For too long, Pennsylvania has relied too heavily on generously funded but ultimately ineffectual taxpayer-funded government subsidy programs in an attempt to stimulate economic growth. The strategy of picking corporate winners may generate positive media coverage at giant ribbon-cutting ceremonies for policymakers, but it has failed to produce tangible benefits for the people of Pennsylvania.
In recent years, Pennsylvania has been a big spender on economic development programs—ranking consistently at or near the top among the 50 states. Nevertheless, it has remained well below the nationwide average in job and wage growth. In contrast, states that spent less on economic development programs experienced much more robust economic growth.
After years of economic development spending increases—in the form of taxpayer-funded grants, loans, tax incentives, and other blandishments— Pennsylvania may be poised to, at least temporarily, reverse course. The governor’s proposed 2002-03 budget would reduce the amount of General Fund dollars committed to the Pennsylvania Department of Community and Economic Development. While this represents just a portion of the Commonwealth’s overall development effort, perhaps it might provide Pennsylvania policymakers now crafting the next state budget the impetus to candidly evaluate the results of the Commonwealth’s past economic development efforts.
This policy brief recommends that elected officials recognize the inefficacy of taxpayer-funded subsidies for politically favored businesses and, instead, enact tax cuts that will benefit all job creators in Pennsylvania. Only by returning to such “budget basics” can state policymakers successfully transform the Keystone State into a better place in which to live, work, and raise a family.