The tax-credit "hangover" of Gov. Rick Snyder's description Monday is drawing some radical remedies in the state Legislature.
The worst of them: proposing to essentially renege on deals with the same companies — including the Detroit automakers — credited with powering Michigan's economic comeback the past four or so years.
Seriously? That's no way to do business or attract investment, even if an estimated $9.4 billion in outstanding credits threatens to blow holes in the state budget for years to come.
"There's almost $10 billion in credits out there," State Rep. Brandon Dillon, D-Grand Rapids, told The Detroit News. "Everybody who has an interest in the state's fiscal health should be willing to make some concessions just like state employees have done, firefighters, school teachers, private employees in the last decade."
Good luck trying to sell that to auto CEOs who delivered their part of the bargain. Their companies committed billions in investment and added thousands of jobs in exchange for proferred credits that could be claimed over the next 30 years.
The credits, started in the Engler years but used most extensively in the late Granholm era, were a primary driver in the decisions by the automakers to reinvest in their Michigan operations coming out of bankruptcy and recession, ranking executives have said.
In exchange for the credits blamed for tipping the state budget into an unexpected deficit, Michigan gained revenue from income and sales taxes it otherwise would not have collected; gained jobs it otherwise would not have; garnered reinvestment in communities hammered by the recession and bankruptcy.
Critics of this "corporate welfare" approach to economic development allege that many investments would have been made in Michigan anyway, an overly confident assessment that fails to account for the unsparing analysis business typically uses to decide such moves.
Costs matter. Attractive tax incentives coming out of the recession, coupled with the most competitive labor agreements in generations, made a Michigan play the right call — but not a guaranteed one.
"I wouldn't use the term 'corporate welfare,' " Snyder told Michigan Radio on Monday. "These are job creators. I've never been a fan of big incentives. There's a legacy hangover problem that we have from the prior administration."
And that problem isn't going away soon. Whatever the credits lack in transparency and accountability, the governor is right when he says the deals nonetheless represent contracts between the state of Michigan and the likes of General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV, to name three.
Because the credits flow through corporate tax returns, the information is deemed confidential and protected by the state Revenue Act. Snyder has not discussed the matters with CEOs of the automakers, holders of the vast majority of the credits, and it's not clear if he will given the legal issues.
The remedies are not easy. Attempting to unilaterally invalidate the credits, as some lawmakers seem to be suggesting, would undermine Michigan's credibility and damage its improving reputation as a good place to invest and do business.
Additionally, the gathering political backlash against what some consider state-sponsored corporate welfare, the Michigan Economic Development Corp. or both could threaten the state's ability to compete against rival states for future investment.
A truth of the state-by-state economic development game is that tax incentives are a critical tool (but not the only one) for attracting new investment and creating jobs. Rival states would notice and exploit the opening.
Where's the historical perspective here, people? Are the global financial meltdown and the recession that pushed GM and Chrysler into ignominious bankruptcy now ancient history, nightmares that never really happened?
If nothing else, those harrowing events should have dispelled for good any sense that Michigan is entitled to these companies, their investments, their jobs or their headquarters. It isn't, witness a once Troy-based Delphi Automotive Plc that is now headquartered in the United Kingdom and employs 95 percent of its workforce outside the United States.
More than a few state lawmakers would be representing hollowed out industrial hulks, their people weighing heavily on the social safety net, but for federal bailouts and the incentives that made reinvesting in Michigan the no-brainer it pretty much turned out to be.
There is no question the incentives credited with delivering an investment boom in 2009 and 2010 are becoming a financial burden today. The governor, his team and lawmakers are smart to push credit-holders for help building an early-warning system than can identify when the incentives will hit the state budget.
But bailing on the state's obligations to commitments already fulfilled is not only dishonorable. It's wrong.
Daniel Howes' columns can be found at detroitnews.com/staff/27151