Darcy Olsen

'Journal' Wrong on Value of Higher Education Spending

Posted on May 16, 2003 | Type: Op-Ed | Author: Darcy Olsen
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Dear Editor,

The editors of The Business Journal let readers down with their editorial "Naysayers won't help cause" (4/25/03), which condemned a forthcoming Goldwater Institute study they had neither seen, nor read. At best, commenting on unseen research is unprofessional. At worst, it is an abuse of public trust. Readers of The Journal should be able to expect, at a minimum, that the editors have earnestly reviewed the material under discussion.

What's at issue? The Institute's forthcoming study examines the relationship between public spending on universities and economic growth.

Analyzing data over a 20-year period in all 50 states, analyst Jon Sanders finds higher-education appropriations have had no consistent, statistically significant impact on growth.

Those findings raise questions about the validity of claims that universities are "epicenters of economic development," as Gov. Napolitano writes, and the wisdom of attempting to improve Arizona's economy by spending millions more on universities.

The Business Journal believes government should help "make Arizona a leader in the burgeoning bioscience industry" and supports a proposal to spend $400 million on research labs. To be sure, research drives discovery and innovation to the benefit of millions of people every day. However, inventors, entrepreneurs, and members of the private sector community have the financial incentive to conduct research and are rightly positioned to carry the risks.

As the Business Journal readers know first-hand, private investment tends to be at least twice as effective as public spending because of the deadweight burden caused by taxation. For instance, studies have shown the marginal rate of return on private capital to be 22 percent per year compared to only 7 percent for public capital investment.

If investing in university research facilities is sound, there will be no shortage of willing private investors, and the payoff will be greater.

Rather than gamble Arizona's future on one cluster industry, legislators should focus on improving Arizona's overall business climate.

Our industrial, commercial and small-business property tax burderns are fourth, sixth and 10th highest in the nation, a situation made more dramatic by the fact that our competitor states have either no corporate income tax (Nevada), or much lower rates (Colorado).

Lowering the overall tax burden to create a more favorable climate for entrepreneurs and businesses of all kinds is a fair, proven path toward greater economic growth and increased prosperity.

Editor's note: The April 25 editorial supporting higher-education and the continued investment in Arizona's biotechnology industry was written after editors read a published news report of the Goldwater Institute's study.

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