Governor Rendell has again lashed out at Senate Republicans for their plan to reduce spending on "economic development". This is a particularly odd stance for the Governor to take in light of the fact that Pennsylvania has spent over a half billion dollars a year on development since he was first inaugurated in 2003 and there is little statistical evidence to show that the money has been effective at stimulating job growth. Indeed, most of the job gains in the state have been in sectors that receive little or no development money with most employment gains over the Governor’s tenure attributable to national economic trends and policies such as low interest rates and tax cuts.
When the opportunity cost of the money spent on development as well as the cost of borrowing much of it is considered, there is no doubt that the funds would have served Pennsylvanians better if they had been left in the hands of taxpayers. Until there is thorough review and evaluation of the myriad grant and loan programs to measure their actual net benefit to the state, it is wise to stem the flood of dollars into these programs. They could actually be having a net negative effect. They are certainly turning Pennsylvania businesses into seekers of government help and thereby permanently enlarging the role of government in the economy with all the attendant problems that will bring.
In effect, the development money creates obligations and support for politicians among those receiving state funding while producing anger and resentment among those who try to make it own their own. Those who seek help and don’t get it will be especially resentful. Government picking winners and losers is the antithesis of the private, free enterprise market driven economy and will lead to more stagnation, not prosperity. But to true believers such as Governor Rendell, growing government is more important that growing the economy.