battery plants and one EV assembly plant that have proven to be the worst economic progression deals of their respective years, even in an era of stupid and unprecedented subsidies by state and local governments,” CEA President John Mozena said in the press release. “Federal trade policies that sell politically favored technologies lead to short-sighted decisions through state and local elected officials, and communities across the country will pay for the value of those deals in the long run. after politics and policies have evolved. “
Joe Lancaster is an editor at Reason.