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Calabrese: Can Michigan film industry sustain itself?

Dan Calabrese

You’d think a state that just faced a massive hole in its budget because of tax incentives would be a bit more reticent about building an economic growth strategy based on tax rebates — especially when they’re designed to attract the sort of enterprise that everyone seems to think will pick up and leave entirely unless we keep providing special favors.

But when you talk about eliminating the $50 million Michigan is still spending to convince the film industry to shoot here, you’d think the proposal was to eliminate economic vitality itself.

Michigan pays big bucks for the privilege of seeing itself in movies, or as state Rep. Kristy Pagan, D-Canton, puts it, for the “cool factor.”

“Who doesn’t want to see Ben Affleck or Amy Adams walking down our streets?” Pagan asks rhetorically. I don’t think she’s looking for a constructive answer, such as “Me” or “Who that?”

But all the cool kids know that you really can’t pay to be cool. Either you are or you aren’t, and the coolest people are the ones who don’t sit around fretting about it. The coolest states do likewise, and they also recognize that wise economic development strategies are based not on giveaways, but on enduring fundamental strengths.

Michigan could hang onto a pretty healthy share of the film industry. But that would require us to rethink some of our presumptions in creating the program in the first place.

One is the fanciful notion of the “economic multiplier,” which claims that every dollar spent on the subsidies creates another $10 in economic activity. This is the same Keynesian nonsense that attributes almost all economic growth to government spending by trying to connect dots between the allocation of cash and its use by those who receive it. We gave a contract to Company A, which used it to hire Employees B, C, D, E and F, who spent the money at retailers G, H, I, J and K, which ordered more inventory from suppliers L, M, N and O. All this activity!

But activity isn’t the same thing as the creation of wealth, which comes from adding value to something that inherently lacks it, and then making it possible for lots of people to benefit from that value. Sending a given dollar on a journey between many different parties doesn’t change the fact that it’s still just a dollar. The film incentivizers continually get this wrong because they don’t know how to distinguish between activity and wealth creation.

This is not to say that no jobs — or even that no good jobs — are created by the film industry’s presence here. Sure they are. Costume-makers who specialize in film work will find it plausible to operate in Michigan only if there are films being made here. The same is true for companies who sell or lease production equipment and, obviously, actors, casting companies and contractors who service production companies in all kinds of other ways. For these reasons, the film industry is absolutely worth having — not because of any “cool” factor, but because even a niche industry has economic value if it’s prosperous.

But that leads to an important question: Could the film industry be prosperous in Michigan without the payola from Lansing? It absolutely could. But that would surely require some adjustment in the thinking of those operating here. Rather than building into the operational budget a massive tax rebate, they’ll have to come up with other efficiencies. They might have to make better use of technology or require outside vendors to bid more competitively for contracts. They might have to seek better deals from local hotels. And contractors might have to think more broadly, too. It’s hard to sympathize with a caterer who complains he or she will be out of business if some film clients are lost. People in other industries don’t need to eat?

Is it possible to make a film profitably without a gigantic government tax break? Because if it’s not, then Michigan is subsidizing an industry that will always be a ward of the state, and that is not a smart economic strategy. But if it is possible, then the gritty streets of Detroit or the beauty of the Lake Michigan coast or the majesty you find up north will continue to be attractive venues for filmmakers who know how to make money at their craft.

Film production can be successful in Michigan, and I for one think it will be. Not because Michigan paid to be one of the cool kids, but because for lots of reasons that are lost on politicians, it already is. Let the new message to film producers be this: You’re welcome here, and we have confidence in you to do it well and make money in the process.

Dan Calabrese writes for the Politics Blog.