Kulongoski’s tax hand-outs don’t work

The Private Sector Has More Incentive to Invest Wisely
By Daniel Roncari
Cascade Policy Institute

Governor Kulongoski recently signed a series of bills that will spend a total of $28 million dollars on several industries and research centers.

The Oregon Innovation Plan will “invest” in ” innovation-based economic development,” supposedly to help make Oregon more competitive. Because the Oregon Innovation Plan is government-directed investment, it is inferior to private sector investment. That is because government decision makers, no matter how well-intentioned they may be, do not have as strong incentives to invest wisely.

Milton Friedman once said: “Nobody spends somebody else’s money as carefully as he spends his own.” In a free market, business people are driven by the profit motive and are directly affected by the decisions they make. Hence, they have a strong incentive to ensure that their investments are generating value for consumers and are profitable. However, when government officials spend other people’s money, they are assuming less risk and have less incentive to ensure that the investments are successful.

If this $28 million dollars were left in the private sector, perhaps as a research and development tax cut, private firms likely would invest these funds in innovation and research that would generate more economic growth. Oregon should pursue policies that promote investment decisions motivated by market incentives, not political ones.

— Daniel Roncari is a research associate at Cascade Policy Institute, a Portland, Oregon based think tank.

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Posted by at 06:00 | Posted in Measure 37 | 5 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jerry

    Yes, Yes, Yes! Finally someone with the courage to mention what a lot of us already know. Big government simply does not work.
    It never has and it never will.

  • Anonymous

    Can this group guarantee that if the money was left in the private sector it would go to innovation and research? NO. and why should taxes be cut for them?? perhaps if a tax cut was granted and the saved money would be REQUIRED to go to such programs it would be worth it. the cascade folks don’t really know or care where the money will go.

    i’d like to know just what the cascade group CAN guarantee will happen. and if it doesn’t would they make up the difference themselves?

    • Steve Buckstein

      Anon, why ask us (Cascade Policy Institute) to guarantee results when government spending comes with no guarantees, let alone any accountability? The whole point here is that investing carries risks, and research and development of new technologies carries very high risks. Government officials are not well equipped to figure out which such risks are worth taking because they are playing with other people’s money. The closest you will come to a guarantee is to let people invest their own money; then you will at least know that they are likely to make the best decisions they are capable of making.

  • Jerry

    Anon – what are you drinking? You don’t need guarantees in the private sector. The market takes care of that all by itself. You certainly can not guarantee that anything will happen in the government program – expect perhaps wasted money.

    I suspect the Cascade folks know a lot more about economics than you do. And they do care where the money goes – that’s the whole point – it should NOT go down some rathole of government waste!

  • Peter

    And the only way the government can throw it down a rat hole is by first taking it form people who earn it and who know better how to spend it or waste it.

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