Public Assets Institute > Press > Op-Eds > Public investment is key to prosperity

Public investment is key to prosperity

By PAUL CILLO – Rutland Herald, August 15, 2010

For 30 years, we’ve been told government is the problem and the best way to help the economy is to reduce taxes for business and get government out of the way. What we’ve been told is wrong. Our economy does better when government plays its rightful role, building and maintaining our public infrastructure and insuring that we have an excellent education system that serves everyone from pre-school-age youngsters to older adult workers.

These insights on how to strengthen the New England economy are contained in a new report released last week by the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. The report, “Prioritizing Approaches To Economic Development In New England: Skills, Infrastructure, and Tax Incentives,” was written by Jeffrey Thompson, a research economist at PERI, who works with Public Assets Institute and its counterparts in the other New England states.

Thompson reviewed the available research on what works and doesn’t work to bolster productivity and ultimately expand economic prosperity. We learn from his report:

The most effective options for creating jobs, both short-term and long-term, are investing in infrastructure and building workforce skills.

Tax cuts and business subsidies do little to create jobs in the short run and are not the most effective way to generate growth over the long term.

In the last 30 years, the U.S. has reduced its investment in public infrastructure, and there has been a subsequent decline in the rate of economic growth.

In the 1960s, New England was ahead of the nation in public infrastructure investment, but in the last two decades it has fallen behind the rest of the country.

Most of jobs that businesses use to claim tax credits would have been created without the incentives.

Investments in public infrastructure and education increase the productive capacity of a state or region; tax credits and other subsidies for individual businesses do not.

Vermont provided more than $400 million in tax breaks for businesses last year.

There are many other findings in the report that there isn’t room to describe here, but this study needs to become part of the public discussion as we look for ways to put Vermonters back to work and address the budget problems facing the state. The report also offers suggestions for how Vermont and the other New England states can find the money needed to start to rebuild our neglected infrastructure and strengthen our education system. Some of the money can come from simply redirecting existing resources — away from ineffective tax breaks and into renovating schools, upgrading sewer and water systems, expanding broadband access, repairing highways, and replacing bridges.

We’ve been misled for the last 30 years to believe that we don’t need government and that those who disparage government are the best ones to lead it. As Thompson’s study demonstrates, there is ample evidence that when government is doing its job and doing it well, it’s good for the economy.

Economic development and investment in public services and infrastructure are not mutually exclusive.

The state needs to be part of the solution to rebuilding and sustaining our economy.

We need to put ideology aside, study the available research, and make sure we use our precious public resources wisely, effectively, and in ways that create economic prosperity that all Vermonters can enjoy.

Paul Cillo is president of the Public Assets Institute (, a nonpartisan, nonprofit fiscal policy think tank based in Montpelier.