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Michael D. Farren



Articles by Michael D. Farren

An Interstate Compact to Phase Out Company Giveaways

11 days ago

Chair Kaiser, Vice Chair Washington, and members of the House Ways and Means Committee:
My name is Michael Farren, and my research at the Mercatus Center at George Mason University focuses on evaluating government efforts to foster economic development. I am grateful for the invitation to discuss the problems associated with economic development subsidies and the possible solutions available for Maryland.
Today, I will illustrate why economic development subsidies remain a problem despite growing agreement that they should be phased out and how an interstate compact offers an opportunity for a cooperative solution.
Academic research shows that economic development subsidies generally don’t achieve their stated goals. That is, they don’t result in broad improvements in local and state

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For Workers, the New Year Begins with a Bang

16 days ago

The January jobs report released today continues to attest to strong economic growth, as U.S. employers added 225,000 jobs last month. It seems the economy has not been spooked by the shadow of impeachment, which has otherwise consumed Washington, D.C., and national news cycles over the last few months.
The labor market appears to have now fully recovered from the economic downturn of the Great Recession. Total labor force participation increased by 0.2 percentage points, with the participation rate for “prime-age” workers (25-54 years old) hitting 80.6 percent. The prime age number is the highest it’s been since mid-2001, and with the exception of the late 1990s, it’s the highest it’s ever been. In addition, participation rate of prime-age women in the workforce (76.8 percent in December

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Understanding Why Economic Development Subsidies Are a Problem and What Can Be Done about Them

25 days ago

Chair Ancel, Chair Cummings, members of the House Committee on Ways and Means, and members of the Senate Committee on Finance:
My name is Michael Farren, and my research at the Mercatus Center at George Mason University focuses on evaluating government efforts to foster economic development. I am grateful for the invitation to discuss the problems associated with economic development subsidies and the possible solutions available for Vermont.
Today, I will illustrate why economic development subsidies are a problem, why they remain a problem despite growing agreement that they should be phased out, and opportunities for unilateral and multilateral solutions.
First, academic research shows that economic development subsidies generally don’t succeed in achieving their stated goals. That is,

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Using an Interstate Compact to Solve the Problems with Economic Development Subsidies

26 days ago

Good afternoon, Chairman Almy, Vice Chairman Ames, and members of the New Hampshire House of Representatives Ways and Means Committee:
My name is Michael Farren and my research at the Mercatus Center at George Mason University focuses on evaluating government efforts to foster economic development. I am grateful for the invitation to discuss the problems associated with economic development subsidies and the opportunity for states to create a cooperative solution using an interstate compact. I’m happy to contribute toward the conversation regarding HB 1132.
My testimony today has three main points:
Economic development subsidies generally fail to achieve their goals. That is,
they generally don’t lead to broad improvements in economic outcomes for the states and cities that use them,
they

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Latest Jobs Numbers are a Ray of Sunshine in Winter, But There are Still Clouds on the Economic Horizon

January 10, 2020

While net job growth reported today by the Bureau of Labor Statistics (BLS) was slightly lower than anticipated, the U.S. labor market remains strong. Continuing its longest expansion ever, the U.S. economy added 145,000 jobs in December and the official unemployment rate (U-3) held steady at 3.5 percent, the lowest it’s been since 1969. If the unemployment rate drops 0.2 more percentage points in 2020, it will mark the lowest level in 67 years. (The lowest unemployment rate of 2.5 percent was set in 1953)
It may seem the economy can’t get much better. But given recent studies on the effect of the ongoing trade war, as well as research on the economic effects of immigration, it’s worthwhile to consider how much better the economy could be if the U.S. were to reduce barriers to trade and

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Christmas Comes Early for US Workers

December 6, 2019

Some economists had expected a rebound in the job market, but the Bureau of Labor Statistics (BLS) has given job-seekers a larger-than-expected early Christmas present. The November jobs report released today estimates that the economy added 266,000 net jobs last month, and revised the estimates for September and October upward by a combined 41,000. At this point, 205,000 net jobs have been added to the economy over the last three months—close to the average monthly job increases seen last year (223,000), which had been tapering off in 2019.
A substantial part of this increase is due to 46,000 striking General Motors workers resuming their jobs in the wake of a new agreement between the auto company and the United Auto Workers union. But even subtracting the returning strikers leaves a

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Labor Market Shrugs Off Strikes, But the Blade Runner Economy Isn’t Here Yet

November 1, 2019

The October 2019 jobs report just released by the Bureau of Labor Statistics (BLS) shows a larger increase in net employment growth than anticipated. Some 128,000 jobs were added to the economy last month, compared the surveys of economists that expected the number to be around 85,000. Meanwhile, the job growth estimates for August and September were revised substantially upward by 51,000 and 44,000, bringing the three-month average net employment increase to a very healthy 176,000 jobs per month.
The low expectations for October’s jobs report were attributable to the recently-settled 40 day strike at General Motors by over 40,000 United Auto Workers members, which accounted for over 95 percent of striking workers in the BLS’s strike report. In fact, the strength of the labor market, in

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Ending the Economic Race to the Bottom: An Interstate Compact Is a Win-Win Solution to Subsidies

October 28, 2019

Michael Farren testified before the Utah State Legislature’s Economic Development and Workforce Services Interim Committee at its September 18th meeting in Salt Lake City, Utah. His presentation explained how an interstate compact could help end the wasteful practice of recruiting corporations to the state by providing targeted economic development incentives.
His presentation covered a brief history of targeted economic development subsidies (TEDS), described the core problems with TEDS (namely, that they don’t work, that they may actually slow local economic growth, and that they definitely lead to less national growth), and outlined why TEDS are still used despite these problems (because most nonacademic economic development research is a one-sided benefits-only analysis, and

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Michael Farren on the POTUS Channel

October 22, 2019

Michael D. Farren reviews Foxconn’s decision to not go through with constructing a manufacturing facility in Wisconsin, despite considerable tax breaks from state and local governments.

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Michael Farren WRVA Radio

October 22, 2019

Michael D. Farren explains how Virginia’s tax incentives to lure Amazon into building its HQ2 headquarters in Arlington will negatively affect Virginians.

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Comprehensive Jobless Rate Hits New All-Time Low

October 4, 2019

Most headlines today will trumpet the unemployment’s rate drop to the lowest level in 50 years (3.5 percent), but the comprehensive jobless rate (CJR), a more holistic measure of unemployment developed in Mercatus Center research, fell to the lowest level ever (6.3 percent).
The CJR is the most encompassing measure of joblessness, counting someone as unemployed if they simply say that they want to work, regardless of whether that person is actively pursuing employment or even available to start a job. As a result, it’s the highest valid estimate that any politician or pundit can claim as the “true” unemployment rate.
The comprehensive jobless rate isn’t intended to replace the official unemployment rates provided by the Bureau of Labor Statistics, but rather serve as complimentary

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Yet More Good News for American Workers

August 2, 2019

The monthly BLS jobs report released today was one more piece of good news in a long trend—the longest ever—of uplifting labor market statistics. The breakneck jobs growth of 2018 (with 225,000 jobs added per month on average) has slowed to a more moderate pace in 2019 (165,000 jobs added per month on average so far), but is still rising about twice as fast as needed to simply satisfy population growth.
Employers added 164,000 jobs in July, with most of the growth occurring in education and health services (50,000) and professional and business services (38,000). The headline unemployment rate held steady at 3.7 percent, but the labor force participation rate rose slightly to 63.0 percent as more workers entered the labor market. Average hourly wage growth also held steady at a rate of 3.2

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Quotable Quotes: Targeted Economic Development Subsidies Don’t Create Economic Growth

July 23, 2019

“You have to spend money to make money” is a common justification for economic development subsidies. Politicians and paid consultants argue that targeted economic development subsidies (TEDS) are a necessary investment in economic growth, but the academic research shows they rarely lead to widespread economic or community improvements.
Furthermore, TEDS have little to no influence on where a business chooses to locate or expand. Most economic development subsidies just don’t work.
Misspending of public resources on TEDS means that we miss out on real opportunities to assist economic growth, like by investing in public goods and critical public services or decreasing tax rates for all taxpayers. A business-friendly political environment and investment in local amenities, such as public

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US Economy Sprints Through the Finish Line

July 5, 2019

America received a belated birthday present, as the Bureau of Labor Statistics reported today that 224,000 jobs were added to the economy last month. This extended the longest continuous period of employment growth to match the now-longest period of economic expansion in U.S. history.
The headline unemployment rate marginally increased to 3.7 percent, and the comprehensive jobless rate—the highest that anyone can claim the “true” unemployment rate really is—slightly increased to 6.7 percent. But most economic statistics did not appreciably change from May’s jobs report.
This good news comes in spite of the recent signs of economic skittishness from President Trump’s trade wars. While some think tariffs stimulate American job growth by making products manufactured in foreign countries more

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Smooth Economic Sailing Hits Headwinds

June 7, 2019

The Bureau of Labor Statistics reported that businesses only created 75,000 new jobs in May, a far cry from April’s boisterous numbers. Furthermore, March and April’s employment gains were revised downward by 75,000 with the addition of new information. It’s possible that American businesses are finally having trouble sailing into the headwinds caused by President Trump’s trade wars.
That said, there were a few bright spots amidst the gathering clouds. The unemployment rate remained at 3.6 percent, a 50-year low. The comprehensive jobless rate—the highest that anyone can claim the “true” unemployment rate really is, also held steady at its lowest-ever value, 6.5 percent. And the number of people working part-time (for economic reasons) but wanting full-time employment fell by 299,000, an

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Springtime Surge in Jobs Growth

May 3, 2019

Overview 
The average monthly job growth in the first four months of 2019 (205,000 per month) has been equivalent to the average monthly increase since employment growth restarted in earnest after the Great Recession (204,400 per month since January 2011, when steady and strong job growth began), suggesting that there’s little worry that the economy is slowing down after the financial market correction last fall. Meanwhile, the headline unemployment rate hit a nearly 50-year low at 3.6 percent—the number of unemployed active job-seekers fell by 387,000 (a 6.2 percent decline).
After an unexpectedly sharp dip in jobs growth in February (attributed in part to the federal government shutdown and winter storms), the labor market sprung back in March and April. The Bureau of Labor Statistics

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